A reform aimed at further regulating the rental property market was announced by the Maltese government during a press conference on the 26th of June 2019.
The reform seeks to, amongst others, introduce a minimum rental period for residential rents, cap year-on-year rent increases, incentivise long-term contracts through tax credits for landlords, and introduce a compulsory registration mechanism for all rental contracts.
The reform introduces a mandatory minimum rent duration of one year while also making the first two months of the lease mandatory for tenants, after which the tenant can dissolve the rent by giving the landlord at least one-month notice. On the other hand, the landlord may choose not to renew the lease by giving the tenant at least three months’ notice from the end of the contract. The lease is renewed automatically for one year if no notice of termination is given.
While the mandatory minimum rent duration is one year, the landlord and tenant can agree on a longer lease.
When a period of two years is agreed between the landlord and tenant, the first four months of the lease will be mandatory for tenants, after which the tenant can dissolve the rent by giving the landlord at least two months’ notice. On the other hand, the landlord may choose not to renew the lease by giving the tenant at least three months’ notice from the end of the contract. The lease is renewed automatically for two years if no notice of termination is given.
Longer notice periods will apply for longer periods of rent.
While the proposed reform does not seek to regulate rental pricing, it introduces a cap on rent increases at 5% per annum. Rent increases will be linked to the Property Price Index, which will be communicated by the Housing Authority.
The new rent laws will require landlords to register residential rental agreements with the Housing Authority.
Along with the rent contract, the new laws will require landlords to provide an inventory of all movables situated within the property being rented, which inventory needs to be signed by both the lessor and lessee.
The Housing Authority has the power to proceed against landlords who fail to register rent contracts in the Rent Regulation Board. Landlords failing to comply with the new rent laws may incur up to €10,000 in administrative fines.
The use of blockchain for the registration of rent contracts further consolidates Malta’s image as pioneer not only in regulation but also in practical use of distributed ledger technology.
The reform also introduces fiscal incentives in the form of tax credits for long-term leases. Landlords entering into rent contracts for two years or more will receive a tax credit based on property size and duration of the lease.
The proposed tax credits for leases of two years are as follows:
The proposed tax credits for leases of three years or more are as follows:
By virtue of the new rent laws, landlords will have the right to claim compensation before the Rent Regulation Board for the period during which the tenant occupied the property after the contract was terminated and the tenant was duly notified.
The reform introduces a mechanism where parties to a rent agreement can settle minor disputes regarding the rental deposit and the property general maintenance not exceeding €5,000 by submitting an application to the Housing Authority to be resolved by an expert panel. This expert panel will now offer a relatively affordable and fast remedy to claimants where either of the parties fail to honour their obligations without any justification.
The new rent laws seek to expand the scope of work of the Housing Authority. In this respect, a new department within the Housing Authority will be focusing solely on the private rented sector. This department will be responsible for the registration of leases and the supervision of the rental market in general.
This reform applies to residential rental contract but does not apply to pre-1995 rental agreements, social or touristic leases.
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