Rental Reform 2020 Regulations

Are you in the know of these recent changes and do you know how this will affect you. The rental reform was widely debated when it was released earlier this year and was opposed by many. Where the reform was definitely the right direction some are saying the landlords have lost their rights. We’ll leave this judgement up to you while we provide a full brief of what the reform has entailed and how this affect both the landlord and the tennants going forward. Comprehensive reform of Malta’s private rental market has been a long time coming. For a while, legislation lagged behind Malta’s economic growth and the accompanying inflation in the rental market.

Then, in June 2019, the Government announced a promise of reform. While not all-encompassing, the Private Residential Leases Act is a first step towards tackling Malta’s housing issues.

Here’s what you should know about the reform before you decide to make a move or renew your lease agreement.

What’s the reform about?

This is a move by the Government to regulate the rental housing market. The Prime Minister has said that it is a response to changes in Malta that have caused disproportionate social problems and competitiveness.

Minimum residential leases and notice periods are in the crosshairs, as well as the registration of contracts and the introduction and expansion of legal and fiscal incentives.

The new legislative framework aims at preventing a ‘free-for-all’ approach. It creates stability for tenants, who are currently at the mercy of their landlord. And, it provides landlords with incentives for longer-term contracts. Unfortunately, though, the Government has skirted the issue of pre-1995 leases, as this reform does not apply to them.

What do you mean by “registration”?

Formal structures are being created to prevent an unfair and unregulated rental market. Key among these changes is the mandatory registration of private rental properties.

Why? To minimise black market abuse and reduce tenants’ vulnerability to unregulated rentals and maltreatment by landlords. If landlords fail to register, they’ll incur a fine of between €2,500 and €10,000.

How? Every landlord must submit the rental contract, inventory and deposit paid. Prioritising accessibility and ease of use, the register will be online as well as on a blockchain and overseen by the Housing Authority.

Helpfully, the authorities are providing an amnesty, transition period. So, all those who previously failed to follow regulations are being given the time to fall in line.

Where to register your property?

What if a dispute arises?

The rent reform is creating a formal space within which disputes between landlords and tenants can be resolved quickly.

When concerned about a contract’s registration, a tenant can contact the Housing Authority for independent investigation. The case may be taken before the Rent Regulation Board, and the Housing Authority may impose a three-year lease at 75 per cent of the property’s market value.

A new adjudication panel of legal and technical experts is also being created. It will hear claims about deposits or maintenance fees with a maximum value of €5,000. Unless individuals need to be called, the claim will be resolved within five working days from the date of the last submission of evidence.

What are the fiscal incentives?

Long-term rentals will now be subject to a mandatory one-year minimum contract. For the tenants’ benefit, annual rental increases will be capped at five per cent. And, for landlords who offer contracts for two and three or more years, annual tax credits will be applied:

The introduction of tax incentives does not form part of the Residential Leases Bill but it was reported in the media that a system of tax credits shall be introduced for lease contracts exceeding one year and dependent on the number of bedrooms of the tenement being rented.It is envisaged that tax laws will be separately amended to include such tax credits.

Are notice periods targeted by the reform?

For long lets, landlords must provide tenants with at least three months’ notice should they wish them to vacate the property. If not, the contract will be automatically extended for the same duration. This notice must be sent via registered letter.

The new notice period regulations affect tenants too. Besides being subject to a minimum period of rental, tenants must also provide sufficient notice if they’d like to leave before the contract’s end. The minimum periods for tenants are:

Contract Length Minimum Rental Period Minimum Notice Period
1 Year 6month di fermo 1 month
2 Years 9month di fermo 2 months
3 Years or more 12month di fermo 3 month
6months (short let) 1month di fermo 1 week

In Malta, landlords have historically faced long delays when trying to get tenants to vacate the property. So the court is now being given the power to announce an eviction on the first hearing. The landlord can also request compensation for any time the tenant stayed in the property beyond the end of the contract. What about short-term lets?

Short-term lets will have a maximum duration of six months. And they may only be offered to non-resident workers, non-resident students and non-residents looking to establish long-term residence in Malta.

(a) non-resident workers who are employed either for a period less than six (6) months or only to complete a specific task within a maximum period of six (6) months;

(b) non-resident students who are enrolled in courses for less than six (6) months;

(c) residents who need to rent an alternative primary residence for a period of less than six (6) months;

(d) non-residents who need to rent a tenement for a period of less than six (6) months, provided that they would not be seeking to establish their long residence in Malta:

Provided that a contract of short lease shall identify the specific category within which the lessee falls into and attest it through attached documentation. In the absence of either of these requirements the contract shall be deemed to be a private residential lease in accordance with article 8

Furthermore, no fiscal incentives apply, and tenants have a minimum seven-day notice period.

The new legislation doesn’t cover tourism rentals, which include Airbnb rentals. The holiday rental market is regulated by the Malta Tourism Authority.

Does the reform target monthly bills?

To guarantee fairness, landlords must provide tenants with access to their water and electricity bills. The tenants can then recover additional expenses and deduct this amount from their rent. ARMS are also no longer allowed to stop the provision of water and electricity to properties where people are living.

All in all, the Private Residential Leases Act is a positive step. We are happy to see that both landlords and tenants are more protected than before.

As stated above, the reform was much needed in Malta. A country that for several years has seen a bouyant market with prices shifting upwards and thousands of ex- pats heading to the Island. Is it 100% fair and does it cover all basis to protect both the landlord and the tenant? Let us know what you think below in the comments!

If you’d like more information about Malta’s rental reform, please make sure to ask a questions and our team of experts will be happy to assist you. Renting a property? Speak to a member of the RE/MAX Lettings team today.