The protection from deprivation of property without compensation

The First Hall Civil Court (Constitutional Jurisdiction) (the “Court”) presided over by honourable Judge Lawrence Mintoff, on 13 January 2020, in the case “Vincent John Rizzo, Philip Edwin Rizzo u Anne Farrugia v. L-Avukat Ġenerali; u Edward Maggi u Natalia Maggi”, dealt with a conflict of laws issue that exists between, on the one hand, Article 12 of the Housing (decontrol) Ordinance (Chapter 158 of the Laws of Malta) and on the other hand, Article 37 of the Constitution of Malta and Article 1 of Protocol 1 (to the Convention for the Protection of Human Rights and Freedoms) of the European Convention of Human Rights.

This case in particular concerned a situation whereby the plaintiffs, as heirs of the deceased, inherited a property as “utile dominium”. In terms of law, contrary to the title of “dominium directus”, which provides a person with the absolute right of ownership over property, the “utile dominium” signifies that one is given the right of use and possession over such property to which the said right is attached. Additionally, the “utile domimium” is also given the right to reap any benefits derived therefrom.

The situation presented before the court, and the crucial point which the plaintiffs sought to remedy concerned the limitation created by conflicting provisions within the laws. This was particularly seen when it came to the right of enjoyment of one’s own property and the right to proper compensation in those instances in which one is deprived of their own property.

The issue arose since the property which formed part of the inheritance of the plaintiffs, was not inherited as free and unencumbered. In 1979 the “dominium directus” granted a right of temporary emphyteusis over the property in question to the defendants. Such right was fixed for a period of 21 years.

Article 12A of the Housing (Decontrol) Ordinance, Article 37 of the Constitution of Malta and Article 1 of Protocol 1 (to the Convention for the Protection of Human Rights and Freedoms) of the European Convention of Human Rights, which form the subject matter of this court case state the following:

Article 12A of the Housing (Decontrol) Ordinance states that, subject to certain conditions, and, on the expiration of a temporary emphyteusis of a dwelling house being occupied by a citizen of Malta as his/her ordinary residence, such person having the right of temporary emphyteusis will be entitled to continue in the occupation of the said house under lease from the dominium directus, at a rent which is equal to the groundrent payable immediately before the expiration of the emphyteusis. Such rent can only be increased to a sum which is not greater than double the amount of the initial ground-rent agreed upon. The terms under which such rental agreement is to be regulated are also stipulated under the said article.

In this case, the defendants, being Maltese citizens who were occupying the property as their ordinary residence at the time of expiration of the emphyteusis, extended their rental term in accordance with the above stated article.

In light of this, the plaintiffs argued that the said provision was to be regarded as unconstitutional. The limitation, imposed by the law, which capped the maximum amount of rent that one could impose on their tenants (in such situations), consequently deprived the plaintiffs of the right of enjoyment of their property. Such deprivation of property was being done without due compensation being given.

The above scenario contradicted two fundamental provisions, discussed below.

The plaintiffs accordingly quoted article 1 of the Protocol to the Convention for the Protection of Human Rights and Fundamental Freedoms and Article 37 of the Constitution of Malta, which respectively state the following;

“Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law. The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties.”

Article 37 of the Constitution of Malta re-instates the above through the following:

“No property of any description shall be compulsorily taken possession of, and no interest in or right over property of any description shall be compulsorily acquired, except where provision is made by a law applicable to that taking of possession or acquisition –

(a) for the payment of adequate compensation;

(b) securing to any person claiming such compensation a right of access to an independent and impartial court or tribunal established by law for the purpose of determining his interest in or right over the property and the amount of any compensation to which he may be entitled, and for the purpose of obtaining payment of that compensation”

Nowadays, through Article 12B of the Housing (decontrol) Ordinance, the law caters for the possibility to amend and renew certain conditions which originally existed under a contract of lease of emphyteusis. The said article was introduced through Act XXVII of 2018 and began to apply from the 1 August 2018.

Today, the owner of a property which had been rented out pre 1 June 1995 by virtue of a title of emphyteusis or sub-emphyteusis can demand, through an application filed before the Rent Regulations Board, that the rent be revised to such amount that does not exceed two per cent of the open market value of the dwelling house, per annum. Such amount is to be determined as of 1 January of the year in which the application is filed.

In the case under examination, and in accordance with the decision taken in Gerald Camilleri vs. Avukat Ġenerali et, the Court ruled that the amendments to the right of emphyteusis reflected in Article 12B of the Housing (decontrol) Ordinance had however been established in order to clarify, amend and regulate future similar situations which have been created through Article 12A of the Housing (decontrol) Ordinance, and not to remedy that deprivation which took place pre-introduction of Article 12B.

The Court therefore ruled that since the introduction of Article 12B is to apply to rental periods starting on 1 January 2019, the plaintiffs were not in a position to seek a remedy, and obtain appropriate compensation, for the entire period in which they were deprived of their property. In such a case, the plaintiffs could only seek suitable compensation and a revision of the rental contract terms and fees, for the rental period starting as of 1 January 2019.