Tenants in properties leased before June 1995 can no longer rest assured of their tenancy rights following a landmark ruling in a constitutional case on Wednesday which declared that the current legal regime breaches landlords’ fundamental rights.
The pronouncement was delivered in proceedings instituted by Anthony Debono and Simone Dimech as owners of a requisitioned property on Guze Ellul Mercer Street, Sliema, rented to Stefan Mifsud who had lived there with the previous tenant, his grandmother and continued to do so after her death in 1986.
The house, formerly owned by the applicants’ father who passed away in 2004, had been Mr Mifsud’s matrimonial home against an annual rent of €203, subject to an increase in line with the Inflation Index, the last being in January 2019.
That was the ‘fair rent’ in terms of the current legal regime, as regulated by the Reletting of Urban Property (Regulations) Ordinance, whereby landlords whose property had been rented out prior to June 1, 1995 had no right to refuse renewal of the lease and had to make do with that ‘fair rent’ in spite of soaring market values.
The applicants argued that the situation gave rise to “an enormous discrepancy” between what they were earning by way of rent and the potential income their property could generate on the free market.
A court-appointed architect had estimated that the house was worth some €300,000 and could generate a monthly rent of €1,000.
The applicants also explained in court how back in 1996 they had to turn down a purchase offer of €450,000 since the tenants refused to accept alternative accommodation offered, thus blocking the sale of the premises.
Moreover, the owners said they had “no real hope of gaining effective possession of the premises nor real income” therefrom given that the tenants’ children held a right to succeed in the enjoyment of the lease.
The First Hall, Civil Court in its constitutional jurisdiction, presided over by Mr Justice Lawrence Mintoff, observed that compared to the market value, the rent was low and the chance of regaining possession of the house for the landlords was “remote.”
The current regime created an unjust imbalance between the rights of the owners and those of the tenants, with the former having to shoulder, for years on end, the social burden induced by the current legislation which allowed sitting tenants the right to continue renewing the lease indefinitely at a paltry rent despite the amendments of Act X of 2009.
The State had clearly “failed to legislate to safeguard the rights of owners,” the court declared, stating that this should never be “unless adequate compensation was provided by the State.”
Such a situation clearly breached the applicants’ constitutional rights, concluded the court, awarding them €20,000 by way of damages payable by the Attorney General, together with all costs of the case.
Finally, the court also ordered the tenants to no longer rely on the law which was thus declared unconstitutional, to retain their hold on the premises.
This effectively means that all pre-June 1,1995 leases, whether residential or commercial, are up for scrutiny. If the rent is disproportionate with market forces, then, the tenants shall no longer be able to claim protection for automatic renewal.
Lawyers Edward Debono and Karl Micallef assisted the applicants.