A new law governing how private residential properties are let out and managed comes into force in the New Year.
The Private Residential Leases Act was designed to better regulate how contracts are drawn up and introduces a series of responsibilities on the landlord and tenant that are overseen by the Housing Authority.
However it is not without its critics, with some landlords claiming it is “draconian” and could stifle the rental industry.
Whether you’re a tenant or a homeowner, here’s what to expect from January 1, 2020:
What is it?
A reform of private residential rental leases for properties let out to tenants working or studying in Malta. The new law encourages landlords to register their rental properties with the Housing Authority as well as imposing stricter terms on contracts and the conduct of both the landlords and tenants.
Registration needs to be done not only by students or workers but by all property owners who are renting their property for a primary residential purpose.
Prime Minister Joseph Muscat announced the Private Residential Leases Act back in June this year. He said that the aim of the Act was to reform the rental market and regulate prices, contracts and the conduct of both tenants and landlords.
Dr Muscat told the media that this was aimed at being a pro-active reform that encourages landlords to be registered rather than punish them to do so.
When will it take effect?
The Act was presented to the Maltese Parliament in June 2019 and was later approved on November 8. This law will take effect on January 1, 2020.
What does it apply to?
The reform covers private residential properties with leases signed or set to be renewed after January 1, 2020 and those still in force as of January 1, 2021. This will also include all rental contracts signed after June 1, 1995.
Short-term contracts need to be 6 months and cannot be less. Long-term contracts are to be one year or more.
What does it not apply to?
This rental reform does not apply to council properties owned by the Maltese government or properties let to seasonal tourists. The latter are regulated under the Malta Travel and Tourism Services Act.
This reform does not apply to properties which are under contracts of Emphyteusis, those that are let by landlords for long lets and are structurally improved by the tenant.
This law does not apply to properties that were rented before June 1, 1995.
Registration: A landlord is required to register every private rental contract signed with their tenants. These contracts must be registered with the Housing Authority within 10 days of the lease starting or being renewed.
Termination: The rental contract cannot be terminated at any time. The notice must be sent three months before the contract duration expires. If the tenant does not get the letter within the specified time, that means the contract would be renewed for one more year.
As for short term leases, the contract would be terminated on the date that is agreed between the landlord and tenant. This means that neither the landlord nor the tenant would need to give notice.
Rental agreements: The new law now requires that the period of the rental agreement and the amount of rent per room and shared spaces must be specified and put in writing.
This means that if a landlord signs a rental agreement in the New Year, say February 9, 2020, the landlord will need to register their contract with these fixed dates to the Housing Authority by February 19. This also covers the extension of a rental lease.
The same goes for the rental and deposit that is paid by the tenant. If the landlord agrees with the tenant that their room is €310 per month, that amount and the payment method are also registered.
This law also enforces that an increase in the rental price can only happen once a year and cannot go over five per cent of the existing rental amount per year. This is in line with the Property Price Index by the National Statistics Office.
The law is also strict on landlords providing an inventory of the contents like the appliances and the condition of furniture. If any of these elements of the agreement are not established, the contract is void.
Utilities: In addition to making sure there is an adequate supply of water and electricity, they are also bound to show the correct tariff and bills proportionately shared among the tenants.
The rental contract cannot be terminated at any time. The notice must be sent three months before the contract duration expires.
What about tenants?
Tenants have to give a strict period of notice before they can withdraw from a long-term contract.
This looks like: 1 year contracts: Following the obligatory six months, the lessee may be released from the contract by giving at least one (1) month notice to the lessor by means of a registered letter;
2 years contracts: Following the obligatory nine months, the lessee may be released from the contract by giving at least two (2) months’ notice to the lessor by means of a registered letter;
3 years or longer contracts: Following the obligatory twelve months, the lessee may be released from the contract by giving at least three (3) months’ notice to the lessor by means of a registered letter;
The new law stipulates that tenants are required to pay the landlord for the extra days that they stay in the property. This would be paid as an equivalent rent to the number of days.
What are the fines?
For anyone who found guilty of renting out or occupying property for residential purpose that does not conform with the requirements of the Act would face a fine of between €2,500 and €10,000.
The Act also enforces fines of €1,500 and €4,000 against landlords who attempt to block water and electrical services to the property, or the removal of furniture, appliances or personal belongings.
The Housing Authority would have the power to issue an enforcement order and fine of €5,000 against a person found guilty of living in a property and is not registered under the Act.
Who will enforce this law?
The Housing Authority has been chosen as the sole regulator of the new rental law when it comes into force. The Parliamentary Secretary for Social Accommodation, Roderick Galdes says the Authority will be given more responsibilities to regulate the rental market.
A new unit called the Private Residential Leases Unit will set up to handle registrations from landlords, which will have to be submitted online through a newly-set up website.
Mr Galdes said the unit would enforce certain “small issues” to avoid having to resolve them in court. It would also be given the power to enforce regulations as stipulated under the new law.
An adjudication panel will be formed to decide on disputes related to these leases.
What the critics have said
The Malta Developer’s Association said in November that the new law will damage the freedom landlords and tenants have to draw up contracts for residential properties.
While it recognised the need for a fairer framework to draw up contracts, it could not be allowed to stifle the industry.
Landlords also said in September that they regarded some of the measures perceived as draconian by rental property owners, with a number of landlords who form part of the Malta Developers Association also arguing that the reform would hurt rather than help tenants in the long run.
Rental property owners said that having to given tenants three months’ notice through an official letter saying they did not want to renew rental contracts, could be troublesome. Failing to send the letter would mean the contract is renewed for another year.
Others felt that difficult tenants could get creative to avoid the official notification.
This article was amended on January 3, 2020 after additional information from the Housing Authority.
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