23rd January 2020

Author: Kelly Meli
The Private Residential Leases Act - an update
The Private Residential Leases Act, chapter 604 of the laws of Malta (the 'Act') came into force earlier this month on 1st January 2020 subjecting all leases, whether new leases or renewal of existing leases, entered into after this day to be registered and falling within the remit of the new Act.
In our previous publication entitled 'The Residential Leases Bill – an understanding of the proposed changes to residential lease agreement in Malta' we discussed Bill No. 91 of 2019 (the 'Bill'). This article seeks to review the changes undertaken to the Bill as enacted by the resulting Act after the legislator took a number of proposals into consideration received from the public, service providers and stakeholders of the rental market.

Fundamentally, the Act shall not be applicable to tenements:

(i) belonging to the Government;

(ii) leased to any tourist, exclusively for tourism purposes;

(iii) which are not let for a primary residential purpose;

(iv) leased before the 1st of June 1995; and

(v) leased after the 1st of June but are no longer in force on the 1st day of January of the year 2020, that is the day of entry into force of the Act.


Registration
The registration of all private residential leases entered into after the entry into force of the Act and their renewal has been made obligatory. The Act imposes an obligation on landlords to register such leases with the Housing Authority within a period of ten (10) days from commencement of the lease. Registration is subject to a first-time registration fee of ten euro (€10) and a fee of five euro (€5) will be applicable when registering renewals. A late registration fee will also apply if the landlord fails to register the lease contract within the required period of time.

It is important to note that in the event that the landlord fails to register the contract, as stipulated above, the tenant may proceed to register the contract himself at the expense of the landlord. The tenant will then have a right to retain part of the rent for the purpose of reimbursement of the administration fee paid to the authority upon registration.

As outlined in our previous publication, private residential leases which were entered into after the 1st day of June 1995 but before the 1st day of January 2020 and which would still be in force on the 1st day of January 2021 shall also be registered. Leases falling within this timeframe must be registered with the competent authority by no later than the 1st day of January 2021.

The importance of registration continues to be delineated in Article 15 of the Act which provides that any agreement, whether verbal or in writing determining any condition which does not result from a written and registered contract shall be considered null and void.

In order for a private residential lease contract to be validly registered with the housing authority it must, on pain of nullity, include:

(i) the tenement to be leased;
(ii) the agreed use of the tenement let;
(iii) the duration of the lease;
(iv) whether such lease may be extended and in what manner;
(v) the rent amount;
(vi) any amount paid by way of security deposit, as well as
(vii) an inventory.

The Act also outlines a number of forbidden clauses which if included in a private residential lease agreement, will automatically nullify the contract itself. These are listed in Article 7 of the Act and include clauses:

(i) which provide for the automatic termination of the contract;

(ii) which authorise the landlord to reduce without equivalent consideration any benefits as found in the lease contract;

(iii) which exempt the landlord from any of his responsibilities at law;

(iv) which impose the payment of additional considerations other than the ones mentioned in Article 7(1)(d) of the Act;

(v) which impose any additional consideration for the use of the movables;

(vi) which stipulate the payment of a fixed amount other than those mentioned in Article 7(1)(f) of the Act; and

(vii) which limit the use which one is expected to make of a residence.

It is interesting to note that (i) above was not originally part of the previously proposed Bill, but the legislator opted to include this and make this prohibition part of the new law.

Long Private Residential Leases
Article 8 of the Act applies the same provisions which were proposed in the Bill in relation to long private residential leases. Such leases cannot have a duration of less than one (1) year and any agreement stipulating a shorter duration shall be deemed to have been agreed for a period of at least one (1) year.

An important requirement and an additional duty being imposed on landlords by virtue of the Act is the obligation to send a notice by registered mail to the tenant by no later than three (3) months prior to the termination of the lease, informing him/her that the lease will not be renewed. In the event that the landlord does not serve the tenant with such notice within the specified time, the lease will be deemed to have been renewed for a further period of one (1) year.

Short Private Residential Leases
Short Private Residential Leases on the other hand shall be negotiated for a term of not more than six (6) months. Short Private Residential Leases must satisfy the needs of the following categories of tenants:

(i) non-resident workers who are employed either for a period of less than six (6) months or only to complete a specific task;

(ii) non-resident students enrolled in courses for less than six (6) months;

(iii) residents who need to rent an alternative primary residence; and

(iv) non-residents who need to rent a tenement provided that they would not be seeking to establish their long residence in Malta.

One important requirement which must be observed when contracting a short-term private residential lease agreement is that the contract itself must identify the specific category within which the tenant falls and this must be attested through documentation attached to the lease agreement, such as, for example, if a foreign student is enrolled in a course at the University of Malta, the duration of which is less than six months, proof of such enrolment must be attached to the residential lease agreement. It is also important to note that short-private residential leases may not be renewed and/or extended.

Termination and Withdrawal
The Act also provides that a tenant may withdraw from a long private residential lease after the lapse of the periods mentioned in Article 11(1) of the Act, provided that a notice is given to the landlord in terms of law and within the time-frames stipulated in Article 11(2) of the Act. It is important to note that unless the lessor is served with a written notice, as required by law, the lease will not be deemed to have been terminated by the tenant, and the conditions stipulated in the lease agreement would continue in full force and effect.

When it comes to withdrawal from the short private residential lease, Article 12 stipulates that the tenant is prohibited from withdrawing from a short private residential lease before the lapse of one (1) month. Following the lapse of the first month, the tenant may withdraw from such lease, subject to the same requirement of providing the landlord with a prior written notice of at least one (1) sent by registered mail.

Rent
Rent shall be freely stipulated between the parties and payment of rent shall be deemed to have been agreed by the parties for a period of one (1) month. Only in instances wherein both the landlord and the tenant are in agreement may the landlord demand the advance payment of more than one (1) month's rent.

The Act also caters for permissible increases of the rental amount and provides that rent increase may only occur once every year subject to an express agreement by and between the parties allowing for such increase to take place. Nevertheless, yearly increases may never exceed the previous rent by more than five percent (5%).

Letting of shared residential space
Another difference noted when undertaking the exercise of comparison between proposed provisions under the Bill and the newly implemented Act concerns the letting of shared residential space. In our previous publication we made reference to 'room rentals' which were previously defined as the "renting of a part of an apartment or building, separately let, or a room separately let with shared kitchen and bathroom facilities, which is occupied by the tenant for residential purposes", and which were regulated by the Article 16 of the proposed Bill. The legislator has completely eliminated the words 'room rental' and replaced these with the 'letting of shared residential space' which are now defined in Article 2 of the Act as "the letting of any separate spare in an apartment or building, with shared amenities, such as kitchen and bathroom facilities".

Article 16 of the Act provides that any contract entered into for the lease of a shared residential space shall have a maximum duration of six (6) months. The tenant may withdraw from such lease by giving the landlord a one (1) week prior written notice, which must be sent by registered mail however the withdrawal may be carried out at any time. It is important to point out that the leases of shared residential spaces must also be registered in line with the requirements set out under the Act.
Yearly increases of rent may never exceed the previous rent by more than five percent (5%)
Overholding of the Tenement
Article 18 of the Act caters for instances where the tenant remains in occupation of the rented tenement beyond the lapse of his title. In such an event, the tenant shall be bound to pay the landlord an amount equivalent to the rent until the date of effective eviction of the property, nevertheless, the landlord would still have a right to obtain compensation for any greater damage which he/she may have suffered as a result of such overholding.

Monitoring and Enforcement
Part III of the Act specifically deals with monitoring and enforcement and Article 19 provides that notwithstanding the provisions of any other law the Chairperson of the Housing Authority or any other person which he/she may authorise, shall have the right to enter a private tenement for the purpose of verifying whether such tenement is being occupied for residential purpose by any person/s who are not the owners of the tenement and who would be occupying the tenement without a valid title of lease and a valid lease agreement, which satisfies the ad validatem requirements and registered in terms of the Act. What is interesting to note is the proviso to this Article 19, which states that such access shall require the prior issue of a warrant signed by a Magistrate. The proviso to Article 19 was not part of the proposed bill and the legislator included such requirement possibly due to the various concerns raised at public consultation stage.

Article 19(2) provides that for the purpose of carrying out investigations on the violation of any of the provisions of the Act, the Chairperson of the Authority or any other person he/she may authorise shall also have the right to enter into and inspect the tenement subject to giving a prior notice of at least twenty-four (24) hours to the tenant.

Any person authorised to enter a particular tenement as stated above must also produce a means of identification, which identification shall be issued by the Authority.

The legislator also introduced penalties applicable to any person/s making false reports regarding the violation of any of the provisions of the Act knowing them to be false. Such person shall be liable to imprisonment for a period not exceeding three (3) months or to a fine (multa) not exceeding five-hundred euro (€500) or to both such fine and imprisonment. In this regard, it is also interesting to note that such fines were introduced by virtue of the Act and were not originally included in the provisions of the proposed Bill.

Article 20 goes on to regulate the enforcement procedure whereby if it appears to the Authority that any tenement is being occupied for a residential purpose by any person who is not the owner of the tenement and who would be occupying the tenement without a valid title of lease; or if the lease contract does not satisfy the requisites ad validatem in writing; or if although these are satisfied, such lease is not registered in accordance with the provisions of the Act, the Chairperson or any officer authorised by him shall issue an enforcement notice to the person/s granting the enjoyment of the tenement without having formalised their relationship according to law. By virtue of this enforcement notice the Authority will require the person/s granting the enjoyment of the tenement without title, to comply with the requirements established in the Act within a time specified by the Authority, failing which the person found guilty of violating the terms of the Act, shall on conviction be liable to a number of sanctions and/or to a fine (multa) not exceeding give thousand euros (€5,000).

Adjudicating Panel for Private Residential Leases
The Adjudicating Panel for private residential leases (the 'Panel') shall have exclusive jurisdiction to determine disputes relating to private residential leases to which the Act applies, in so far as the claim does not exceed the value of five thousand euro (€5,000). The Panel shall only hear claims related to registered contracts and shall have the power to determine issues in relation to repairs, liability of the landlord, execution of urgent repairs, the liability of the tenant for damage amongst others. The Panel shall consist of a chairperson, who will be a person who has practised as an advocate for not less than three (3) years; and two (2) to four (4) professionals of a recognised standing chosen from amongst persons of known integrity and with knowledge of and experience in the real estate sector. Members of the Panel shall be appointed for a term of five (5) years and on the lapse of their term they shall not be eligible for reappointment.

Proceedings before the Adjudicating Panel are regulated by Legal Notice 354 of 2019 'Adjudication Panel For Private Residential Leases Regulations, 2019 ' which legal notice delves into procedural matters such as the summoning of witnesses, statements of defence, counterclaims before the Panel amongst others.

Mode of Complaint and Right to Appeal
Every claim filed before the Adjudicating Panel shall be made in writing and a copy shall be served to the defendant who shall have the right to file a reply in writing before the same Panel within ten (10) days. It shall not be necessary for the Adjudicating Panel to hold any hearings however, the it shall deliver judgment by no later than five (5) working days from the date of the last submission of the parties and/or any witnesses, as the case may be.

Any party who feels aggravated by a decision of the Panel may appeal on a point of law to the Court of Appeal, by filing an appeal within a period of twenty (20) days from the date of the decision of the Adjudicating Panel.

The Act also sets out the penalties which will be imposed on individuals found in breach of this Act. Article 22 provides that any person who;

(i) is found granting any tenement or any separate space therein for a residential purpose which is not in accordance with the provisions of the Act;

(ii) hinders, obstructs, molests or interferes with the Authority, any public officer or any other person in execution of his or her duties at law, or fails to comply with any reasonable requirement demanded the Authority, any officer or person in execution of his or her duties at law, or fails to assist such persons in carrying out the said duties, or knowingly furnishes such person with false information or refuses to give information; or

(iii) makes a declaration for any one of the purposes of the Act, which is false, misleading or incorrect;

shall on conviction be liable to a fine (multa) of not less than two thousand and five hundred euro (€2,500) and not exceeding ten thousand euro (€10,000).

Following the enactment of the Act a number of consequential amendments had to be made to other legislations stemming from this Act namely, the Code of Organisations and Civil Procedure, the Civil Code, the Criminal Code and the Reletting of Urban Property Ordnance and the Housing Authority Act.

This a general guidance note and does not constitute legal advice. Each case is to be determined individually and specifically.

Get in touch with us to discuss your rental queries, issues or request for drafting of lease agreements by sending an email to:
nicola@frendolapira.com or
kelly@frendolapira.com.

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