New Rent Laws – The Private Residential Leases Act

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Recent Developments in Maltese Rent Laws
The Private Residential Leases Act which came into force on the 1st January 2020 relates to leases of urban property for residential purposes. Indeed this new Act applies to “private residential leases” which are defined in Article 2 as “any long or short private residential lease, including the letting of shared residential space, which is entered into after 1st January 2020, and any lease for a residential purpose entered into before the 1st January 2020, which would still be in its original or renewed period on the 1st January, 2021”.Hence, the Act applies to both long and short (i.e. less than six months) private residential leases, along with leases of shared residential spaces.

Is the Private Residential Leases Act applicable to every tenement?
Tenements belonging to the Maltese Government, along with tenements let to tourists for tourism purposes, and tenements which aren’t let for a primary residence purposes or which have been let before the 1st June 1995 are excluded from the application of the Act’s provisions.

What is the cut-off date for the new legal provisions to be applicable?

In accordance with the provisions of this new law, it is obligatory for lessors to register with the Housing Authority all private residential lease contracts entered into after the 1st January 2020 and/or all renewals of leases entered into after the 1st January 2020. There is no obligation to register pre-2020private residential leases whichexpire before the 1 January 2021. However, pre-2020 leases which expire on or after the 1st January 2021 are to be registered before the 1st January 2021, and upon such registration the Private Residential Leases Act shall start applying to such pre-2020 leases.  Such registration is to be done within 10 days from the commencement of the lease and should the lessor fail to register the lease contract, then the lessee may proceed with its registration at the lessor’s cost.  Lease contracts which are not registered in accordance with such provisions shall be deemed to be null and void. A registration fee of €10 applies for every registration of a contract of lease and should the contract fail to be registered within ten days from the commencement of the lease, a late registration fee of €120 applies. Separate applications are required for every private residential lease contract entered into.

What are the ad validitatem requirements for such lease agreements under this new law?

Private residential lease agreements are to specify the property to be leased and the period for which it shall be let along with its agreed use. Moreover, it is important for the parties to specify whether the lease may be extended, and if in the affirmative, in which manner. The amount of rent and the manner in which such payment is to be done is also to be included in the agreement along with a clear indication of the amount deposited by the lessee onto the lessor by means of security for the performance of the former’s obligations. It is now also obligatory to include an inventory certifying the condition and state of the property and the furniture and domestic appliances therein contained. The Housing Authority has formulated sample contracts that are published online on its website. Parties are not obliged to utilise such model contracts drafted by the Housing Authority, however, any contract which does not follow the Housing Authority’s template is to be accompanied by a separate form annexed to the agreement which may be found on the same Authority’s website, and the details contained on this form shall prevail over the contract itself. It is fundamental for those parties who opt to draft their own lease contracts to ensure that the contents of the Act are strictly adhered to, since in default, the contract may be declared null and void. Indeed, clauses providing for the automatic termination of the lease (unless being relative to requiring the lessee to act as a bonus paterfamilias, pay rent, or prevent unlawful use of the tenement or sub-letting), or clauses authorizing the lessor to reduce any of the benefits stipulated in the contract without consideration, along with clauses exempting the lessor from liability arising from his contractual obligations (such as in the event of latent defects), are to be deemed as being without effect if inserted in such private residential lease contracts. Furthermore, clauses limiting the use of the residence, or imposing payment of additional considerations other than rent, deposit, insurance, and any condominium expenses, or clauses imposing on lessees additional consideration for use of moveables or fixed-payments for water, electricity and utilities which do not reflect the actual consumption, are equally deemed to be without effect should they be inserted intosuch agreements.

Any conditions for long-term leases?

Long-term private residential lease agreements must be entered into for a minimum lease-period of one year. Indeed, any agreement stipulating a shorter duration shall be deemed to be for a period of at least one year, nonetheless. Furthermore, the lease agreement shall be automatically renewed for a further one-year period unless the lessor gives notice of termination to the lessee by means of a registered letter, at least three months prior to the original termination date. Lessees may withdraw from a long-term lease after six months whenever the lease is for a period of less than two years, and this by giving one-month prior notice by means of a registered letter to the lessor; or after nine months whenever the lease is for a period of more than two years but less than three years by giving two-months prior notice by means of a registered letter to the lessor; or after twelve months whenever the lease is for more than three years by giving three-months prior notice by means of registered letter to the lessor. The lessor is entitled to retain the value of one month’s rent from the deposit if the lessee opts to terminate the lease agreement earlier. Parties may agree to have termination clauses which are more favourable to the lessee but not to the lessor. It is noteworthy that the lessor may not impose any sort of penalty on the lessee for exercising his withdrawal rights as explained above.

Any conditions for short-term leases?
Short-term private residential lease agreements must be entered into for a maximum lease-period of six months and the contract shall automatically terminate upon the expiration of the six-month period. In such leases, there is no obligation to give notice of termination in advance since the lease does not renew automatically by virtue of law. The lessee may withdraw from the lease agreement at any time after the expiration of one month from the commencement of the lease by granting the lessor one week prior notice by means of a registered letter. The said conditions applicable for short-term private residential lease agreements are also applicable for the letting of shared residential spaces.

What about conditions on rent?
The rent to be paid by the lessee as consideration for the lease is to be agreed freely between the parties. Unless agreed otherwise, the lessor can solely ask for one month’s rent payment in advance and for a deposit as security of the lessee’s obligations at the commencement of the lease agreement. The lessor, in turn, is obliged to grant to the lessee a receipt of payment, unless payment is made through financiary-procedures that within themselves constitute proof of payment. If agreed to by the parties, rent may only be increased annually, and such annual increases cannot exceed the higher of the increase in the Property Price Index published by the NSO and 5% of the value of the rent.

What happens in the case of defaulting lessees?
Lessees who keep occupying the rented tenements beyond the lapse of the agreed term are obliged to pay the lessor an equivalent amount of rent until the date of actual eviction and the lessor is entitled for compensation from the lessee for any greater damage incurred due to such default.

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