Rent Reform & Budget Measures 2020

September 16, 2019 | 5 minute read

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New Property Rent Reform in Malta

News piece last updated on 11/9/19

11/10/19

The law seeks to introduce stability and predictability through several initiatives, namely a minimum contract length and notice periods, registered formal contracts and legal and fiscal incentives. The legislation is mainly designed for people who do not need social housing but cannot access the property market.

On the 2nd of July 2019: The Residential Leases Bill (Bill No. 91 of 2019) was published in the Government Gazette of Malta which will bring into force on 1 January 2020 the Residential Leases Act.

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The Act shall be applicable to:

  1. Leases of residential property that are entered into or renewed after the entry into force of the Act i.e. 1 January 2020;
  2. For leases entered into after 1 June 1995 and before 1 January 2020 – registration and applicability of the new law should be with effect from 1 January 2021

The Act shall not apply to:

  1. Tenements belonging to the government
  2. Tenements rented exclusively for tourism purposes;
  3. Tenements rented for a secondary residential purpose or as a summer residence;
  4. Tenements leased before the 1st June 1995

The term "private residential lease" is divided into two, being:

  1. "long private residential leases" - any lease which is negotiated for a primary residential purpose and which is not a short private residential lease;
  2. "short private residential leases" – any lease negotiated for a duration of less than 6 months which is meant to satisfy non-resident workers employed for a period of less than 6 months, non-resident students enrolled in courses less than 6 months, residents who would need to rent an alternative primary residence for less than 6 months and non-residents renting for less than 6 months and who are not establishing their long-term residence

What the Bill says on this new law?

  1. Registration process for all private residential lease contracts;
     
    1. Contracts must be registered at a fee otherwise considered null;
    2. For private residential leases it shall be the duty of the lessor to register the contract within 30 days of commencement of the lease otherwise lessee can register lease himself still at the expense of the lessor;
    3. A separate registration is required for every new private residential lease;
  1. Requisites of a contract of all private residential lease contracts;
     
    1. To be made in writing
    2. Shall include any amount deposited by the lessee for security
    3. Shall include an inventory
  1. Clauses which if inserted in the contract, would be deemed to have no effect;
     
    1. Those that provide for automatic termination of the contract other than the non-fulfillment of the lessee’s obligations;
    2. Clauses that authorize the lessor to reduce without equivalent consideration any benefits stipulated in the contract;
    3. Clauses that exempt the lessor for any responsibilities to which he is bound by law
    4. Clauses that impose the payment of additional payments other than the rent, deposit and insurance on the contents and other contributions for condominium;
    5. Clauses that impose on the lessee additional consideration for the use of movables beyond the payment of the rent;
    6. Clauses which stipulate the payment of a fixed amount for the consumption of water, electricity or other utility if such amounts do not reflect the actual consumption of such utility by the lessee;
    7. Clauses which limit the use which one is expected to make of a residence
  1. For long private residential leases;
     
    1. Contract must be for at least 1 year;
    2. The lessor must give a 3 month notice for the termination of the lease by means of a registered letter. In the absence of such a notice, the lease shall be deemed as renewed;
    3. The lessee may not terminate the lease before the lapse of 2 months for lease period of less than 2 years, 4 months for lease period between 2 and 3 years and 6 months for lease period of 3 years or more. Following which the lessee may terminate the lease anytime by giving 1 month notice for leases of less than 2 years, 2 months’ notice for leases between 2 and 3 years and 3 months’ notice for leases for over 3 years.
  1. For short private residential leases;
     
    1. The lessee may not terminate the lease before 1 month;
    2. The lessee may terminate provided one week prior notice is given without any penalties;
  1. Rent increases;
     
    1. May only take place once a year
    2. May not exceed the annual variations recorded in the property price index as published by NSO
    3. Increase may never exceed the previous rent by 5%
  1. Room rental;
     
    1. Shall have a 6 month duration
    2. Lessee may terminate at any time by given 1 week prior notice
    3. Lessee may not terminate before 1 month
    4. Agreements may not be renewed
  1. General provisions;
     
    1. Rent payment shall be on a monthly basis unless otherwise agreed and the lessor cannot require an advance payment of more than 1 month
    2. The provision of water and electricity should be adequately provided by the lessor and lessor cannot refuse to sign declarations regarding the number of persons residing in the premises..
  2. Evictions:

By virtue of the new rent laws, landlords will have the right to claim compensation before the Rent Regulation Board for the period during which the tenant occupied the property after the contract was terminated and the tenant was duly notified.

    10.  Dispute resolution;

The reform introduces a mechanism where parties to a rent agreement can settle minor disputes regarding the rental deposit and the property general maintenance not exceeding €5,000 by submitting an application to the Housing Authority to be resolved by an expert panel. This expert panel will now offer a relatively affordable and fast remedy to claimants where either of the parties fail to honour their obligations without any justification.

   11. The role of the Housing Authority

The new rent laws seek to expand the scope of work of the Housing Authority. In this respect, a new department within the Housing Authority will be focusing solely on the private rented sector. This department will be responsible for the registration of leases and the supervision of the rental market in general.


Tax incentives

The introduction of tax incentives does not form part of the Residential Leases Bill but it was reported in the media that a system of tax credits shall be introduced for lease contracts exceeding one year and dependent on the number of bedrooms of the tenement being rented.It is envisaged that tax laws will be separately amended to include such tax credits. More details and clarity will be published as they are available.

This document does not purport to give legal, financial or tax advice. Should you require further information or assistance, please do not hesitate to contact Antoinette Scerri from our team.

Nexia BT’s team of tax advisors and lawyers can help you in becoming compliant and advise you accordingly about the new law. Get in touch with our team to know more on tax@nexiabt.com

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