Justice at last

A court judgment last May could turn out to be a game-changer for owners whose properties have been occupied for generations. Edward DeBono of Fenech & Fenech Advocates explains the implications to MONEY.

The recent landmark judgment has offered a ray of hope to numerous owners whose properties have been rented out, sometimes for generations, at paltry rents.

The judgment was delivered by Judge Lawrence Mintoff presiding over the First Hall of the Civil Court in its Constitutional Jurisdiction in the names Anthony Debono et vs Avukat Generali et, concerning the constitutionality of pre-1st June 1995 nonrequisitioned residential leases.

At stake were all those owners whose properties had leases prior to 1995. These long-suffering owners have for generations had to pay succession duty taxes on their properties at market rates and yet receive paltry compensation in rents capped by Ordinance XVI of 1944 to the market rate as at August 4, 1914.

Owners of all properties are to receive fair compensation for their property if the tenants are to continue being protected in their tenancy rights. Without striking a fair balance between the rights of the owner and those of the tenant, one cannot possibly save our system from continually being lambasted by the European Court of Human Rights of unconstitutionality.

This judgment has not come in a vacuum. Similar cases have been delivered already in recent years by our local courts, albeit only after impregnable case law had first been established by the European Court of Human Rights (ECHR).

The ECHR has, over the years, struck down various Maltese laws which gave protection to sitting tenants at grossly unfair terms, to the detriment of owners, including – for example — the infamous Act XXIII of 1979 and Chapter 158 of the Laws of Malta which allowed tenants to convert a temporary emphyteutical concession (ċens temporanju) into a perpetual lease, which lease could also be inherited by family members residing with the tenant.

Previous case law has dealt with commercial premises, band clubs, and leases of decontrolled residential premises, as well as leases emanating from temporary emphyteutical concessions, all of which have been repeatedly declared unconstitutional by our Constitutional Court and the European Court of Human Rights.

A number of lawsuits are also pending before the First Hall of the Civil Court in its Constitutional Jurisdiction concerning agricultural leases, and although these cases are yet to be decided, it is evident that these leases too will be declared unconstitutional, as a few euros per annum as rent for fields, farmhouses and other rural tenements cannot possibly pass the test of proportionality for tenements worth hundreds of thousands of euros if not millions.

Despite the ECHR’s repeated calls for the Maltese government to “put an end to the systemic violation of the right of property”, the Maltese Parliament has remained indifferent. The only reaction came in August of 2018, with the introduction of yet another repressive amendment to the law, in the form of Act No. XXVII of 2018.

This law gave tenants of a dwelling under a title of lease created by virtue of Chapter 158 of the Laws of Malta, the right to continue occupying the property by paying a maximum rental of up to 2% of the value of the property, as established by the Rent Regulation Board, subject to a rather lenient ‘means test’.

The unconstitutionality of Act XXIII of 1979 was clear for all to see. It could never be deemed constitutional to impose a forced landlord/tenant relationship upon a landlord who had entered into a temporary emphyteutical concession for an agreed period of time (most often to avoid the prospect of having his property requisitioned) when the 1979 law arbitrarily did away with the agreement between the parties and granted the tenant a perpetual leasehold, at a rent which effectively could never exceed double the amount of ground-rent originally agreed to between the parties.

Similarly, owners who had faced requisition orders also had indisputable human rights claims. Slowly but surely, case law has been established in this respect, and owners of properties affected by the 1979 law of requisition orders, have, to a certain extent, been vindicated.

The few who instituted proceedings have received compensation – but whether it is adequate or not is another question.

Owners of commercial properties leased prior to June 1, 1995 subject to the draconian provisions of Chapter 69, have recently also been successful in their quest for justice.

The significance of the Anthony Debono et case, however, is that it extended this rationale to cover pre-June 1, 1995 residential non-requisitioned and non-decontrolled leases, which are regulated by Chapter 69 of the Laws of Malta, and which to date had never been successfully challenged.

WITHOUT STRIKING A FAIR BALANCE BETWEEN THE RIGHTS OF THE OWNER AND THOSE OF THE TENANT, ONE CANNOT POSSIBLY SAVE OUR SYSTEM FROM CONTINUALLY BEING LAMBASTED BY THE EUROPEAN COURT OF HUMAN RIGHTS OF UNCONSTITU- TIONALITY

In the Anthony Debono case, the Attorney General argued that since the lease was entered into voluntarily, and since the owners knew that they would have to keep on renewing the lease indefinitely, they could not claim that this constituted a breach of their fundamental human rights.

The court did not uphold this line of defence and noted that the applicants had no way of circumventing the repressive provisions of Chapter 69 of the Laws of Malta and Ordinance XVI of 1944 of the Laws of Malta. Moreover, the present owners had inherited the property burdened with a protected lease to which they had not given consent. In spite of this, they were expected to pay inheritance tax on the full market value of the property, without any real prospect of ever being able to reclaim the effective possession of the said property as the nephew of the original tenant inherited the tenancy rights of his grandmother who passed away before the amendments of Act X of 2009.

This basically meant that younger tenants could outlive the owners who would have to pay succession duty for two or three generations without receiving any adequate compensation.

The court awarded the owners €20,000 in damages, payable by the Attorney General, and declared that the tenants may no longer rely on Chapter 69 of the Laws of Malta and Act X of 2009 in order to continue renewing their lease. This effectively opens the floodgates for other landlords to challenge all pre-June 1, 1995 residential and commercial leases, on the basis that the maximum rent receivable as regulated by law is disproportionate with market forces and that landlords are forced into an owner/tenant relationship for generations.

It is high time that our legislators draft laws appropriate to the times where the rights of the owners and the tenants are both fully protected, striking a fair balance between their respective rights and obligations and ensuring full respect to the fundamental human rights of the citizens of this country as protected by the European Convention on Fundamental Human Rights.

It is to be noted that our Constitution falls short of striking this balance as the judgments of our Constitutional Court state that Article 37 of the Constitution does not accord the relative protection of owners vis-à-vis their tenants, but it is the European Convention in the First Article of the First Protocol which grants Maltese citizens protection from these draconian laws which have been enacted along the decades.

Words by

Edward is a senior partner at Fenech & Fenech Advocates, specialising in litigation for the past 37 years, and practising in Civil and Commercial Litigation and Property Law.