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A Guide to the 2020 Rent Regulations – The Private Residential Leases ActMEDIA ROOM
October 6, 2020
Important changes to the manner in which private residential leases are regulated in Malta were brought into effect last January 2020. The enactment of the Private Residential Leases Act, Chapter 604 of the laws of Malta (the “Act”), is aimed at protecting the right to adequate accommodation and promoting fairness, transparency, and predictability between parties in a lease agreement.
In this article, we have answered a number of commonly asked questions that arise in connection with this newly introduced Act, and this, with the aim of summarising the important elements thereof.
1. When is the Act Applicable?
All private residential leases entered into or renewed after 1st January 2020, shall be regulated by the Act.
Leases which commenced on or after 1st June 1995, and still legally valid and in force after the 1st of January 2020, shall continue to be regulated exclusively by the provisions of the Civil Code. However, if the said leases remain in force as of the 1st of January 2021 they would need to be registered as explained further below. The obligation to register is also applicable to any lease that is renewed beyond the 1st of January 2021.
The Act is not applicable in the following instances:
- Tenements belonging to the Government of Malta;
- Tenements let to any tourist, exclusively for tourism purposes;
- Tenements which are not let for a primary residential purpose;
- Tenements let before the 1st June 1995;
- The letting of urban tenements where contracts of emphyteusis or sub-emphyteusis have been or are about to be converted into leases by virtue of law.
2. What is a Private Residential Lease?
The Act identifies two types of private residential leases:
i. Short-term Private Residential Leases
A lease will be deemed a ‘Short-term private residential lease’ if it does not exceed 6 months and is meant to satisfy the need of the following categories of lessees:
- a) non-resident workers who are employed either for a period less than six (6) months or only to complete a specific task within a maximum period of six (6) months;
- b) non-resident students who are enrolled in courses for less than six (6) months;
- c) residents who need to rent an alternative primary residence for a period of less than six (6) months;
- d) non-residents who need to rent a tenement for a period of less than six (6) months, provided that they would not be seeking to establish their long residence in Malta.
A short-term private residential lease must necessarily identify within which of the above categories, the lessee falls into, with documentary evidence to substantiate same.
Upon entering into a short-term private residential lease, a lessee may not withdraw from the said lease before the lapse of one (1) month. Termination of the said lease following the lapse of one (1) month, would need to be preceded by notice by registered mail to the lessor of at least one (1) week. Naturally, the Act stipulates the minimum requirements, and parties remain free to agree upon more advantageous conditions for the lessee in the case of withdrawal of the lease.
A short-term private residential lease cannot be extended and automatic renewal does not apply for such leases.
ii. Long-term Private Residential Leases
Long-term private residential leases must be for a minimum of one (1) year.
Subject to the possibility of stipulating more advantageous conditions for the lessee, upon entering into a long-term private residential lease a lessee may not withdraw from same before the lapse of:
- a) six (6) months in the case where the lease is for a period of less than two (2) years;
- b) nine (9) months in the case where the lease is for a period of two (2) years or more but less than three (3) years; or
- c) twelve (12) months in the case where the lease is for a period of three (3) years or more.
Withdrawal from a lease may be made by giving notice to the lessor by means of a registered letter. Such registered letter must be sent to the lessor as follows:
- at least one (1) month before in the case where the lease is for a period of less than two (2) years;
- at least two (2) months before in the case where the lease is for a period of two (2) years or more but less than three (3) years; or
- at least three (3) months before in the case where the lease is for a period of three (3) years or more.
Should a lessee not abide by the above-mentioned periods, the lessor will have the right to retain an amount not exceeding one month’s rent from the deposit paid by way of security.
In the case of long-term residential leases, automatic renewal shall be applicable, such that for the purposes of termination, the lessor must serve the lessee with a notice of termination.
3. Can one let a shared residential space?
Yes, the letting of shared residential spaces is allowed under the Act. Any contract entered into for the lease of a shared residential space must have a duration of at least six (6) months.
A lessee may withdraw from such lease, at any time, by giving one (1) week prior notice to the lessor by a registered letter. No penalty may be imposed on the lessee for exercising his rights of withdrawal.
Any such lease agreement would also need to be registered as explained above.
Any lease of shared residential space may not be renewed - automatic renewal applicable under long private residential leases does not apply for the lease of a shared residential space.
The Housing Authority retains the power to introduce and enforce safety and security standards in relation to tenements which are let to more than one (1) person, including rules limiting the number of persons that could occupy such tenement at once.
4. What are the mandatory clauses that must be laid down in a private residential lease contract?
All private residential lease contracts drawn up after the 1st January 2020 must be done in writing and must include the following:
- details of the property to be leased;
- the intended use of the tenement as agreed;
- the period covering the lease for which the tenement shall be let;
- whether, and how, the lease can be renewed;
- the lease amount (rent) and the payment method;
- any amount deposited by the lessee by way of security;
- an inventory in writing, attesting the condition of the tenement, as well as the state of any furniture and domestic appliances supplied by the lessor
Failure to include any one of the above essential requirements would render a contract non-registerable and thus null and void.
Additionally, when renting out premises for residential purposes, a lessor is bound to ensure an adequate supply of water and electricity.
The Act also indicates what clauses would be deemed forbidden clauses and thus not allowed in a lease agreement. For further detail in this regard, you may get in touch with us and we will advise you accordingly.
5. What conditions are applicable with respect to the Rent?
The rent may be freely stipulated by the parties. Unless otherwise agreed, the payment of the rent would be deemed to have been calculated for one (1) month.
The lessor cannot request the advance payment of more than one (1) month’s rent unless it is otherwise agreed by the parties. Having said that, the lessor has a right to request an additional amount by way of security, for the performance of the lessee’s obligations.
The lessor is bound to deliver to the lessee a receipt for the payment unless it has been agreed that payment is made through procedures that are capable of proving the effective fulfilment of the obligation; (bank payments for instance).
A rent increase may only take place once every year. In the absence of any express agreement, the rent cannot be revised during the term of the lease.
Yearly increases may not exceed the annual variations recorded in the Property Price Index published by the National Statistics Office. Importantly, any rent increase may never exceed the previous rent by more than five per cent (5%).
6. When is one obliged to register a lease?
Private residential lease agreements to which the Act applies must necessarily be registered with the Housing Authority.
An application for registration, may not relate to more than one relevant lease. If a lessor has more than one private residential lease contract due for registration, a separate application for each of the said contracts would need to be filed.
If the lessor fails to register the lease, the lessee may proceed with the said registration, at the expenses of the lessor.
The administrative fees payable to the Housing Authority are as follows:
|Type of Registration||Administrative Fees|
|Normal Registration (within the 10-day specified period)||€10|
|Late Registration (after the 10-day specified period)||€120|
|Renewal of Agreement (upon termination)|
* No fees are due for the renewal of lease agreements that in the contract specify that the lease will be renewed each year
For the purposes of registration, the Housing Authority may require the lessor to specify the number of occupants that shall reside in the particular tenement. The Housing Authority is also empowered to enforce minimum standards of habitability for tenements offered for letting.
7. What happens if the tenant (or lessee) over-holds the rented premises?
For both short and long term private residential leases, in cases where a tenant is in default of his obligations and remains in occupation of the rented tenement beyond the lapse of his title, he would be bound to pay the lessor an amount equivalent to the rent due until the date of the effective eviction from the property.
Demand for such compensation may be made simultaneously with the demand for termination of the lease and, or for the eviction of the lessee from the rented tenement.
Additionally, the lessor shall always have a right to obtain compensation for any greater damage suffered.
We trust that this guide helps provide a preliminary understanding of the basic principles applicable as a result of the newly introduced Act. Prior to entering into any private residential lease agreement, it is always advisable to seek professional legal advice.
Should you require any assistance with the drafting or review of private residential lease agreements, the registration or termination of same, have any queries regarding the preparation of an inventory, or any other matter relating to the Act, contact us and one of our trusted legal professionals would be able to assist and advise you accordingly.
About the Author
This article has been authored by Rachel Genovese, CSB Group Regulatory Advisor. For any additional information or support required please contact us on [email protected].