Determining the competence and the jurisdiction of the Rent Regulation Board

In a judgment delivered in the names Marissa Van Den Berg vs. Spouses Haegendorens, F. Muscat et al on 8 January 2019, the Court of Appeal presiding in its Inferior Jurisdiction sought to determine whether the Rent Regulation Board, established in terms of the Reletting of Urban Property (Regulation) Ordinance (Chapter 69 of the Laws of Malta), has the jurisdiction to decide claims against third parties being neither landlords, tenants or sub-lessees and whether such Board had the competence to decide claims relating to brokerage fees.

The merits of the case in question relate to a dispute which arose between the plaintiff, who entered into a lease agreement, as lessee, with the defendants, being lessors of an apartment located in Sliema and leased to the defendant for a period of one year. The lease had been brokered by Ms Muscat, a letting agent who executed the lease agreement together with the lessors and the lessee. After moving into the tenement, the plaintiff complained that the premises leased to her were neither habitable nor sanitary, arguing that an overflow of drainage in the tenement’s shaft had caused the growth of mould and the emission of what was described to be ‘an unbearable odour’. Plaintiff argued that this constituted grounds for termination of the lease, and instituted proceedings before the Rent Regulation Board against the defendants, qua lessors, and Ms Muscat requesting inter alia the rescission of the lease and a refund of any deposit guarantee and upfront rent that the plaintiff had advanced pursuant to the lease. The plaintiff additionally requested to be refunded the sum of €398.24 being equivalent to half the first month’s rent and paid to the letting agency responsible for brokering the lease of the property by way of non-refundable agent’s fee.

The defendants rejected the claims brought against them before the Rent Regulation Board and lodging a counter-claim before the said Board and asking it to order payment by the plaintiff of €9,900 by way of outstanding rent being outstanding for the remainder of the duration of the contract. The lessors also requested the Board to liquidate damages and costs borne by them as a consequence of breach of contract by plaintiff. The second defendant, Ms Muscat, also lodged a reply with the Rent Regulation Board arguing inter alia that the Board was only legally granted competence to determine claims against tenants and landlords, and that as such, it could not legally deliver judgment against third parties, including without limitation letting agents. The defendant continued by arguing that the Board also lacked competence (rationae materiae) to decide the claim to the extent that this related to brokerage fees. These matters, it was argued, fell outside the Rent Board’s purview.

Having regard of all three responses, the Rent Regulation Board proceeded to deliver preliminary judgment in Ms Muscat’s favour, noting that Ms Muscat had been correct to note that the Board only had jurisdiction to determine claims arising between landlords, lessees and sub-lessees in all their variations and further noting that: “It is amply clear that defendant F. Muscat upon signing the contract of lease was doing so because it was her role to do so. She did not assume any kind of obligation vis-à-vis any of the parties. This Board will not and cannot delve into the issue whether Ms Muscat was acting in her own personal capacity or else whether she was acting as a letting agent... Moreover, the Board cannot decide on issues relating to agency fees because this is the competence of the ordinary Courts or in this case due to the amount involved it is the competence of the Small Claims Tribunal.”

Plaintiff Van Den Berg appealed this decision, asking the Court of Appeal to annul the said decision on the grounds that the Rent Regulation Board’s interpretation of the law was erroneous. Reference was made to Article 1525(1) of the Civil Code which provides the Rent Regulation Board with the power to adjudge lease disputes and which, in its relevant parts, stipulates:

“The Rent Regulation Board, (hereinafter referred to as the ‘Rent Board’)... shall have exclusive competence to decide on all matters relating to contracts of lease of urban property and of a residence and of commercial tenements. Other leases fall under the competence of the courts of civil jurisdiction while matters relating to agricultural leases shall fall under the competence of the Rural Leases Control Board appointed according to the provisions of the Agricultural Leases (Reletting) Act…”

This, in the plaintiff's view, granted the Board exclusive jurisdiction to determine not only lease contracts per se, but also any and all other matters being ‘related’ to any lease, including therefore disputes relating to brokerage fees. The appellant contended that by refusing to deliver judgment against the defendant nomine, the Board went against the spirit of the law and against the legislator’s desire not to fragment related disputes into separate proceedings being decided upon by distinct adjudicators. By limiting its own jurisdiction and competence, the plaintiff argued that the Board had acted in breach of the very same law that provided it with exclusive jurisdiction in all matters related to leases. The defendant, although having received due notice of the appeal, did not lodge any reply.

Despite the appellant’s contestations, the Court of Appeal emphasised that the jurisdiction afforded to the Rent Regulation Board in terms of the Civil Code pertained solely to contracts of lease, a contract which only established a contractual relationship between lessors and the relevant lessee, or potentially sub-lessee. The latter are the only parties deriving rights and obligations from lease agreements and it was therefore the Court’s understanding that ‘exclusive competence’ granted to Rent Regulation in terms of the aforementioned law arose only limitedly and only within the lessor/tenant relationship. Following a review of the lease agreement, there was no doubt in the Court’s mind that the letting agent only entered into and executed the contract in view of the lessor and the lessee’s obligation to pay the said agent a standard broker’s fee.

The Court of Appeal therefore proceeded to deliver judgment in favour of the defendant nomine thereby confirming the Rent Regulation Board’s preliminary pronouncement.