Tenants denied right to continue relying on the protection afforded by ‘unconstitutional’ pre-1995 residential lease laws
In its decision delivered on 8 May 2019, in the names of ‘Anthony Debono et vs. the Attorney General and Stefan Mifsud et’, the First Hall of the Civil Court (Constitutional Jurisdiction) (the “Court”), presided over by Hon. Judge Lawrence Mintoff, considered, inter alia, the constitutionality of the Maltese pre-1995 rented property legislation in so far as these laws affect the landlord’s right to property, the remedies to be afforded to the landlord and the effect of the unconstitutionality of the old rent laws on the tenants.
In brief, the relevant facts of this case are as follows. The plaintiffs inherited a property located in Sliema from their father in 2004. This property had been rented out to the defendants’ paternal grandmother since 1952 until she passed away in 1986. On her demise, the title of lease devolved on her nephew (one of the defendants) who had resided with her in this same property for 14 years, given that at the time of his grandmother’s demise, Act X of 2009 had not yet come into force. The defendants, being the said nephew and his wife, were paying the minimum rent established at law, through the Reletting of Urban Property (Regulations) Ordinance (Chapter 69 of the Laws of Malta) and the applicable sections of the Civil Code (Chapter 16 of the Laws of Malta), that is, €203 per annum to the plaintiffs even though the market value of the rented property merited a higher rent. The plaintiffs argued that they could never receive a just and fair amount of rent because the law in itself prevented this. They were receiving an amount which was established in 1914, which amount remained the same up until 2010 when some adjustments were introduced through Act X of 2009 allowing landlords to increase the rent every three years in proportion to the increases in the inflation index rates.
The plaintiffs argued that the fact that the rent was fixed by law and could not be revised, irrespective of the huge discrepancy which existed between the rent received and the return on investment which they could generate on the free market, breached their fundamental human right to property given that the law did not strike a proportionate balance between the landlords’ rights and those of the tenants. Moreover, the plaintiffs said that they could never gain effective possession of the property or receive any real income on the property. They continued to say that their predecessors were even forced to rent out their property in accordance with the terms contained in Chapter 69 of the Laws of Malta because of expropriation laws which existed in 1954 given that the property was neither decontrolled nor decontrollable.
Due to the above-mentioned reasons, the plaintiffs felt that they were deprived of their right to the enjoyment of their own property as protected by the Constitution and the European Convention of Human Rights (the “ECHR”) without even receiving a just compensation for the loss of possession of the property in question. To this end, the plaintiffs inter alia requested the Court to declare that the operations of Chapter 69 of the Laws of Malta, together with other existing laws, are allowing the defendants to continue residing at the plaintiffs’ property and benefitting from low rent even though this violates the plaintiffs’ fundamental human rights, as protected by Article 37 of the Maltese Constitution, the First Article of the First Protocol of the ECHR and Article 14 of the same ECHR. The plaintiffs even went a step further by asking the Court to provide them with appropriate remedies, including the eviction of the defendants from the property in question. The Court was also asked to liquidate and award just compensation, in terms of Article 41 of the ECHR, for damages suffered as a consequence of the operations of Chapter 69 of the Laws of Malta, particularly because this law created an imbalance between the rights of the landlord and those of the tenant by forcing the landlord to charge an amount of rent which did not reflect market realities.
The Attorney General (the “AG”) made a number of counterarguments which mainly centered on the following reasoning:
Article 37 of the Maltese Constitution only applies in cases where possession is taken compulsorily. It was explained that this substantial element only features in cases where the aggrieved person would have been divested and dispossessed of all rights which s/he would have enjoyed over the property. The AG argued that in the present case, this kind of divestiture did not materialise given that the plaintiffs did not lose all of their rights to the property. The law just controlled the use of the property within the parameters of the Maltese Constitution and the ECHR.
the state has a wide discretion to enact those laws which it considers appropriate in order to control the use of property in accordance with the general interest and in order to be able to address certain social needs.
the rationale behind the mentioned lease laws was that of legislating against the eviction of inhabitants from their residential homes on the termination of a contract of lease and preventing tenants from ending up homeless.
State control over levels of rent falls into a sphere subject to a wide margin of appreciation by the State and its application may often cause significant reductions in the amount of rent chargeable. Hence, one cannot just compare the value of the property on the free market versus the value of rent received and argue that there is a discrepancy (Amato Gauci vs. Malta, European Court of Human Rights (the “ECtHR”), 15/09/2009). The low level of rent is counter-balanced by the wide margin of appreciation granted to the State to legislate in the context of social measures particularly those relating to the provision of residential homes.
The Court appointed an expert architect who had estimated that the house was worth circa €300,000 and could generate a monthly rent of €1,000. The plaintiffs continued to explain that they had to refuse a purchase offer of €450,000 because the tenants rejected the alternative accommodation offered by the plaintiffs.
The defendant tenants argued that they had always followed applicable laws and have planned their lives around the protection, which they felt was being provided by the law. They said that they always paid rent on time, kept the place in good condition and have always satisfied their obligations as tenants of the property.
The Court’s considerations were mainly three-fold. Firstly, it considered whether the plaintiffs had exhausted all ordinary remedies before instituting the constitutional case. This was a plea which was initially raised by the defendants. The Court decided to reject this plea because the defendants failed to specify which ordinary remedies were available to the plaintiffs and said that had they made reference to the Rent Regulation Board, this would have been incorrect given that this Board only had specific powers, such as the power to order an increase in rent or the taking back of possession of the property.
Secondly, the Court analysed whether Chapter 69 of the Laws of Malta (as amended by Act XXXI of 1995 and subsequently by Act X of 2009) violated the plaintiffs’ human rights protected by article 37 of the Maltese Constitution, the First Article of the First Protocol of the ECHR and article 14 of the same convention. The Court quoted Vincent Curmi noe et vs. AG et (24/06/2016) and said that article 37 of the Constitution of Malta was purposely drafted in a wide manner to cover not just physical objects but also interests or rights to property. When assessing whether Article 1 of the First Protocol of the ECHR was violated or otherwise, the Court made reference to an ECtHR case in the names of Attard Zammit Cassar vs. Malta (30/07/2015) where it was said that:
“In each case involving an alleged violation of Article 1…the Court must ascertain whether by reason of the State’s interference, the person concerned had to bear a disproportionate and excessive burden…
…the Court must make an overall examination of the various interests in issue, bearing in mind that the Convention is intended to safeguard rights that are “practical and effective”. It must look behind appearances and investigate the realities of the situation complained of. That assessment may involve not only the conditions of the rent received by the individual landlords and the extent of the State’s interference with freedom of contract and contractual relations in the lease market but also the existence of procedural and other safeguards ensuring that the operation of the system and its impact on a landlord’s property rights are neither arbitrary nor unforeseeable.”
After considering a string of cases which delved into the subject matter in question, the Court decided that the plaintiffs’ right to private property was in fact violated. It said that the current regime created an unjust imbalance between the rights of the landlords and those of the tenants with the former ending up assuming a social burden which was created through laws which are still in existence and allowing tenants the right to continue renewing the lease indefinitely at a negligible amount of rent despite the amendments of Act X of 2009. The State, on the one hand, legislated in favour of social housing needs and ensured that persons, such as the defendants, were provided with a residential home but on the other hand failed to protect the interests of landlords. The Court clearly indicated that private individuals should not be allowed to bear the financial responsibility for social measures introduced by the State to protect the interests of other citizens without receiving a just compensation.
Thirdly, the Court decided on the form and the quantum of compensation to be provided to the plaintiffs after taking into account a number of factors which were pointed out by the Constitutional Court in the case Cassar Torregiani vs. AG et (29.04.2016), these being: (i) the period of time during which the plaintiffs’ human rights were violated versus the plaintiffs’ waiting time before the institution of the case, (ii) the level of disproportionality between the rent received and the income which would have been generated if the property was rented out on a free market but taking into account the social purpose behind the measure, and (iii) any material damages suffered by the plaintiffs.
Due to the above-mentioned reasons, the Court decided the case in favour of the plaintiffs and after taking into account the factors mentioned in the preceding paragraph, it ordered the AG to pay an amount of €20,000 as compensation for the damages suffered by the plaintiffs. Finally, the Court also said that by awarding compensation for damages yet allowing the law to remain in effect (between the parties); it would effectively be sanctioning a state of unconstitutionality. Human rights law exists in order to ensure that human rights are adequately protected and not to allow violations to occur subject to the receipt of compensation for damages suffered. The Court therefore, ordered the defendants to no longer rely on the legal protections which were granted by the above-mentioned ‘unconstitutional’ laws applying to pre-1995 residential leases in order for them to secure their place as tenants of the property. This case was appealed on a point of law and is currently being heard by the Constitutional Court in its superior jurisdiction.