Emphyteusis – an obscure word (one that interestingly, the typical spellcheck software does not even recognise) and the proper legal term used to describe the more familiar concept of ‘ground rent’ (ċens in Maltese).

There is a lot to say about the institute of emphyteusis; it is rich in history, yet relatively poor in modern debate. Indeed, ground rent is today mistakenly considered by many to be a mere redundant nuisance, as if it is something that one can easily do away with, with next to no legal consequences.

Certainly, this is not the case. Emphyteusis is a legal contract proper, one that carries myriad rights and duties.

Emphyteusis was originally ‒ and to a certain extent is still today ‒ a contract whereby a landowner would lease a tract of land to another, in perpetuity or for a long time, in return to a low rent. The occupier (the emphyteuta) is duty-bound to take care of the land and to actually improve it.

The idea was that owners who possessed many lands (and could not possibly care for them all) would make sure that under the hand of the emphyteuta, the lands are cultivated and not laid to waste. Like that, the occupier would obtain the enjoyment of a land he did not own without having to fork out a capital outlay and the owner would still exercise a form of dominion over the property through the receipt of ground rent. At the same time, the property would not be merely taken care of but it would actually be improved. Should the emphyteuta not pay rent, or cause to deteriorate the land, then the contract could be terminated.

Noticeably, this is quite a special contractual relationship, unlike any other.

These elements carried over throughout the centuries and are largely still part of the institute of emphyteusis today. Interestingly though, redemption (fidi) was not an original ingredient to this legal institute; it was introduced in Malta only by a law enacted in 1981. Prior to that, emphyteusis could not be redeemed. Maltese law recognises two types of emphyteutical concessions: perpetual ground rent and temporary ground rent.

Perpetual emphyteusis is that which lasts forever and is, at face value, almost indistinguishable from ownership, save for the payment of ground rent – which can be redeemed – and for the burden of any conditions in the original concession, such as for instance, the altus non tollendi (a prohibition from developing the property for more than a determined height) – which, as per the most prevalent judgments, cannot be unilaterally redeemed.

Temporary emphyteusis is somewhat of a significant lesser right – it is a concession that is granted for a period of time (usually a long one). Upon the expiration of this period, this property is to be returned to the dominus (the owner), supposedly in an improved state.

Redemption (fidi) was not an original ingredient to this legal institute; it was introduced in Malta only by a law enacted in 1981

Expectedly, the value of a property subject to a perpetual emphyteusis is substantially higher than that subject to a temporary emphyteusis, more so if, at the time of purchase, the temporary concession is soon to expire.

This difference in value is what encouraged the plaintiff to pursue a remedy in court in the case of ‘Jurgen Lee Bord v Ramon Cassar et’, decided by the Court of Appeal on March 27, 2020 (984/13).

In 2008, the plaintiff had purchased a property from the respondents. They had told him that the property was subject to perpetual ground rent and indeed, this burden was also indicated as such in the contract of purchase. To the plaintiff’s shock and horror, he later discovered that the emphyteusis was not – as he was told – a permanent one but a temporary one, which was set to expire in the year 2027. Whereas he had purchased a property that he had thought he (and his heirs) would enjoy perpetually, he had now found in 2013 (when he filed the lawsuit) that after just 14 years, he would have to return it to the owner.

As a result, he filed a lawsuit against the respondents, requesting that the contract is rescinded on the basis of an error of fact and that the money paid is returned.

At this juncture, that court was called to decide whether or not the plaintiff’s consent had been given through deceit or error of fact and whether there existed the suitable requisites for such a cause to succeed.

The law permits an error of fact to void a contract only if that error affects the substance itself of the thing which is the subject matter of the agreement. Therefore, an error as to a matter ancillary to the subject matter of the contract will not invalidate that contract.

Not every error of fact is justified; the error must be excusable and not one which is made through carelessness or lack of attention.

The Civil Court, First Hall had concluded that there was indeed a substantial determined error of fact.

The respondents appealed.

In its judgment, the Court of Appeal stated that when purchasing the property, the plaintiff had reasonably believed that the emphyteusis was perpetual, so much that he paid the relative appropriate price. The respondents (now the appellants) were arguing that the error of fact was not excusable, for he could have found the truth had he conducted the correct notarial searches, which would have uncovered contracts done in the years 1911, 1936 and 1937, all mentioning the existence of a temporary ground rent.

The court noticed first that the respondents themselves had declared in the contract of purchase that the property was subject to perpetual and not temporary ground rent. It was not correct to state that the plaintiff could have conducted further notarial searches, for there is no obligation at law on the purchaser to conduct searches that far back. Indeed, there was no indication in the more recent contracts (done in the years 1988 and 1995) that the ground rent could have been a temporary one. These all mentioned a perpetual ground rent of Lm0.25, in accord with that declared by the respondents on the contract of sale.

It mattered not that the respondents had not tried to fool the plaintiff. The cause of error of fact in law did not require the respondents to know about the error or for them to have an intention to deceive. It is an element neutral to the state of mind of the other party in contract.

As a result, it confirmed the decision of the first court and returned the case for it to continue being heard on the remaining matters.

Carlos Bugeja is a partner at Azzopardi, Borg & Abela Advocates.