Law report: Rental law revamp: Are you missing out on higher rent and your rights?
The case Alexander Vella et al. (the "Plaintiffs") vs. L-Avukat ta L-Istat u Joseph Grima (the "Defendants") was brought before the Constitutional Court (the "Court") on 18th November 2024. Presided over by the Honourable Judge Mark Simiana, the Plai
The case Alexander Vella et al. (the "Plaintiffs") vs. L-Avukat ta L-Istat u Joseph Grima (the "Defendants") was brought before the Constitutional Court (the "Court") on 18th November 2024. Presided over by the Honourable Judge Mark Simiana, the Plaintiffs initiated the proceedings, asserting that their right to the enjoyment of their property had been infringed.
In brief, the Plaintiffs are the rightful owners of the property in question (the "Property"), which they inherited from their predecessors. A right of usufruct had been granted to their mother, which remained in effect until 2004, when it ceased upon her passing.
On the 16th of September 1971, the Defendant entered into a contract granting them temporary emphyteusis over the property for a term of 17 (seventeen) years. During this period, the Defendant paid an annual ground rent of LM 80. After the 17 (seventeen) year term expired, the Defendant continued residing in the property, with the annual payment increasing to LM 160 and subsequently to €745 per year
Plaintiffs Request
The Plaintiffs respectfully requested the Court to declare Article 12(2) of the Housing (Decontrol) Ordinance (Chapter 158 of the Laws of Malta) null and void, as it restricts their right to the enjoyment of their property.
Article 12(2) states the following:
"On the expiration of the most recent emphyteusis or sub-emphyteusis the emphyteuta or the sub-emphyteuta who satisfies the requirements of sub article (1)(b)(i) shall be entitled to continue in occupation of the dwelling house under a lease from the person holding the preceding emphyteusis or sub-emphyteusis at the same rent and under the same conditions applicable according to article12(2)(i), (ia) and (ii) which shall apply mutatis mutandis."
They contend that this provision contravenes Article 37 of the Constitution of Malta (Chapter 1 of the Laws of Malta), which deals with the protection from deprivation of property without compensation and Article 1 of the European Convention on Human Rights, which deals with the obligation to respect human rights.
Additionally, the Plaintiffs sought appropriate remedies to address this infringement of their fundamental rights, including both pecuniary and non-pecuniary compensation.
Defendants response
In their response, the Defendants, among other arguments, requested that the Plaintiffs first provide sufficient evidence of their title to the Property. The Defendants also argued that Article 37 of the Constitution is inapplicable in this case, asserting that it applies only when property has been "compulsorily" expropriated. They maintained that for expropriation to be deemed compulsorily, an individual must be entirely deprived of all rights to the property. Furthermore, the Defendants contended that there was no violation of Article 1 of the European Convention on Human Rights.
Courts considerations
The Court determined that the Plaintiffs had successfully established their title of ownership over the Property. Additionally, it observed that the Plaintiffs had been unable to enjoy their property for a significant period.
Referring to Article 37 of the Constitution, the Court highlighted the following provision:
"No property of any description shall be compulsorily taken possession of, and no interest in or right over property of any description shall be compulsorily acquired, except where provision is made by a law applicable to that taking of possession or acquisition-(a) for the payment of adequate compensation."
The Court also referenced the case Rebecca Hyzler et vs Avukat Generali et, where it was concluded that although the property had not been "compulsorily taken" from the owners, the "interest" and "right" over the property had indeed been deprived. The Court emphasized that the indefinite use of property without adequate compensation constitutes a violation of the owner's rights.
The Court stated that those laws that impose a relationship between owners of urban properties and tenants are designed to achieve a social purpose in the general interest. Such laws, in themselves, do not infringe upon the fundamental rights of property owners. As has been observed on multiple occasions, the social objective pursued by the legislation in this case must be regarded as serving a public interest, thereby justifying its implementation.
The Court went on to state that when it is established that there is a legitimate legal basis for such interference in the enjoyment of ones property an "assessment has to be carried out to determine the proportionality of the contested measure to determine whether a fair balance has been struck between the interest of the community and the requirements of the protection of the individuals fundamental rights. This means that there must be a reasonable relationship of proportionality between the means employed and the aim sought to be realised by any measure depriving a person of his possessions"
The court should also determine whether "an individual and excessive" burden has been imposed on the individual, and where this is the case there appears to be a strong presumption of lack of proportionality.
The Court identified this as the crux of the issue. It observed that the evidence demonstrated that, at the time the lease was established in favour of the Defendants, the Property already had the potential to generate a significantly higher rental income-more than double the agreed amount. Over time, while the value of the Property increased, the rent payable remained largely unchanged. Consequently, the Court concluded that the Plaintiffs were unjustly deprived of the full enjoyment of their Property. The burden placed on the owners was deemed disproportionate, as the deprivation was not offset by compensation that could be considered even remotely adequate.
Courts Conclusion
The court concluded that there was indeed a violation of the Plaintiffs fundamental human rights as protected under the Constitution of Malta and the European Convention of Human Rights, which occurred up until July 2018 - when Article 12B was introduced in the Housing Decontrol Ordinance, to address the disproportionality which previously existed in the law. Article 12B states that:
"the lessor shall be entitled to file an application before the Board requesting that the rent be reviewed to an amount not exceeding two percent (2%) per annum of the free and open market value of the dwelling-house on 1st January of the year in which the application is filed and in order to establish new conditions regarding the lease."
When determining the damages owed, the Court referred to the approach outlined in the European Court of Human Rights judgment in Cauchi v. Malta (ECtHR, 25/03/2021). To calculate appropriate compensation: The Court deducted approximately 30% of the amount the Plaintiffs would have earned on the free market, recognizing the legitimate aim of the applicable law. A further 20% deduction was applied to account for the uncertainty of whether the Plaintiffs would have retained the property as a rental over time. Finally, the rent already received by the Plaintiffs was subtracted from the remaining amount.
In total the Court awarded the Plaintiffs the sum of EUR 58,300 after having made the necessary deductions.
Bettina Gatt is an Associate within the Ganado Advocates' investment services and funds team.
Disclaimer: Ganado Advocates is responsible for contributing to this law report but was not in any way involved as legal advisor for the parties in the judgement being covered in this law report.
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