Sense must prevail sooner rather than later

The Malta Chamber of Commerce has regularly aired its views with regard to the urgent need for an effective review of the country's rent laws.

President Guido de Marco's announcement that "rent laws will be revised and incentives will be granted for the use of our sizeable stock of empty dwellings" was perceived by the Chamber as a breath of fresh air. The President made the statement in his speech at the opening of the 10th parliament on May 24.

Indeed, rent laws in this country are the source of great social injustice causing social pressures through artificially high property prices for young and older people alike.

These also adversely affect the country's environment in a physical manner in that new housing units continue to be built despite a stock of 22,000 permanently empty properties.

Standard of living is also affected because such properties are seldom well maintained. Despite these serious problems which are inflicted across all sectors of the population, the country's leaders on both sides of the political spectrum have shown reluctance to seriously address the situation.

The legal amendments made in the mid-1990s have served little purpose. The fact that Malta suffers from a housing problem demonstrates, beyond doubt, that these past efforts did not produce the desired results.

Consequently, the rental market in Malta is struggling to survive. Even post-1995 rents continue to be high in Malta because the supply of rented property is relatively scarce.

The attraction of more properties to the supply-side of the market is not easily envisaged under present circumstances. There is little doubt that Maltese landlords continue to strongly distrust the local rent laws and their legislators.

Despite the liberalisation measures mentioned above, landlords continue to be apprehensive and uncertain. Judging from previous experience vis-a-vis retroactive legislation, it is possible that the present rent laws, even if amended, will once again become subject to retroactive legislation by future administrations. The resultant sense of mistrust is of no help and must be adequately addressed in any measures to be taken by the government.

No one in Malta has any doubt that the rent laws, to date, have been of great unfair prejudice to the landlord and that this situation still applies with respect to the old existing rents.

Chapter 69 of the Laws of Malta - Reletting of Urban Property (Regulation) Ordinance - protects the tenant in so far as the lessor may not refuse renewal of the lease or raise the rent without permission of the Rent Regulation Board (section 3) and when revision is granted, the revision is nothing but a pittance.

An even greater injustice occurs in the case of commercial letting because here the tenant is exploiting protection from antiquated and unfair legislation to the detriment of the rightful beneficiary of profits. In terms of commercial premises, another injustice arises in that the government enjoys the right to increase the rent of commercial premises which it owns while private landlords may not.

The Sunday Times' opinion survey (June 22) on the subject made interesting reading to the majority of Maltese who, like me, believe wholeheartedly that a review is long overdue.

From the survey, it transpired that 70 per cent of respondents claimed the government should not enjoy rights over its rented properties that individual landlords do not.

For years on end, the Chamber denounced the practice and the legality of "inheriting" low rent agreements from relatives by moving into rented properties shortly before their demise.

This practice can safely be termed as an abuse when one considers the prolonged injustice it causes on the landlord. It comes to no surprise that a vast majority of Maltese people interviewed favour changes in this respect.

The Chamber has also complained in the past about the issue of maintenance. Understandably, the landlord cannot maintain properties rented at low rates with the meagre amounts received. This causes buildings to eventually develop into slums to the detriment of all concerned, including society at large. A graver social injustice occurs where the tenants happen to be relatively more affluent than the landlord who could be old age pensioners relying on rents to supplement a pension.

In certain cases, such rents are so low that they are not worth putting pen to paper to issue a receipt let alone finance maintenance. Again, the Chamber is encouraged by the statistic researched that almost two-thirds of people participating in the aforementioned survey believe that works should be paid for by the tenant enjoying the low rent.

In the Chamber's view, the strong bias against the landlord and the latter's distrust of the law is deterring the establishment of a fully-fledged rent market in Malta.

This could constitute a plausible alternative to property ownership while putting a socially desired brake on the acceleration of property prices.

A total liberalisation of rents would allow a mature rental-market to flourish thereby contributing towards alleviating first-time buyers from their mortgage burdens.

This scenario would offer a plausible alternative to taking out massive house loans to finance the purchase of property delivering young people from heavy indebtedness.

Mortgage repayments typically occupy a vast proportion of expenditure, particularly for young people in the so-called "first-time buyer" market segment.

Several ideas have been mooted in the press in recent days and weeks. The Chamber clearly supports calls for rent law reforms made by the chairmen of Alternattiva Demokratika and the Housing Authority. Harry Vassallo cited injustice as the main reason for this urgent requirement as well as to accommodate the 3,000 people on the Housing Authority's waiting list.

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 in order to rekindle the landlord's trust in the pertinent legislation.

If the landlord is placed in a relatively commercially favourable position and is confident the government will not subsequently renege, through retroactive legislation, then the landlord will invest and supply property to the renting market. It would bring a win-win situation for the landlord, people in the market and the population at large if a vast number of the 22,000 permanently vacant properties are not left unutilised.

The Chamber has often cited fiscal and financial incentives as other ideal methods to stimulate the property owner with a view to ultimately generating the desired goal at both the social and economic level. In the Chamber's view, the way forward is through persuasion and not imposition. It is not the stick attitude that must prevail.

The housing solution is both sensitive and serious. A remedial legislation packet is long overdue and must combine both the landlord's and the tenant's justified interest according to the prevailing times.

It must achieve this through a formation of trust, a series of financial benefits and subsidies and definitely not through any imposition that would continue to hamper any hope of restoring confidence within the market players.

It is also suggested that the government would assume a cooperating stance with the private landlord so as to facilitate the latter's supply of dwellings on the local renting market. This could be achieved by the redirecting of public funds which would otherwise be channelled into the provision of housing estates.

These funds could be used to subsidise (temporarily or otherwise) the payment of rents or the provision of housing by the private sector. In this manner, free space would not be developed and will remain accessible to the general public. Besides, the government would not have to bear any capital outlay.

By means of the above suggested solutions, the Chamber expects that in the not-too-distant future, the problems generated directly and indirectly out of Malta's archaic rent laws would be entirely resolved. The Chamber also expects political consensus in this area to the benefit of all concerned and for social justice to prevail.

Mr Fava is president of the Malta Chamber of Commerce