A landmark judgement was delivered last month by the European Court of Human Rights, which is bound to change the interpretation of our municipal rent laws.

In the case of ‘Zammit and Attard Cassar v Malta’, the ECHR decided that Articles 3 and 4 of the Reletting of Urban Property (Regulation) Ordinance which prohibit an increase in pre-1995 rents, violate the owner’s property rights as protected by Article 1 of Protocol 1 of the European Convention on Human Rights since this law imposed an unfair and excessive burden on the owner.

Rent laws state that in a pre-1995 lease, upon the expiration of the lease period, the owner of the property cannot refuse the renewal of the lease, raise the rent or impose new conditions unless authorised by the Rent Regulation Board. Moreover the raise in rent, even if authorised by the board, cannot exceed 40 per cent over and above the ‘fair rent’ at which the property could have been leased in 1914. In practical terms, the fair rent – which is anything but – makes it impossible for the owner to demand an increase in rent since the maximum increase can only amount to 40 per cent over the rent rate applicable a hundred years ago. This law is befitting to all urban leases, irrespective of whether the lease period was agreed to by the parties or stipulated by law.

This led to situations where, prior to 1995, an owner rented out a property and, unless the tenant infringed the limited conditions of the lease imposed by law, the owner could not refuse the renewal of the lease or raise the rent, leading to a situation where the rent remained the same despite the tenant and his family possessing the property for decades.

Obviously, the rent would reflect the market price of the property at the time of the contract. However, since such a lease is indefinite, over the years the rent becomes a pittance when compared to the increase in the property’s market value.

This landmark judgment dealt with a commercial store originally rented out in the 1970s. However, the rationale adopted by the ECHR can be used in interpreting laws applicable to all pre-1995 leases.

Contrary to a number of local judgments, the ECHR decided that despite the fact that upon commencement of the lease the landlord knew or ought to have known about the limitations imposed by the law, this is not tantamount to subjecting oneself to the law and waiving one’s right to peacefully enjoy the property because the landlord could not have been in a position to envisage the extent of inflation in property prices in the decades to come. Therefore, the restrictions imposed by the law constitute an interference in his enjoyment of his property. Apart from that, the court also noted that the landlord cannot effectively waive a right which he never had to begin with.

The ECHR considered that once the law interferes with the enjoyment of one’s property, a fair balance must always be struck between the general interest of the community, for which the law was enacted, and the requirements for the protection of one’s fundamental rights.

Despite this, the owner suffered an unfair and excessive burden since the court did not provide adequate procedural safeguards aimed at striking a fair balance between the interests of the tenant and those of the owner. Due to the pittance in rent being paid, which is far less than the market value of the property, the tenant could make inflated profits to the detriment of the owner who was not receiving a just rent. Consequently, the interference by the state in controlling the use of property was not justified since the prejudice suffered by the owner was not proportionate to the general interest for which the law was enacted.

One must consider that this law was put in effect in the 1930s when the social, economic and political landscape was very different to what it is today. What was essential and in the public interest over 80 years ago cannot be deemed of same importance in 2015. Amendments to the rent laws in 1995 and 2010 were a step in the right direction; however, they still do not strike a fair balance since the changes were minimal when considering the excessive and disproportionate burden suffered by property owners.

Daniel Buttigieg is a lawyer with Fenech & Fenech Advocates.

www.fenechlaw.com

This article is not intended to offer professional advice and you should not act upon the matters referred to in it without seeking specific advice.