By Dr. Nicole Vassallo – Junior Associate
The Reletting of Urban Property (Regulation) Ordinance introduced the notion of a ‘protected’ lease, geared at protecting the interests of the tenant. The Ordinance stated that a landlord who leased his property before 1995 (under the so-called ‘old rent regime’) could not refuse to renew the lease upon its expiration and was additionally precluded from increasing the rent to reflect market prices. This means that landlords who entered into lease agreements (prior to the year 1995) which are still in force today, are still receiving as little as €190 in rent per annum, and this in spite of the exorbitant increase in the Property Price Index.
The legal world is certainly witnessing a rise in disputes between the landlord trying to reclaim his property on the one hand, and the tenant trying to protect his/her lease, under the same conditions, on the other hand.
This is not to say that landlords do not have access to various legal remedies to protect their rights. In 2021, Article 4A was introduced in the said Ordinance. This enables the landlord to file an application with the Rent Regulation Board, requesting that the rent is reviewed to an amount not exceeding 2% per annum of the free and open market value of the occupied property.
When receiving an application of this kind, the Rent Regulation Board proceeds to conduct a means test of the tenant at the initial stages of the proceedings, on the basis of the Continuation of Tenancies (Means Testing Criteria) Regulations. This will determine whether the tenant will continue to reside in the property with a revised rent not exceeding 2% per annum of the market value (if the tenant satisfies the means test), or whether he/she will be ordered to surrender the property back to the landlord (if the tenant does not satisfy the means test).
In order to satisfy the means test, a tenant is required to have an income and capital which fall within the threshold established by the Regulations.
The tenants listed below are considered to meet the income criteria of the means test, and therefore satisfy the test insofar as their income is concerned, if such income in the period between 1st January and 31st December during the year immediately preceding the year in which the application is filed in terms of the above, does not exceed:
- €28,500 – For a person younger than 36 years of age;
- €38,000 – For a person who is between 36 years of age and 45 years of age;
- €42,000 – For a person who is between 46 years of age and 55 years of age;
- €44,500 – For a person who is between 56 years of age and 65 years of age;
- €46,500 – For a person who is between 66 years of age and 75 years of age;
- €50,000 – For a person who is 75 years of age or older.
For example, if a tenant is served with such an application in 2022, and he/she is 35 years of age at the time of receiving the application, the income to be taken into account in determining whether or not he/she satisfies the means test, is the income received in the year 2021, which must not exceed €28,500 in that year.
The tenants listed below are considered to meet the capital criteria of the means test, and therefore satisfy the means test insofar as their capital is concerned, if such capital in the 5 years prior to filing the application as stated above, does not exceed:
- €60,000 – For a person younger than 36 years of age;
- €90,000 – For a person who is between 36 years of age and 45 years of age;
- €185,000 – For a person who is between 46 years of age and 55 years of age;
- €213,000 – For a person who is between 56 years of age and 65 years of age;
- €245,000 – For a person who is between 66 years of age and 75 years of age;
- €600,000 – For a person who is 75 years of age or older.
For example, if the tenant was served with an application in 2022, and he/she is 35 years of age at the time of receiving the application, the capital to be taken into account in determining whether or not he/she satisfies the means test, is the capital in the years between 2017 and 2021, which must not exceed €60,000.
Where a tenant is found not to satisfy the means test (and therefore has a higher income and/or capital than the parameters allowed by law), after hearing all the evidence and submissions of the parties, the Board will order the tenant to vacate the property within a 2 year period. Consequently, the amount of rent to be paid by the tenant during this period will be determined by the Rent Regulation Board.
Alternatively, where a tenant is found to satisfy the means test (and therefore has an income and/or capital that fall within the parameters established by law), the rent shall increase by a maximum of 2% per annum of the free and open market value of the property on the 1st of January of the year in which the application of the landlord containing the request, is filed. The tenant may then apply for the Private Rent Housing Subsidy Scheme offered by the Housing Authority, if he/she meets the criteria required to be eligible for the scheme, and the increase in rent is paid by the said Authority.
When such an application is filed before the Rent Regulation Board, the Housing Authority shall always be notified and shall have the right to participate in the proceedings as a ‘friend of the court’ (amicus curiae).