The landlords of a commercial property on the Sliema seafront have been awarded €100,000 in damages in another legal challenge to the rental laws.
The property, on The Strand, had originally been acquired under a 109-year emphyteusis back in 1919.
In its judgment the court noted the “inertia” of the state which failed to legislate a better balance of the rights and obligations of landlords.
The applicants or their predecessors had leased out the premises in 1976 to a business entity at an annual rent of Lm4,000, subject to a five per cent increment every five years, for three consecutive terms.
In 1994, the landlords sought to negotiate a new lease agreement, for an annual rent of Lm8,000, equivalent to €18,635.
However, no agreement was reached and the matter ended up before the Rent Regulation Board which fixed the rent at Lm6,500. That decision was confirmed on appeal, but the landlords refused to accept payment of the rent.
An excessive and unjust burden
The landlords claimed a breach of rights and argued that the current rent at €29,195 was inadequate in view of the dimensions and location of the premises.
The respondents, namely the company leasing the premises and the Attorney General, countered that the applicants, or their predecessors in title, had been aware of the legal regime when leasing out their property.
The court, presided over by Madam Justice Miriam Hayman, delved into case law which constantly acknowledged the “wide discretion” of the state to enact laws controlling the use of property in light of the general interest.
“However, when exercising that discretion through the setting up of mechanisms to protect one category (the tenants) (the state) did not have a free hand to disproportionately prejudice the rights of another category (the landlord.)”
The court observed that when signing the lease agreement the applicants “had not been in a position to anticipate fluctuations in market trends nor subsequent legal amendments that were to regulate, or rather control, the payment of rent.”
The rent projected by the court expert when compared to the rent paid left no doubt as to “the enormous disparity and complete lack of proportionality” suffered by the landlords.
Moreover, although the lease was due to expire in 2028, the landlords would still have no option but to “shoulder such an excessive and unjust burden,” for the next eight years, the court said.
In this case, the landlords were awarded €100,000 in moral and pecuniary damages, payable by the state.
The court, however, rejected the applicants’ claim that the situation amounted to discrimination in terms of Article 14 of the European Convention on Human Rights. Nor did the rent laws amount to a form of state aid which threatened to distort competition.
The case is now pending appeal. Lawyers Joseph Ellis and Martin Farrugia assisted the applicants.