Issue link: https://maltatoday.uberflip.com/i/1137604
OPINION 23 maltatoday | SUNDAY • 30 JUNE 2019 Rent reform, at last Michael Falzon micfal45@gmail.com THE proposed 'Private Resi- dential Leases Act' announced by the Prime Minister last Wednesday goes a long way to regulate – rather than control – leases in the current free rental market. The main lacuna is, of course, the fact that the reform does not cover pre-1995 rents. Recent court judgements have confirmed that the cur- rent legal regime regulating these rents breaches land- lords' fundamental rights as it imposes restrictions that do not allow landlords to get the value for their property. The Court ruled that if the rent is disproportionate with market forces, tenants will no longer be able to claim protec- tion for automatic renewal. Hence tenants in properties leased before June 1995 can no longer rest assured of their tenancy rights. This also applies for com- mercial premises: an issue that has also been put aside while shopowners with uncontrolled rents compete with shopown- ers with controlled rents, creating a playing field that is hardly level, of course. The proposed reform skirts round this issue that will remain the major unsolved problem in the rental market. The number of tenants in this uncertain situation is by no means small. Expect more landlords having recourse to the Constitutional Court – and to the Court of Human Rights in Strasbourg – while tenants see what they thought was their security of tenure evaporating in front of their very eyes. This will create huge prob- lems to those who genuinely cannot afford enormous rent increases. On the other hand, the re- form will help to regulate the uncontrolled regime of other more recent leases. The liber- alisation of the rental market has led to many abuses that this law attempts to forestall. The proposed law imposes a one-year minimum contract for home rentals, and caps yearly increases to 5%. Oth- erwise the rental regime will only be governed by the free market. At the same time, landlords will be eligible for tax incentives when entering into longer term contracts. This is all in the right direction. The Housing Authority is being given a new remit – that of monitoring and policing the rental market with all lease agreements having to be reg- istered with it online. Finally, the government is making such registration obligatory, failing which landlords will be will taken to court and face a fine of up to €10,000. This will also tend to reduce tax evasion that is still rife with many landlords failing to de- clare – for tax purposes – their income from rent. Landlords will have a three- month notice period during which they can tell tenants if their contract will be renewed or not. If a landlord does not inform the tenant three- months before an existing contract ends, then the agree- ment will be automatically extended for another year. Nevertheless, the cap on rent increases will mean landlords can only increase rents by a maximum of five per cent from one year to the next in contracts of more than one year. The authority will force landlords who do not register lease agreements to enter into a three-year contract at 75 per cent of the market value. All in all, the proposed law is very positive and will avoid the current situation where tenants are continually wor- ried that their rent would be increased astronomically and capriciously. At the same time, it does not control unduly the free rental market. The new law tries to avoid landlords or tenants having to take recourse to Court cases on certain issues, with the Housing Authority having the right to take landlords before a rent regulation board for administrative issues related to the deposit and rental pay- ments. Moreover, an adjudi- cating panel for private resi- dential leases will decide on issues such as minor damages to property and appliances. According to the proposed law, landlords will have a right to demand payment for the period that tenants remain in the property during a dispute on eviction, without the need to have to sue the tenant in Court. However, it does not seem that the other current difficulties as a result of 'ever- lasting' eviction cases in Court are going to be avoided. I think that this is a worrying failing in the proposal: the lack of an efficient regimen that will make evictions easy and fast. Many landlords claim that they abuse the system because of this problem. Effecting evic- tion in real time has always proved an impossible task. As far as I can see, evictions will still depend on a Court decision with such decisions taking donkey's years to be finalised. Construction at a standstill The draconian Legal Notice on the Avoidance of dam- age to third party property regulations (LN 136 of 2019) published last Tuesday under the Building Regulation Act has created more problems than it has solved. It is a knee-jerk reaction to three incidents where dam- age to third party property adjacent to construction sites was considerable although – thankfully – there were no fatalities. So long as any unqualified Tom, Dick or Harry can enter into a contract for demolishing buildings and/or excavating rock, many problems in the construction industry will not be solved. It is the lack of regu- lation of such contractors and developers that is the cause of many probems; because this lack of regulation is at the core of the 'cowboy' mentality of a number of players in the construction industry. Pushing everything onto the responsibility of architects and site managers does not solve the problems in the industry. It only 'solves the problem' of Government not being able to clearly blame someone for such incidents. The net result is that since Tuesday practically all con- struction sites were at a stand- still until new construction method statements are drawn up as required by the new regulations and contractors employ a site manager. These changes cannot be car- ried out overnight. Meanwhile the only job that is going on in my office is the permitted excavation of a res- ervoir for agricultural purpos- es in a field that is, naturally, Outside Development Zone. In such cases, there are no adjacent third-party structures that necessitate the applica- tion of the new procedures. Ironically, building in devel- opment zones is grinding to a halt, while that in ODZ areas carries on unabated. Pushing everything onto the responsibility of architects and site managers does not solve the problems in the industry. It only 'solves the problem' of Government not being able to clearly blame someone for such incidents The new law tries to avoid landlords or tenants having to take recourse to Court cases on certain issues