Dominic McGrath asks:

I am an Irish non-resident owner of property in Malta. As part of the process of acquiring a property as a foreigner, I was required to obtain an immovable property permit. One of the conditions of this permit is that I am not allowed to rent out my property, unlike Maltese nationals.

Is this situation contrary to any existing European law in that fellow Europeans are treated differently from Maltese nationals?

Understandably, the purchase of property by foreigners has always been a sensitive issue in Malta. On the one hand, we have always sought to encourage a certain degree of opening in order to attract foreigners to purchase property in Malta. This is, after all, a form of foreign direct investment. It brings in foreign money into the local economy and enables Maltese property-owners to sell their property at good prices. This is as it should be.

On the other hand, however, the purchase of property by foreigners was always subject to concerns in terms of the impact it may have on the price of property. It is for this reason that the right of foreigners to buy property in Malta has always been regulated or controlled - and a law that dates back 30 years has sought to limit, in principle, this right to just one property. This was done through the requirement of a permit that is known as the immovable property permit or AIP.

It was in this context that, during accession talks with the European Union, Malta put the matter of property as one of its main negotiating issues. Malta's concern was that, upon membership, the EU right of freedom of movement of capital would apply and automatically give all EU citizens the unlimited right to acquire property in Malta without any restrictions whatsoever. Malta, therefore, sought - and acquired - an exemption from this rule that would apply on a permanent basis.

In a country which is so small in territory and so densely populated, the concern is not difficult to understand.

Thankfully, this concern was well understood by our European partners and summed up brilliantly by the then EU commissioner responsible for enlargement, Gunther Verheugen, who said that "it cannot be in the interest of the European Union that an ordinary Maltese family could find difficulty buying property in its own country".

By and large the outcome of negotiations preserved the status quo, namely that the right of purchase of property by foreigners would continue to be limited to one single property unit even after membership.

So this is the situation today.

But some changes do apply. For instance, Malta acknowledged that if EU citizens want to transfer their residence to the island on a permanent basis, then they should not be required to apply for an AIP permit to purchase what would become their ordinary dwelling house. And if they live here for five years or more, then they should also be entitled to purchase more than one property.

But for those who simply want to purchase a second residence - a holiday home - here, as in the case of this reader, the same limitations would apply.

But this is as far as it goes. No further restrictions should apply.

This means that if foreigners purchase one property in Malta, even as a second home, there is no reason why they should not rent it out during their absence from the island. To my mind, the outcome of negotiations does not entitle Malta to prevent them from doing so.

If as Maltese citizens we are able to lease out our property, the same should also apply to other EU citizens who own property in Malta. If at all, such restrictions may be applied to non-EU citizens owning property in Malta. But not to EU citizens.

Any restriction on the right to rent out property would, to my mind, go beyond the terms of what was negotiated and would therefore fall foul of EU law.

So whereas the requirement for EU citizens to apply for an AIP permit and whereas the requirement to limit their ownership to just one property can continue to apply, other restrictions should not.

Therefore, in this case, the condition in the correspondent's permit that he should not rent out his property should, to my mind, be withdrawn.

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