After more than two years in the making, the highly-anticipated rental market reform was announced last week. Ivan Martin goes over the main changes for landlords and tenants alike.

The rent reform seeks to incentivise landlords to enter into long-term rental agreements by offering them hundreds of euros in tax credits. This, the government hopes, will help provide more security for tenants, in a market that is characterised by widespread abuse and skyrocketing prices.

The reform will introduce a mandatory one-year minimum contract for long-lets, with financial incentives for landlords who provide a two-year and a three-year-or-more agreement.

Annual rental increases will be capped at five per cent, but only in multi-year contracts.

Nothing, however, will stop landlords from entering into one-year contracts and drastically increasing the rental price for the next one-year agreement.

While the price will still be set by the free market, landlords will now be bound to provide tenants with at least three months of notice if they plan to evict them.

If a tenant is not informed of the landlord’s wishes prior to this period then the contract will be automatically extended for another year.

On the flipside, tenants will now have to meet a mandatory minimum period of rental before being able to leave a contract.

For one-year contracts this will be two months, for two-year agreements it will be four months, and for three-year contracts it will be six months. 

Tenants will also be required to provide a notice period should they wish to vacate the property before the termination of the contract.

Short-let contracts, which will be set at a six-month maximum duration, can only be provided to non-resident workers and non-resident students. No fiscal incentives will be available for these landlords.

The reform is currently being discussed in parliament and the government expects it to come into force by January. However,  a transitory amnesty period will allow for the sector to get used to the new system. 

Registering rent contracts

All residential rental agreements will have to be registered with the authorities, in a bid to cut down on black market abuse that pervades the industry.

The register, which will also be online and run on blockchain, will be overseen by the Housing Authority. 

Failure to register will mean a fine ranging from €2,500 to €10,000

Landlords will have to submit the contractual agreement, the inventory of the entire property, and the deposit paid, into the new system.

Should an agreement not meet the necessary criteria, it will not be registered, and will instead be flagged.

Cracking down

According to the team that drafted the reform, to date Malta’s rental market is characterised by widespread black market abuse. Under the new system, if a landlord fails to register their property, they will be subject to a fine ranging from €2,500 to €10,000. 

Tenants will also be encouraged to flag irregularities or suspicions to the Housing Authority.

A beefed-up Housing Authority will be empowered to investigate the market. The authority will also be able to take a case before a new Rent Regulation Board on behalf of the tenant and demand an imposition of three-year leases at 75 per cent of the property’s market value. This would provide security for tenants who to date fear being made homeless if they report landlords who rent on the black market.

A new adjudicating panel for residential rentals will be set up and composed of legal and technical experts.  It will deal with disputes related to deposits or maintenance fees of no more than €5,000.

Claims will be resolved within five working days.

Protection for landlords

The courts will be empowered to announce an eviction on its first hearing, putting an end of the endless delays landlords sometimes have to put up with before they get their property back.

Landlords will also have the right to demand compensation for any additional months the tenant might stay beyond a contract, without having to open fresh court proceedings.

Utilities

Tenants will now be given access to water and electricity bills to ensure that they only pay for the amount they consume.

Landlords will be duty bound to provide access to the billing information for the provision of utilities so that tenants will no longer have to take the property owner’s word on how much was due. 

Also utility providers will no longer suspend the provision of water and electricity in cases were either tenants or landlords are disputing the amount due. 

Airbnb and tourist rentals

This reform does not have anything to do with the holiday rental market and tourism rentals such as Airbnb, which will be covered in another law being drafted.