Constitutional Court gives landmark decision on agricultural leases

The Constitutional Court has declared that the law protecting agricultural leases (qbiela) had breached a landowner’s rights, in a decision partially overturning a 2021 judgement on this subject.

This is in view of recent amendments to the Agricultural Leases (Reletting) Act. Vicenza Magro had filed a court case over the 2,910sq.m. field in the area known as il-Bur ta’ Ħallew which had been leased to the Schembri family, who were paying just €24 in rent every two years.

The landowner had also submitted that the law also did not provide an adequate mechanism for the revision of the value of the lease, leading to an enormous discrepancy between the rent paid and the free market value.

In December 2021, the First Hall of the Civil Court dismissed the case, ruling that the law created the right balance between the rights of owners and tenants. But this decision has now been amended in a judgment handed down in Magro’s appeal yesterday. 

The Constitutional Court, presided over by Chief Justice Mark Chetcuti together with judges Giannino Caruana Demajo and Anthony Ellul, partially upheld the appeal, declaring that the law governing agricultural leases violated both the Constitution as well as the European Convention on human rights - but only in relation to the law on agricultural leases as it stood before it was reformed in 2023.

The court rejected the request to declare that the Schembri family of farmers could no longer benefit from the protection of the impugned law in view of the amendments introduced this year. 

The Court observes that the impugned law has not been changed in any way from the time when the cited judgement was given. With Act XXII of 2022 which entered into force on 8 February 2023, Article 4(2A) added a mechanism to establish fair rent for agricultural property in a way that does not do not exceed 1.5% per year of the value of the free and unencumbered land.

The law provides for an increase of 2% where the land includes a farm building. This rent can be increased every eight years according to the same mechanism stipulated in the law in the absence of a different agreement being reached by the owner and the tenant. 

“This amendment in the law is intended to maintain a fair balance between the owner and the tenant where although it may not offer or guarantee full compensation for all cases, however when legitimate objectives are present and taken in the general interest, as is the case here, the amount of fair compensation may be much less than the full market value.”

The judges explained that the fact that the law only gives the possibility for the rent to be increased by no more than 1.5% or 2%, depending on the case, and therefore does not allow the owner to receive the full market value, did not mean that proportionality between the general interest and the interests of the owners desired by the legislator is not present.

The rent remains controlled for as long as the tenant needed protection, while the rent can be increased every eight years, said the court, while stressing that it was not expressing an opinion on the effectiveness of this legal remedy, as this was not part of the case.

“In any case, the problem with the law is that it does not provide a remedy to the owners with regards to the low rent that they received for the time before the law entered into force. Therefore the Court considers that the plaintiff suffered a violation of her rights as sanctioned through Article 1 of the First Protocol of the European Convention, however only from 1982 (when the case was filed) until January 2023 when the legal amendment entered into force.”

On the point of compensation, the Court said it agreed with the First Court’s assessment that the technical expert’s estimate was “not completely realistic”. The technical expert had estimated the annual rental value of the land in question, around 2,910 square metres in area, to be €1,964. But the evidence exhibited before the First Court showed that the farmer made very little return from the cultivation of agricultural produce, while still facing substantial costs. “The Court considers it not to be realistic to expect a farmer to be willing to pay this amount to rent the land.” 

The judges expressed doubts as to whether the expert had actually taken into consideration the amount the farmer is willing to pay for the land, “a factor that ultimately determines the true demand for land, instead of arriving at its estimate simply on the basis of real estate speculation.” 

But, said the court, after factoring in the 30% reduction established by case law in calculating the amount due, this would compensate for the court expert’s inaccurate estimate.

Calculating compensation using criteria established by case law, the court established the compensation due to the plaintiff to be €6,355. Due to the duration of the unjust situation until 1982, when the plaintiff became the owner of the land in question, the additional sum of €2,000 claimed by the plaintiff as moral damages were deemed reasonable.

The total amount of compensation, €8,355 was to be paid solely by the State Advocate, said the court, given that the tenants were not responsible for the damages suffered by the plaintiffs.

The court declared that Articles 3 and 4 of the Agricultural Leases (Reletting) Act, Chapter 199 of the Laws of Malta were injurious to the rights of the plaintiff as protected by Article 37 of the Constitution and Article 1 of the First Protocol of the European Convention, in the form that they were before Act XXII of 2023 entered into force.

Lawyer Errol Cutajar appeared for the Schembri family, while lawyer David Camilleri represented the landowner.

Għaqda Bdiewa Attivi welcomes court decision

Għaqda Bdiewa Attivi expressed satisfaction with the recent decision of the Court of Appeal, confirming the “protection of farmers' rights.”

The NGO emphasised the significance of this development, attributing it to recent law amendments made by the government. 

"This is a very important development - thanks to the law amendments made by the Government recently, the court's ruling underscores the importance of safeguarding farmers' interests and preventing their eviction from the lands they cultivate," Għaqda Bdiewa Attivi said on Tuesday night.

In addition to affirming the importance of agriculture, the court's decision provides a justification for setting low rents in cases that serve the "general interest" of society, according to the NGO's statement. 

"The sentence also raised concerns about how the architect's estimate did not take into account how much the farmer is willing to pay for the land," added Għaqda Bdiewa Attivi. 

The organisation believes that this observation highlights the reservations they have consistently voiced regarding the methods and approaches used by technical architects to determine the value of crops.

Għaqda Bdiewa Attivi contends that these factors confirm their longstanding concerns about the exercise and methodology employed by technical architects when estimating the value of crops.