New rules aim to curb speculation in property scheme

The government has added new conditions to a property scheme on leased residences in order to avoid the "legal abuse" whereby new owners were making a lot of money by re-selling.

The scheme allows those who had leased a residential property from the Joint Office to "redeem" their home and gain full ownership against a small payment.

Although it was deemed a success, the government lately realised that people were making a killing from the scheme by selling their properties at commercial rates only days after redeeming them, the Parliamentary Secretary for Land, Jason Azzopardi said yesterday.

The new conditions aim to discourage this sort of speculation. Now, if a property is sold after being redeemed, a percentage of the income will have to pass to the government.

If someone sells a property within five years of having it redeemed, 25 per cent of the sale price will be forfeited. This amount will drop by five per cent every five years, so even if a property is sold after 15 years, 10 per cent will still have to be paid to the government.

Furthermore, the property will have to continue being used as a residence by the owner for 20 years after the sale or after the redemption of the ground rent, so it would not be possible to turn it into a block of flats or given for some other use.

Dr Azzopardi said the measures ought to curb abuse, which, although legal, went against the spirit of social justice. Since the scheme was originally a concession, the government had every right to change the rules, he added.

"Some made tens of thousands of euros from the scheme and many of the properties were turned into blocks of flats," he said.

About 5,000 applications were submitted under the scheme so far, 3,000 of which are still pending and will now be considered under the new conditions. No more new applications are being accepted until the scheme is re-launched in "a few months' time" with the new conditions.

Members of the Commission for People with a Disability or people who sell their property to their own family members (siblings, parents, grandparents or children) will be exempt from giving a percentage of the sale price to the government. However, the new owner in such cases will have to abide by the new conditions.

Checks will be carried out to ensure that all the properties sold under the new rules will be used for residential purposes. The controls will include evidence from the electoral register, water and electricity bills and inspections.

The original scheme was introduced in 2002 and at first only applied to those 80,000 Church properties transferred to the state following an agreement reached in 1991. In 2004, it was extended to government property on lease.

cperegin@timesofmalta.com