How shall the Residential Leases Act affect the Private Rental Sector? A Summary of the Main Points of the Bill

Dr Josef Cachia and Dr John Caruana  -  22/August/2019

Throughout the years, Malta’s private rental sector regulation has been dynamic and has undergone numerous amendments. The recent Bill published last month is set to introduce some pivotal rules into the Maltese lease legislation, as it seeks to maintain standards of fairness, clarity, and predictability in contractual relations between lessors and lessees and to safeguard and protect the right to adequate accommodation. It represents a substantial step forward for tenants of residential property, who shall be awarded more rights, and shall be protected from any abusive practices by landlords.

The prospective Act shall apply to all leases of residential property that are either entered into or renewed after the entry into force of the Act, or which were granted after the 1st June 1995, if they are still in force on the 1st January 2021. Notably, however, the Bill lists numerous exceptions as to when the protection and regulations under it shall not apply, including:

  • when the residential tenements belong to the government;
  • when the tenements are rented exclusively for tourism purposes;
  • when the tenements are rented for a secondary residential purpose or as a summer residence;
  • when the tenements are leased before the 1st June 1995; and
  • in urban tenements where contracts of emphyteusis or sub-emphyteusis have been or are about to be converted into leases by virtue of the law.

In all, the prospective Act seeks to regulate three different types of leases, these being: room rentals (referring to the renting of a part of an apartment or a building, separately let, or a room separately let with shared kitchen and bathroom facilities, which is occupied by the lessee for residential purposes), short private residential leases, and long private residential leases. The first two can only have a maximum duration of six months, while on the other hand long private residential leases must have a minimum duration of one year.

All lease contracts falling within the scope of the prospective Act must be registered with the Housing Authority. If the lessor fails to comply with this obligation, the lessee may proceed to register the contract himself, at the expense of the lessor. The registration of the lease contract shall, in turn, entail the tenant’s protection as it shall ascertain that none of the following possibly abusive clauses are included in the lease contract:  

  • clauses which provide for the automatic termination of the contract other than the non-fulfillment of the lessee’s obligations, as expressly provided by the Civil Code;
  • clauses which authorise the lessor to reduce, without equivalent consideration, any benefits stipulated in the contract;
  • clauses that exempt the lessor from any of the responsibilities to which he is bound by law;
  • clauses which impose the payment of additional considerations, other than the rent, the deposit, insurance on the contents of the tenement and any other foreseen contributions;
  • clauses which stipulate the payment of a fixed amount for the consumption of water, electricity or other utility services if such amount does not reflect the actual consumption of such utility services by the lessee; and
  • clauses which limit the use which one is expected to make of a residence

The legislator has also ensured to prescribe different time periods within which a lessee would be able to withdraw from a lease agreement should he desire to do so. Moreover, by virtue of the Bill, it is ensured that there shall no longer be situations where the lessee of a long private residential lease gets caught unawares when it comes to leasing termination as it shall be the lessor’s duty to give notice to the lessee at least 3 months before by registered letter prior to the expiration of the lease. Failure to do so would result in the private residential lease being deemed to have been renewed for a further period according to the terms of the original lease. Notably, if the tenant stays in his leased home after the agreed duration has lapsed, the landlord cannot forcefully evict him but has to bring the matter before the Rent Regulation Board.

Lastly, there is the fundamental issue of rent. This must be freely stipulated by the parties and unless otherwise agreed, its payment will be on a monthly basis. In no case may the lessor require the advance payment of more than one month’s rent. Regarding rent increases, these may only take place once annually, and in the absence of any express agreement, the rent cannot be revised during the term of the lease. Moreover, yearly increases may not exceed the annual variations recorded in the Property Price Index published by the National Statistics Office, and they may never exceed the previous rent by more than 5%.

As one can deduce from the above, these rules represent a major overhaul in the private residential rental sector. Since the law has not yet been implemented fully as an Act, some of the rules described above may also be subject to some changes. However, the objective of the Act shall remain the same: that of bringing an end to the saga of rental abuses which has occurred throughout the years.

KSi Malta’s legal team has all the resources needed in order to provide you with advice and assistance on this matter, whether you are acting as the tenant or the landlord. We provide a range of lease contract-related services including contract vetting, contract drafting, and contract negotiating services. We understand the repercussions that a badly drafted lease contract can have, and all necessary measures are undertaken to ascertain that your best interests are protected. We also take all steps required to ensure that the lease agreement is formulated in accordance to your specific set of circumstances
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