Labour squandered quarter of a billion euros leasing and refurbishing private properties for use by government entities. It spent €245.82 million actually.
The State has over 4,000 unutilised properties of its own. It’s the country’s largest property owner. So why waste hundreds of millions of our taxes renting out private property? Is it just sheer incompetence or staggering recklessness with taxpayers’ money? Both – but not only.
Those €245 million are going into the pockets of a few chosen ones – handpicked actually. Out of 260 private properties leased, 117 were through direct orders. One particular property cost the government €1.6 million in rent and, yet, no tender was issued. The minister responsible simply decided who to give those €1.6 million to. When the NAO enquired, the ministry responsible “did not provide the reasons substantiating why the government entity resorted to direct order”.
The detailed NAO report on government’s leasing of private property is utterly depressing. It paints a picture of chaos, anarchy, lawlessness and staggering incompetence. But it also raises serious “governance concerns”, “lack of accountability and transparency” and serious doubts about possible criminal collusion.
For a start, the government has no clue how many private properties it’s leasing. The NAO discovered that there is no central database of leased properties. In order to figure out how many properties are leased, the NAO had to search through answers to parliamentary questions. The problem was those answers often failed to declare the costs.
The NAO resorted to looking for direct orders published in The Malta Government Gazette. It also sent separate queries to 19 government ministries asking them about leased properties. In desperation, they also sent out surveys to different government entities to try and collect the information.
Frustrated, the NAO declared that its job was rendered impossible. The lack of information held by the government, despite the huge cost to the State, was unbelievable. “This hindered this office from collating full information concerning leased properties,” the NAO lamented.
Labour spent over €41.8 million refurbishing private property but only allocated €500,000 to the Lands Authority
This was made worse by the fact that some government entities failed to submit their responses to the NAO. Others were incomplete, failing to state the cost or size of the properties leased.
Despite the spokes placed in its wheels, the NAO managed to identify 260 private properties currently leased by the government. In 2022 alone, Labour squandered almost €22 million in rental payments to the private sector. The total cost of leasing amounted to a staggering €204 million.
If you thought the government was getting quality properties suited to its needs, you’re wrong. Government entities failed to conduct any needs assessment before leasing private property. So, Labour spent another €41.8 million of our money to make those properties fit for use. In some cases, it spent far more on refurbishment than on the exorbitant lease.
In six properties, Labour spent over €1 million per property to make them usable. The worst culprit was Silvio Schembri. On one single property leased for the Malta Business Registry, Schembri spent €11.5 million on refurbishment.
That’s on top of paying one of the highest leasing rates – €171 per square metre – on that property. The average leasing cost is only €118/sqm. The Malta Business Registry is not in Valletta or Sliema. It’s in Żejtun where rental rates are some of the lowest in the country. No wonder Schembri desperately tried to conceal the contract.
Schembri spent €26 million to lease that bathroom showroom in Żejtun and then spent another €11.5 million to turn it into offices. When the lease expires, the owner will reclaim his property refurbished at taxpayers’ cost. Its value will have substantially increased. That’s a super-jackpot for the owner – he gets €26 million and a refurbished appreciated property.
That’s not the only Schembri scandal. He spent another €3.83 million refurbishing another property leased for the Malta Gaming Authority. He spent €1,403/sqm in refurbishing on top of the €164/sqm in lease. He spent another €1.9 million to refurbish another private property leased for the Malta Digital Innovation Authority. That one hit the record – €1,452/sqm in refurbishing costs over and above the €160 /sqm in lease.
Schembri wasted over €17 million refurbishing private properties that he leased by direct order from the private sector. Those properties were entirely unfit for purpose. Yet, Schembri agreed to pay their owners some of the highest leasing rates and then spent millions more to upgrade those properties – to the benefit of the owners.
What’s even more galling is that Schembri was responsible for the Lands Authority (LA) until the latest reshuffle. The LA is legally responsible for all government property, including the over 4,000 unutilised properties.
The LA is also responsible for private property leased by the government. Government entities should check with the LA whether there are suitable government properties before leasing private property. Schembri could easily have asked the LA for some government property for those three entities.
But the LA confided with the NAO that it’s not involved in leasing private property: “Government entities usually prefer to keep such task (sic) well within their control.”
The LA has no idea what properties the government owns. Its Land and Estate Management System (LEMIS) is incomplete and outdated. Information is still held in “tens of thousands of files that have been accumulating over the past decades”. Often, the LA doesn’t know the size or state of the property, whether it’s a house or block of flats, and, in many cases, doesn’t even know whether it has the keys to the property.
Labour spent over €41.8 million refurbishing private property but only allocated €500,000 to the Lands Authority – that’s barely enough to cover “urgent repair works or to clear imminent danger”.
Schembri was responsible for the Lands Authority for years. While he starved it of funds, he spent over €17 million refurbishing private properties and handing millions more in lease to private owners for property entirely unfit for purpose.
If that doesn’t warrant a criminal investigation, I don’t know what does.