Unconstitutional rent law must change – Franco Debono

Law Commissioner Franco Debono is urging Parliament to act "urgently" in amending Maltese rent laws after a groundbreaking Constitutional Court judgment found the law preventing the eviction of tenants upon expiration of the pre-1979 temporary leases was unconstitutional.

The Court of Constitutional Appeal confirmed a decision that found the law that converts pre-1979 leases into permanent rental agreements, as preventing landlords' fundamental right to the enjoyment of property.

Critics have now warned that the judgment is a wake-up call for MPs to amend 'out-dated' laws such as the 1959 Housing Decontrol Ordinance, as otherwise the government risks being sued in numerous claims for compensation by landlords.

This stand was echoed by Franco Debono, who said the Constitutional Court had the right to declare laws as unconstitutional, a right vested in the checks and balances that is allowed under the doctrine of the separation of powers. "If the parliament overlooks the judgment and fails to act, this important and fundamental mechanism would be dangerously eroded and undermined."

The automatic conversion of temporary leases into rental agreements is foremost bone of contention between tenants and landlords, with the latter often up in arms due to the paltry rent-controlled payments they are still receiving.

One such landlord, and authority on the property market, Chris Testaferrata Moroni Viani, said that the decision was a step towards an effective remedy for the "mass injustice" that the lease conversion imposes on landlords.

"While providing indirect social housing and alleviating poverty concerns, the law has imposed a string of adverse effects on landlords.

"Coupled with the paltry rents landlords receive and the fact that tenants can permanently reside in a dwelling owned by third parties, even after the expiration of the original lease, landlord have been facing a situation where they cannot enjoy their own property due to the automatic conversion," he said.

Under the Housing Decontrol Ordinance, any lease of up to 30 years contracted before 21 June 1979, can be turned into a rent and as a result, tenants living in houses on a temporary lease retained the right to stay in these houses, and pay an annual rent equivalent to double the lease they paid.

"Conversely, landlords do not have a chance of taking back their rightful property and in some cases, they had to enter into loans to buy homes, while tenants resided in the property rightfully owned by landlords," Testaferrata said.

"Due to the fact that people think that they have a permanent right to occupy a property belonging to others, some tenants have been taking advantage of the archaic laws while at the same time owning numerous other properties leased out for today's rent fees."

Testaferrata underlined that the properties can no longer be leased out at 1979 prices. "There are cases where landlords are only being paid just €116 a year, a far cry from the rent fees in today's market."

The defence lawyers who secured the ground-breaking decision, Cedric Mifsud and Michael Camilleri, have said that the Housing Decontrol Ordinance is being used by tenants to permanently reside in homes they had once leased, to the detriment of the legitimate owners. They have since called for MPs to amend the law, or it could be used in new claims for compensation by landlords.

This predicament was voiced by Malta Developers Association president Michael Falzon, who said the judgement could presage big upheavals in the rental market. "The government should consider amending the law so that owners are given the right to ask for compensation based on the actual value of the property when temporary emphyteusis expired, rather than being arbitrarily based on the annual 'rent' agreed when the emphyteusis was established."

However, professor of history of law at the University of Malta Raymond Mangion insists that the parliament is not obliged to amend the law, because the Constitution provides no imposition to change laws deemed unconstitutional by the courts.

"By law, parliament is not tied by the court's judgment, irrespective of the jurisdiction of the court. There is no explicit provision in the Constitution imposing the parliament to adopt legislative amendments. It may instead opt to act against the court's decision, and not amend the rent laws. MPs can choose to wait for further judgments before drafting amendments to the law."

Being two separate and autonomous entitles, the law courts cannot use its power to impose the House of Representatives to amend laws.

But government is still open to the risk of more compensation claims brought against it by landlords, as Mangion says. "They might resort to the European Court of Human Rights, which is now considered the third level in judicial remedy. If the government is then found guilty of compromising the right of the landlords to enjoy one's property, the ECtHR may hold Malta liable for damages."