State told to fork out €60,000 to Kingsway for unfair rental laws

A Constitutional Court ordered the payment of over €60,000 in damages from the State to the owners of a Valletta property, shop 6 at Kingsway Palace on Republic Street, on a breach of property rights.

Kingsway Palace Company claimed that rent control regulations infringed on their right to rent out their property, whose previous tenants were protected from rental increases and evictions.

Kingsway requested the removal of the Rent Control Ordinance’s protection for the lease and a declaration of no obligation to renew the lease for the company San Antonio Ltd, which expected a termination in 2028 for its commercial lease, contracted before 1995.

The 1995 law essentially stipulated that leases drafted before June 1, 1995, and renewed after that date, would not be considered as new leases, allowed them to operate under a pre-existing legal framework.

For Kingsway’s property unit at no. 6, this meant that despite subsequent amendments and lease transfers, the agreement remained bound by the pre-1995 rent control regulations.

The property was initially leased to the partnership ‘Borg & Farrugia’ through a private contract with an annual rent of Lm500 (€1,165) in 1961. The lease agreement was amended in 1997 to recognise Farry Limited, represented by Joseph Farrugia, as the tenant, replacing the original tenant, with an increased rent and provision for a 5% rent increase every three years.

But in 1999, Farry transferred the lease to San Antonio Company, with the terms and conditions of the 1961 and 1997 contracts remaining applicable. In 2023, San Antonio returned the keys to the property, leading to the cessation of the case against them.

Kingsway argued that the continuation of the pre-1995 legal framework resulted in them being bound by an “unfair and discriminatory” law, preventing them from receiving a market-based rent and exercising full control over their property.

Madam Justice Joanne Vella Cuschieri ultimately ruled in their favour, concluding that the continued application of the pre-1995 rent control regulations infringed upon their property rights as enshrined in Article 1 of the First Protocol of the European Convention – the right to enjoyment of private property.

The judge concluded that the discrepancy between the rent received by the plaintiff and the market rental value established by a court’s technical expert was disproportionate. The judge awarded pecuniary damages, considering the period from 1987 until the enactment of leasing law amendments in 2021 – €55,306 for continuous rental income, and €5,000 in non-pecuniary damages. The Judge also ordered the decision to be notified to the Speaker of the Maltese Parliament.