Updated | MDA disappointed by 'weak and ineffective' new contractor licencing law

Updated at 13:01 with Public Works Ministry's reaction

The leading development lobby has expressed strong dissatisfaction with a new law mandating contractors to be licensed, labelling it "weak and ineffective." 

“The MDA is very disappointed and cannot understand why the obligation of contractors to be covered by an adequate insurance policy to cover third parties' properties and damages and the contractor’s employees have not been made compulsory at licensing stage and at every renewal stage,” the Malta Developers Association said.

The association expressed perplexity over the government's decision not to require licensed contractors to hold adequate insurance policies covering third-party damages and their employees as a prerequisite for obtaining a license. 

According to the lobby group, this omission renders the new legal notice ineffective and unlikely to achieve its intended goals.

The recently introduced Legal Notice LN166/23 stipulates that all excavation, demolition, and construction contractors must obtain licenses by 2025 to operate in the sector. 

During the transitional phase, provisional approval from the Building and Construction Authority, which regulates the industry, is required. 

Operating without a license after the deadline could result in fines of €50,000 and prison sentences of up to six months.

While an initial draft of the regulations included a requirement for contractors to have insurance policies, the final law merely urges contractors to ensure that their works are covered by an insurance policy, without making it a prerequisite for obtaining a license. 

As it stands, project developers must have insurance policies to protect against damages to neighbours, but there is no legal requirement for contractors to be insured.

Despite an increasing number of construction-related incidents, collapses, and fatalities, authorities have been slow to regulate the sector. 

In response to the law's shortcomings, the MDA criticized the government for not making insurance policies mandatory for contractors seeking licenses. 

The lobby group deemed this decision "unthinkable" given recent events in the construction industry and urged Planning Minister Stefan Zrinzo Azzopardi to amend the law, emphasizing the need to enhance the construction industry's quality and safety standards.

“The MDA is so adamant about this issue,” it said, that it encouraged the Opposition to file a parliamentary motion demanding change unless the government rectifies the law itself. 

The association stressed the necessity of a legal framework ensuring that only qualified and competent contractors are licensed to operate in Malta to safeguard the safety of the public and contractors' employees. 

Anything less, according to the MDA, would jeopardize public safety and the well-being of those working in the construction industry.

'Claims made by MDA are incorrect'

Reacting to claims made by the MDA, the Public Works ministry said they were inaccurate and cited article 5 (3) of the new law, which mandates licensed contractors to obtain insurance coverage to safeguard against damages.

A ministry spokesperson said that despite extensive discussions with the Malta Insurance Association, they haven't reached a resolution yet, but the talks will persist in search of a solution.

The ministry emphasised that contractors must now provide proof of insurance for each individual project before the Building and Construction Authority issues a Commencement Notice, which allows works to commence. 

If a licensed contractor is found on a construction site without the appropriate insurance coverage for the project, they would be in violation of the law.

The ministry admitted that the current law doesn't mandate contractors to obtain liability insurance to protect their employees.

Nevertheless, they expressed their commitment to introducing this requirement in the future. 

The ministry referred to a public consultation period that highlighted the need for further discussions, especially involving insurance providers.

They also mentioned that the published regulations were the result of a comprehensive consultation process and represent a new obligation in the construction sector.