The announced legal amendments to the residential leases act cannot be seen as a point of arrival nor may it be considered a point of departure, but one of the regular checkpoints or milestones that shall accompany the process that started three years ago. In 2020, the Government of Malta decided it no longer wanted the local rental market to remain in a state of unprofessionalism and obscurity. The State, wary of the many lessons learnt in its brief independent history, had no intention of intervening heavy-handedly in the free market this time.
The statistics collected over these past three years clearly point towards the success of this calibrated approach to regulation. By the end of September 2023, the Housing Authority’s Rent Registration Unit had around 57,000 active registered agreements in its database. From the data gathered we have witnessed a gradual increase in longer rental agreements (having a duration of three years or more) and in most cases landlords and tenants who extend their rental arrangements for longer periods tend to keep the price of rent relatively stable. Furthermore, the Authority, through regular publications and data releases, has provided the market with invaluable information for prospective investors and consumers who are in a better position than ever to understand the dynamics of this complex market.
Naturally, these three years have not been without their challenges and the rental market is far from perfect. The disruption caused by the COVID-19 pandemic in the early stages of the Act’s life cycle profoundly altered the dynamics of the market as it brought substantial changes to the profile of the average renter in Malta. We have witnessed an increase in premature terminations of lease agreements in the post-pandemic years, as well as concerning signs of over-crowded tenements popping up in various corners of the archipelago. The costs and hassle created by a higher turnover of tenants caused headaches to property owners, and the over-occupation of rented dwelling houses was negatively affecting the quality of life of both tenants and neighbours.
It was time for the Ministry and the Housing Authority to put their constant market research, social dialogue and data collection exercises to good use and come up with a quick and effective response to these new dilemmas.
In the amendments tabled to the House of Representatives, the Government seeks to: maintain the balance between the property rights of landlords and the protection of tenants, strengthen the Housing Authority’s ability to enforce whenever necessary, simplify the registration processes and curtail abuse. For instance, we are proposing a new system of mandatory periods of occupation for lessees which are no longer fixed but flexible, reflecting the intention of the landlord instead of arbitrary legal parameters.
To explain this change in layman’s terms, let’s imagine the ordinary situation wherein a landlord and a tenant agree to enter into a rental agreement for a period of one year. The tenant shall be bound to observe the full period of the tenancy according to the lease agreement, on pain of forfeiting one month’s worth of rent unless the landlord communicates, by means of a written notice delivered to the tenant via registered mail, that he does not intend to renew the agreement with the same tenant. From that moment onwards, the tenant is free to find an alternative rental arrangement and may vacate the rented premises without incurring any penalties if his date of departure is communicated, in writing, to the landlord at least a month in advance.
Apart from the change in mandatory periods, the amendments address the matter of overcrowded rented tenements by limiting registrations of rental agreements to the maximum number of occupants permitted by national planning legislation. The current Use Class Order limits the simultaneous occupation of a residential dwelling to not more than six occupants if said occupants do not form part of the same family. The regulatory framework will be updated to take these restrictions into account whenever a new registration is submitted, and it shall now become an offence under Chapter 604 to permit the over-occupation of a rented premises or to distort the information provided in a rental registration to bypass the limitations imposed by planning legislation. The administrative penalties related to these breaches shall be capped at €2,239, however failure to conform with the new administrative sanction mechanism could lead to a criminal case against the abusive landlord. The criminal fines that may be handed down to persons found guilty by the Court of Magistrates in terms of the Act may vary from a minimum of €2,500 to €10,000.
Besides these two major changes, the amendments shall also: extend the deadline for the registration of a rental agreement from ten days to thirty days, shall make it easier for landlords to submit the inventory to the agreement in the form of photographs and short captions, shall close any loopholes that prevent the Authority from enforcing disciplinary actions against non-conforming parties, shall extend the competence of the Arbitration Panel, introduce a blacklist of tenants and landlords who fail to adhere to the decisions of the Panel and facilitate the transfer of information to persons who seek to enforce decisions of said Panel.
The Ministry and the Housing Authority remain committed towards the strengthening of the private rental market in Malta and Gozo through legislation which is coherent and up to date with current trends. The opinion and feedback of all stakeholders is crucial to us and we shall continue to listen to actors from all walks of life throughout the legislative process which is about to commence. The rental market provides shelter to a significant portion of residents our country, and we owe it to everyone involved in this sector to stay on the ball and proactive in our approach to regulation and enforcement.