Taming the residential rental market

The proposals in the White Paper entitled Renting as a Housing Alternative is a breath of fresh air in the long overdue debate on the need to regulate the rental market for residential property.

As rightly pointed out in the White Paper, the Maltese community has developed an allergy to local rent regulation as, when it existed, it was generally too rigid. It oscillated from strict over-protection of the tenant to absolutely no controls.

For a very long time, we also ended up with temporary legislative provisions enacted during the war which were over-stretched too long after their useful life. In effect, this reluctance over the years to introduce proper landlord and tenant legislation effectively killed off the rental market for a long time and it is only as a result of this fact that Malta is a nation of home-owners: it would not have developed in this way, had the post-war governments got their priorities right.

The proposals put forward by the White Paper are generally a good step forward. If properly implemented, they will go a long way towards laying the foundations for a stable residential rental market based on adequate (and necessary) protection of both landlords and tenants. A serious debate is, however essential in order to avoid creating unnecessary difficulties.

The rental market is currently in a state of anarchy, where the only applicable rules that apply are those of the jungle – where might is right – because, so far, the state has abdicated its duties to protect the vulnerable from the excesses of the market. Subject to the three exceptions listed in the White Paper (temporary foreign workers, tertiary education students and temporary leases for persons repairing and/or upgrading their own homes) establishing the period of one year as the minimum length of a residential lease addresses the abuse currently resulting from short-term leases. Likewise, establishing as a duty of landlords to give a suitable notice period of their intention not to renew a lease is right and proper. It is in everybody’s interest that everyone is aware of their rights and duties, as this will lead to better planning on all sides and, consequently, to a more stable and civil relationship between landlords and tenants.

It was also about time that the deposit requested on the signing of lease agreements are properly regulated – both as to the actual need for a deposit, its quantum and the circumstances in which it would be reasonable for it not to be refunded. This is a subject about which countless stories of actual abuse on the part of both landlords and tenants abound and regulation of it will bring some sense into the subject.

It is also right that variations to the rent to be paid during the period of the lease are properly regulated,  thereby defining the limits of permissibility. Too strict a limitation, however, will lead to a preponderance of short-term lease agreements because the market prefers frequent rental revisions that enable the rent payable to be as close as possible to the full market value.

Registering lease agreements is a step forward. It will not only lead to a check to  ensure that agreements comply with the new legislation but will also have the potential to ensure that tax evasion associated with rent paid is history.

When considering the White Paper’s proposals, one should avoid introducing unnecessary exceptions as these will only serve to stultify the objective of the exercise: the development of a stable rental market for residential properties. In particular, the proposal in the White Paper to justify the premature determination of a lease agreement, when a landlord needs the property for his own use or in order to sell with vacant possession or else to redevelop it, is uncalled for. Given that the residential leases in question will most probably be short-term leases anyway (between one and five years) no harm will be done to anyone if the landlord patiently awaits until the end of the lease before taking back possession.

The current proposals, with the one exception referred to above, are an essential next step to help the residential rental market develop properly. On their own, however, they are insufficient because they must be supported by a Housing Authority that proactively addresses the needs of the vulnerable when facing the market, which is eager to fleece those who meekly submit themselves as they see no way of becoming homeowners!

 

published in The Malta Independent on Sunday – 22 October 2018

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