The newly-introduced Private Residential Leases Act has turned the private rental market on its head. The Act came into force on January 1, 2020, and its aim is to regulate contractual relations between lessors and lessees and to safeguard the right to adequate accommodation.
Applicability
The Act applies to private residential leases that were entered into after January 1, 2020, and those leases that were entered into prior to the aforementioned date, but are still in force on January 1, 2021, whether in their original or renewed period.
Non-applicability
The Act shall not be applicable to:
• Tenements which are not let for a primary residential purpose;
• Tourist accommodation;
• Tenements owned by the government of Malta;
• Leases entered into before June 1, 1995;
• Urban tenements under contracts of emphyteusis or sub-emphyteusis which have or may be converted into leases.
Obligatory registration
All private residential leases falling within the scope of the Act are to be registered with the Housing Authority within 10 days from the start of the lease. It is the lessor’s obligation to register the lease agreement; however, should he fail to do so, the lessee may register it at the expense of the lessor. Registrations are subject to an administration fee and the Housing Authority shall impose an additional fee for late registrations. Failure to register will render the contract null and void.
Requisites of a private residential lease contract
All private residential lease agreements shall be made in writing and must include the following requirements:
• Tenement to be leased;
• The agreed use;
• The letting period;
• Whether the lease may be extended and in what manner;
• The rent to be paid and payment method;
• The deposit paid;
• A detailed inventory.
• In the absence of one or more of the above requirements, the lease contract shall be considered null and void and shall not be registerable.
The forbidden clauses
In order to safeguard lessees from unfair clauses, the Act provides a list of forbidden clauses, that is, clauses which if included in a lease contract will be deemed to be without effect.
Rent may only be increased once a year and cannot exceed five per cent of the existing rental amount
Examples include clauses that limit the use that one is expected to make of a residence; clauses that exempt the lessor from any responsibility to which he is bound by law, such as to warrant against faults or defects; clauses that demand the payment of a fixed amount, separate from the rent, to cover the consumption of any utilities if the said amount does not reflect the actual consumption; and clauses that provide for the automatic termination of the contract.
Private residential leases
The Act regulates long and short private residential leases and the lease of shared residential spaces.
A short private residential lease is a lease for a duration of six months, which shall apply to:
• Temporary, non-resident workers employed for up to six months;
• Non-resident students pursuing short courses of less than six months;
• Non-residents who are not seeking to establish ordinary residence in Malta and need to rent a tenement for a period of less than six months;
• Residents who require an alternative primary residence for a period of less than six months.
• On the other hand, a long private residential lease is negotiated for a period not shorter than one year. This said, any private residential lease agreed for a shorter period will be deemed to have been agreed for one year unless it falls within the above definition of a short residential lease or relates to shared residential space.
Rent
The rent can be freely stipulated between the parties and is to be calculated on a monthly basis, unless agreed otherwise. The advance payment of more than one month’s rent must be subject to agreement by both parties. The lessor retains the right to demand a deposit from the lessee.
Rent may only be increased once a year and cannot exceed five per cent of the existing rental amount. This is in line with the Property Price Index published by the National Statistics Office.
Termination
A long-term lease contract may be terminated by the lessor by means of a registered letter sent at least three months before the term expires. Failure to abide by this time limit shall result in an automatic renewal of the lease.
The lessee can withdraw from the contract by means of a registered letter after the lapse of:
• Six months where such lease is for a period of less than two years;
• Nine months where the lease is for a period of two years or more but less than three years;
• Twelve months where the lease is for a period of three years or more.
Should the lessee withdraw prematurely, the lessor has the right to retain the value of one month’s rent from the deposit.
A short-term lease contract ceases upon the expiration of the term agreed upon between the parties. Hence, there is no automatic renewal. The lessee can withdraw at any time after the lapse of one month by giving prior notice of at least one week by means of a registered letter.
Similarly, the contract regulating a shared residential space may terminate automatically upon the expiration of the contract. The lessee is allowed to withdraw at any time by giving the lessor one week prior notice through a registered letter.
This article is not intended to constitute legal advice and neither does it exhaust all relevant aspects of the topic.
Rose Galea Testaferrata, Associate at Refalo Advocates