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10 Takes from the Proposed Rent Reform

Today, the Government announced that it will be presenting a bill to Parliament, proposing key changes to our current regime of the law of lease. At this early stage, the details are still rather sketchy, even because the bill has yet to be properly published. But, here are some takes from what we could gather:

1. All things remaining equal, the law will come into force as of January 2020

The law proposed still has to go through the arduous process of being presented to Parliament, debated, amended, and finally approved. Indeed, by the time this proposal makes it into law, one could be looking at a very different regime than that proposed today and at very different legal circumstances.

2. All lease agreements need to be duly registered

So far, the law states that all lease agreements done after 1 January 2010 must be made in writing, and specify the property to be leased, its use, the period and how (if) it could be extended, and the rent payable and how it is to be paid. There is no requirement for registration. The proposed law looks to change all of this; it will require all lease agreements to be registered, together with an inventory of the whole property and a deposit.

3. Leases for less than a year will not be accepted (with some exceptions to non-resident tenants), and long leases will be awarded with tax credits

So far, the law does not state how long a lease should be, provided that the period is specified. The new law will introduce a mandatory one-year period as a minimum, plus fiscal incentive for landlords who lease their properties for even longer periods, ranging from €200 to €500 each year (depending on the length of the lease).

4. Annual rental increases will be capped at 5%.

So far, there is no law that regulated rental increases. Parties are free to agree on rent increases as they please. If this proposal becomes law, this will be no more. The landlord would not be able to impose increases high than the maximum of five percent per year.

5. The proposal introduces mandatory notice-periods

Currently, it is up to the parties to regulate whether any notice period is to be given for a lease to be extended after its termination. The rent reform proposal introduces a mandatory three-month period, which will be longer for longer leases, no unlike notice-periods in employment contracts.

6. A new “panel” will be introduced to hear disputes of a relatively low value, in order to maximise efficiency of justice

Right now, all disputes relating to lease agreements are heard by the Rent Regulation Board, independently of the nature and/or value of the matter at hand. This will change. Cases relating to the payment of deposits and other matters the value of which does not exceed €5,000 will become competence of this new panel composed of legal and technical experts, which will in turn alleviate the Rent Regulation Board’s case load.

7. The law will not cover tourist accommodations

Presumably, holiday rentals and lodging services such as AirBnB will be regulated elsewhere.

8. The use of special summary proceedings will be widened

According to the law as it is today, there are limited situations when a landlord can seek the eviction of a tenant through special summary proceedings (‘giljottina‘), that is, to ask the Rent Regulation Board to pronounce judgment on the first sitting. The right exists, but it is limited to exceptional circumstances, so much that there are very few cases which are decided this way. This is set to change, as the law proposes the widening of this mechanism, making it easier for example for landlords to take back possession of their property after the period of lease has expired, without needing to go through lengthy court proceedings.

9. The Housing Authority will be styled as the rent regulator

Today, there is really no authority that regulates lease agreements. The Housing Authority will be given this task, and will have the power to oversee lease conditions, and to act accordingly.

10. No word on pre-1995 leases

The proposed law seeks to regulate ‘new’ leases, and there is no word whether pre-1995 leases will be in any way affected by these changes. Indeed, it looks like this proposed reform will not address the implications of the recent judgments of the Civil Court First Hall (Constitutional Jurisdiction) that found the rent controls under Chapter 69 and the Civil Code to be unconstitutional. That – it seems – is a problem for another day.

Disclaimer: This article is not to be considered as legal advice, and is not to be acted on as such. Should you require further information or legal assistance, please do not hesitate to contact Dr Carlos Bugeja on carlos@abalegal.eu.