Finally putting an end to social injustice

The Malta Chamber of Commerce and Enterprise refers to the last "Speech from the Throne" wherein it was declared that "rent laws will be revised and incentives will be granted for the use of our sizeable stock of empty dwellings".

It is pleased to note Minister Dolores Cristina's recent announcement in the media that the government is to seriously address this problem. It is also most encouraging that positive feedback seems to be coming from other political parties.

The Prime Minister was also recently quoted as saying: "We need to find the reasons why people are not renting houses, we have to address that". The chamber agrees entirely with Dr Gonzi when he further declared: "What needs to be changed (in the law) is the conditions for those who rent property on pre-1995 conditions as they are unfair on the owners".

The chamber believes that landlords do not rent houses to Maltese people because they do not trust Maltese legislators. This mistrust is based on historical facts. Successive governments have legislated with retroactive effect. Thus a legal position obtaining, at a certain period of time, when a contract was entered into or right acquired, was subsequently overturned by the government to the detriment of that individual. Reference is made to the changes in the Housing Decontrol Act made in 1979 under the Labour administration and to the Capital Gains Tax legislation enacted in 1992 under the Nationalist government.

In view of the above, the chamber suggests that:

a) legislation on this subject be enacted with the consensus of all political parties. Recent developments suggest this may be forthcoming and

b) such legislation is enshrined in the Constitution so that it is not easily reversed.

The government and the political parties should amend the rent laws because these are unfair on the owners and have been so for decades. The chamber envisages three main steps to be overcome for the property market to become truly liberalised.

The first relates to "security of tenure". For years, this provision has given rise to social injustice as it offers protection to those relatives of tenants who "abusively" moved into premises in the twilight of their relatives' lives to "inherit" favourable rental conditions. The elimination of this unfair protection is deemed socially and politically friendly. In this context, a recent statement by Minister Cristina that "the rent laws of 1995 liberalised the rental market without affording any security of tenancy to tenants who moved into post-1995 agreements" warrants further clarification.

The second step is liberalisation of pre-1995 residential rents. Rents could be indexed to the 1939 minimum wage or the retail price index. Although the resulting increases are not envisaged to be prohibitive, a safety-net could be offered to tenants who cannot afford the revised rent. In such cases, the government may offer subsidies or social assistance which would ideally be subject to means-testing to minimise abuse.

This move could be perceived as less politically neutral although the social injustices inflicted by the current system should not be overlooked especially in cases where the tenants happen to be relatively more affluent than the landlord. To add insult to injury, as the law stands, the landlord is also obliged to finance any maintenance works required in rented properties.

Thirdly, the chamber's stand on pre-1995 commercial rents is in favour of complete liberalisation. The situation here give rise to even greater injustice because the tenant is exploiting protection from antiquated and unfair legislation to the detriment of the rightful beneficiary of profits. In the case of commercial rents, another injustice arises in that the government enjoys certain rights that private landlords do not.

The chamber therefore proposes that current rents should be given a short moratorium after which they will be liberalised. The tenant would be given the right of first refusal to retain the rented property at the new rates and conditions. If the tenant dies before the moratorium term a new tenant at free market rates will be sought with immediate effect.

This would not merely eliminate the injustice caused but also ensures fair competition between operators of similar businesses in nearby locations but with mammoth differences in their rental agreements. The chamber is convinced that this change is long overdue.

Inherited property is taxed according to the value given to it by the Inland Revenue Department without usually taking into account of whether the property is rented or vacant. In the former case, a property would carry a much lower value in the property market if it were rented out under the 1939 rent laws. It would be fair for the fiscal authorities to take such an important matter into consideration.

The issue of rent is closely related to that of social housing. The government spends millions of liri in constructing housing estates on scarce virgin land. This policy does not make sense in the light of some 22,000 permanently empty properties which could easily be utilised for this purpose. Such a policy is doubly prodigal - financially and environmentally. The government should drastically alter its policy and channel public funds into incentives to landlords of vacant premises to promote the lease of their premises.

The chamber acknowledged that its proposals might be politically sensitive. Nevertheless, the status quo continues to impose harsh social injustices to tenants who may be social cases in their own right. The proposed amendments are aimed at restoring social justice to land and property owners. They would enable the rental market to flourish, redimensioning rent charges and property prices through liberalisation and market forces.

These suggestions would also provide a plausible alternative to young people who at present take out high mortgages to purchase expensive property. They are also conducive to placing properties which are currently vacant and dilapidated back on the rental market. This would benefit the environment through the regeneration of slum areas while at the same time new buildings would not continue to be erected on virgin land.

The chamber strongly suggests a positive perspective in effectively tackling the situation rather than a negative stance. It maintains that the situation requires an enhancement in the law. The landlord must be offered a better commercial position and security against retroactive legislation. Only then will the landlord supply property for rent. It would bring a win-win situation, for the landlord, people in the market for housing and the population at large if a vast number of 22,000 or so properties are not left permanently vacant. Landlords have suffered enough injustices through legislation which continues to discriminate against them. They should definitely not be burdened further through taxation.

Through the above suggestions, the chamber expects that the problems caused by Malta's archaic rent laws could be resolved. The chamber also expects political consensus in this area to the benefit of all concerned and for social justice to prevail.

Mr Apap-Bologna is president of the Malta Chamber of Commerce and Enterprise.