MINISTERS’ DEPUTIES

Notes on the Agenda

CM/Notes/1514/H46-24

5 December 2024

1514th meeting, 3-5 December 2024 (DH) Human rights   H46-24 Apap Bologna group (Application No. 46931/12), Ghigo group (Application No. 31122/05), Amato Gauci group (Application No. 47045/06) v. Malta Supervision of the execution of the European Court’s judgments Reference documents DH-DD(2023)1322, DH-DD(2023)1321, DH-DD(2024)1133, CM/Del/Dec(2022)1451/H46-20

 

Application	Case	Judgment of	Final on	Indicator for the classification
46931/12	APAP BOLOGNA (see list of cases CM/Notes/1514/H46-24-app)	30/08/2016	30/11/2016	Complex problem

Case description

These cases mainly concern violations of the applicants’ right to peaceful enjoyment of property due to the operation of different rent control laws (Article 1 of Protocol No. 1). The Court found that a disproportionate and excessive burden had been imposed on the applicants further to the requisition of their properties; the imposition of owner-tenant relationships, and the forced indefinite extension of certain private leases (emphyteusis) because of, inter alia, the extremely low rent received by them, the uncertainty as to the possibility to recover their properties, the length of time that the properties had been out of their possession, and the lack of procedural safeguards in the application of the law. Under Article 46, the Court called for general measures to put an end to the systemic violation of the right of property in such cases.[1]

The Court further found violations of Article 13 due to the Maltese Constitutional Court’s failure, even when finding a violation of Article 1 of Protocol No. 1, to take the required action to bring the violation to an end, namely, to evict the tenant or impose higher rents for the future. Moreover, the amounts awarded by the Constitutional Court as compensation did not constitute adequate redress.

In two cases, the Court found additional violations: Article 14 in conjunction with Article 1 of Protocol No. 1 because the legislation applicable did not treat the applicant differently according to the type of property owned (Cassar) and Article 6 § 1 and Article 13 concerning length of civil proceedings and lack of effective remedies thereof (Marshall and Others).

Status of execution

Overview of the execution process: These cases have been under supervision since 2006. Amendments to the different applicable laws, in 2010 and 2018, mainly concerning slight increases in the payable rents, were not deemed satisfactory neither by the Court, nor the Committee of Ministers, as they only very slightly ameliorated the situation of the owners.

In 2021, the Maltese authorities adopted the Controlled Residential Leases Reform Act, which mainly provides for the possibility for an increase in rent up to 2% per year of the open market purchase value of the property, the possibility for owners to resume possession of the property when the tenant is no longer considered a person in need of protection, and the restriction of the categories of relatives who can inherit the occupation rights (for more details see CM/Notes/1451/H46-20).

Last decisions of the Committee of Ministers: At its 1451^th meeting (December 2022) (DH), as concerns individual measures, the Committee noted that the progress with the individual measures is closely linked to the adoption and successful implementation of the general measures and invited the authorities to submit updated and detailed information on the applicants’ situation and on the envisaged individual measures, including transitional measures until the general measures would be adopted and implemented.

As concerns general measures, the Committee mainly:

·         noted with interest the 2021 legislative changes to the Housing Act and invited the authorities to submit information on the criteria used by the competent authority when deciding on the increase in rents concerning requisitioned properties, and whether the law provides for the possibility of eviction, as well as on the impact in practice of the newly introduced mechanism;

·         noted with interest the 2021 legislative changes to the Housing (Decontrol) Ordinance and invited the authorities to provide information on the measures aimed to resolve the issues, notably as regards the capping of rents to 2% and conditions for release of properties, as well as recent examples of the use by owners of the newly introduced mechanism of increase in rents and potential vacation of properties, and on its impact in reducing the number of protected rents;

·         noted with interest the recent case-law of the courts of constitutional competence on releases of properties or compensations for violations of Article 1 of Protocol No. 1 and invited the authorities to submit further examples of this type of cases; and

·         invited the authorities to provide data showing a clear trend in the reduction of the overall length of civil proceedings and the effectiveness of the domestic remedies in this respect.

In response, the Maltese authorities supplemented the information previously submitted by updated action reports of 29 September 2023 and 8 October 2024 (DH-DD(2023)1321, DH-DD(2023)1322 and
DH-DD(2024)1133), all summarised below.  

Individual measures:

The amounts awarded by the European Court as just satisfaction have been paid in all cases.

It follows from the Court’s judgments that the applicants in the cases of Zammit, Cachia and Others and Galea and Borg reached new agreements on the rent payable with the tenants (Zammit in 2019; Cachia and Others and Galea and Borg in 2020) and that the applicants in the cases of Micallef and Others and Martinelli and Others regained possession of their properties.

General measures:

A) Measures aimed at redressing the violations of Article 1 of Protocol No. 1 and Article 13

1) As concerns the amount of rent, the authorities reiterate that under the Controlled Residential Leases Reform Act of 2021, owners can ask the Rent Regulation Board (hereinafter, the RRB) to revise the rent up to 2% per year of the open market purchase value of the property. They submit that this 2% corresponds to broadly half the rental yield of 4% to 5% observed in the private rental market. In the two-year grace period for vacating the premises by the unmeritorious tenants, the rent established by the RRB in its discretion may be even the full market rent. An independent study made with the support of the Council of Europe, using public data and data collected during a visit organised by the Department for the Execution of Judgments to Valletta in March 2024, revealed that the average estimate value of the controlled properties was EUR 247 095; the average percentage of the freehold value of the property determined by the RRB was 1.95%, and the average revised rent was EUR 4 685 per year. Compared to the estimated market prices of similar properties rented on the free market, the average rate of controlled rents is around 63%. The authorities underline that even if 2% of the open market value of the property may be below market rate in some cases, this is justified because the value of the property is established without reference to the improvements made by the tenant throughout the years (the domestic case-law showing that many of the tenants had to do significant structural works at their own expenses to make the property habitable; also, the tenant would have been required to maintain the property in a good state of repair).

2) On the impact of the new mechanism in practice, the authorities, while recalling that further requisitions or imposition of forced rent contracts are no longer possible, submit that only 135 properties remain requisitioned in March 2024, compared to 142 in 2022.[2] Most of the owners of these properties did not initiate any proceedings for derequisition or adjustment of rents. Only 17 owners have complained to courts and only three have lodged a request for a rent increase before the RRB. Most of these requisition orders are still in force because the tenant is in need. As for the protected rents, publicly available data[3] show that in 2021, there were approximately 10 545 active controlled leases in Malta under different laws, including the ones criticised in the present judgments, accommodating 19 184 persons (3.8% of the population), with 67% of these leases with tenants over 65 years old. Since 2021, the Housing Authority offers a subsidy for controlled households whose rent increased covering the difference between the previous and the new rent (for retired tenants) and between 25% of the gross income and the new rent (for tenants still employed).[4]

3) As for the use by owners of the newly introduced mechanism of increase in rents and potential release of properties, the authorities submit that so far there have been 2 714 procedures before the RRB for rent increases (1 433 decided). The highest number of applications was in 2022 (1 079). The courts of constitutional competence examined 843 requests for compensation in 2021, 674 in 2022, and 639 in 2023 (227 of the cases of 2023 were appealed). In 2023, the RRB delivered 425 judgments, awarding the maximum rent in 90.6% of these cases. Between 1 September 2023 and 19 June 2024, it adjudicated 622 cases, awarding the maximum rent in 95,4% of cases. In the other cases the minimum increase was at least 1.5% of the open market value of the property.

4) Concerning the awards of compensation, the authorities underline that the prevailing jurisprudence of the national courts, at first and second instances, shows an alignment to the amounts awarded by the Court as compensation in similar cases. As for the Constitutional Court, its jurisprudence is scarce. For instance, in 2020, it adjudicated 19 appeals in old rent laws cases on compensation awarded by the first-instance court. In eight of those cases, it was the plaintiff who appealed to the Constitutional Court asking higher compensation. In six of those eight cases, the Constitutional Court increased the compensation awarded, while in one case the compensation remained the same and in one case the compensation was decreased. On more recent case-law, the authorities submitted several examples of cases decided by the Constitutional Court in 2024 that follow the line set by the European Court in the Cauchi judgment for the calculation of compensation for past violations of Article 1 of Protocol No. 1, i.e. until the entry into force of the mechanism of increase in rent of 2021.

B) Measures aimed at redressing other violations

In relation to the additional violations found by the Court, the authorities mainly reiterate their previous submissions that, as concerns Article 14 in conjunction with Article 1 of Protocol No. 1, the current legislation ensures a non-discriminatory treatment of owners, and as concerns Articles 6 § 1 and 13, capacity-building measures are ongoing to reduce the length of proceedings.

Analysis of the Secretariat

As regards individual measures

No further measures are necessary in the cases ofZammit, Galea and Borg, Martinelli and Others, Micallef and Others and Cachia and Others, where the just satisfaction awarded by the Court was paid and the properties have been released, or new agreements on payable rent have been reached, thus providing full redress to the applicants. It is proposed therefore to close the examination of these five repetitive cases, by adopting a final resolution.

In the other cases, either information is missing, the requisition orders or the imposed private leases are still in place, or the vacation proceedings initiated by the applicants are ongoing (see for details H/Exec(2024)15).

As the just satisfaction awarded by the Court only covers losses until the date of its respective judgments, and the Court dismissed the applicants’ claims for future losses subject to action being taken by the government to put an end to the violations by introducing a mechanism that would ensure a fair balance between the interests of owners and tenants, the Committee might reiterate its previous invitation to the Maltese authorities to continue submitting detailed and up-to-date information on the applicants’ current situation, including on envisaged transitional individual measures until the general measures would be fully implemented.

As regards general measures

A.    Measures intended to restore the balance between the competing rights of owners and tenants (Article 1 of Protocol No. 1 and Article 13)

1.   Awards of higher rent for the future or eviction of unmeritorious tenants

The Court took issue in these cases with the disproportionate and excessive burden imposed on the applicants by different rent control regimes, as well as with the Constitutional Court’s failure, even when finding a violation of Article 1 of Protocol No. 1, to take the required action to bring the violation to an end, namely, to impose higher rent for the future or evict the tenant”.[5] While the clear intention of the Maltese legislature when adopting the different rent control laws was the protection of tenants in need, this was done at the expenses of the owners, who were forced to bear most of the social and financial costs of supplying social housing accommodation.

The situation in Malta has significantly improved since the first findings of violations by the Court in 2006, as both the legislation and the domestic case-law evolved in the meantime, most notably to:

·         prohibit further requisition of properties and imposition of forced tenancies;

·         limit the possibility to inherit rent controlled tenancies, so there is a natural cut-off date for the current regime, which will dissolve upon the demise of the current generation of tenants;

·         request the revision of rent, subject to a statutory capping;

·         request the release of the properties in question, under certain conditions;

·         align the case-law of the Constitutional Court to the Court’s criteria in awarding compensation.

The Court itself held that the legislative amendments of 2021 introduced a new potentially effective procedure for the applicants, capable of putting in place a higher future rent or evicting the tenant, following a finding of a violation of Article 1 of Protocol No. 1 by the constitutional jurisdictions, so they had an available remedy in theory as well as in practice, which was accessible, capable of providing redress, and offered reasonable prospects of success for their complaint under Article 1 of Protocol No.1.[6]

In matters as complex as the present ones, where the authorities have to secure the rather delicate balance between the interests of owners, including their entitlement to derive profit from their property, and the general interest of the community – including the availability of sufficient accommodation for the less well-off – in accordance with the principles of the protection of property rights under the Convention,[7] the successful adoption of pertinent legislative measures must be followed by their adequate implementation in practice. 

The legislative and judicial measures listed above are all positive measures that contribute to redressing the balance between the competing rights of owners and tenants in this type of leases. However, although undeniably the owners’ situation greatly improved, some further clarifications would be useful to show how the new legislation is effectively implemented in practice in a way to adequately take into account the owners’ rights when confronted with the tenants’ rights.  

In addition, specific comments can be made as regards the amounts of rents payable by the needy tenants and procedure for release of properties.

Amount of rent payable by tenants in need

It is positive that, as confirmed by the most recent statistics submitted by the authorities, the tendency is towards awarding the maximum statutory rent (and even above this maximum for unmeritorious tenants in the two years grace period that they are still allowed to occupy the property in question). In relation to the capping to 2% of the sale value it is noteworthy that this represents roughly 63% of the free market rent. These two elements are in themselves reducing considerably the imbalance between the regulated rents and market rents. It is important to note also, as explained by the authorities, that the calculation of the sale value of the property is made irrespective of the improvements made by the tenant, which are an added value for the owner, and the State offers a subsidy to tenants to be able to pay the higher awarded rents, so taking on part of the burden of offering social housing. This approach towards awarding the maximum statutory rent seems indeed beneficial to the owners and should be pursued and consolidated. The Committee might invite the authorities to confirm this positive trend by submitting further examples of decisions on rent increases, showing how the revised rents corelate to the market rents, and that the revised rents may be awarded retroactively where procedures for finding a violation of Article 1 of Protocol No. 1 predate the procedures for revising the rent.

Release of properties by unmeritorious tenants

While it is positive that this possibility is provided by the law, it still remains unclear from the authorities’ submissions how effective is this in practice. As acknowledged by the authorities in their most recent action report, most of the 135 remaining requisitioned properties are occupied by persons in need, so release would be impossible.

In addition, the possibility of release of properties as concerns the other protected rents is limited, on the one hand by the high thresholds of the means test performed on the tenant to decide whether he/she continues to be eligible for social accommodation, and on the other hand by the impossibility for owners to reclaim their properties for their own personal use where the tenant is 65 years of age and older. These limitations may translate into the fact that most of these properties would remain under these rent-controlled regimes until its natural cut-off date.[8] Therefore, in order to have a clearer picture on the realistic possibilities of release of properties, the Committee might invite the authorities to submit information on how these high thresholds of the means test ensure that only tenants in need continue to be eligible for social accommodation, and whether they are revisable, and statistical data on the number of evictions ordered following the legislative amendments of 2021, including as concerns requisitioned properties, as well as on the length of time between the decision to evict and the actual release of the property.

2.   Awards of compensation for past violations

The Court repeatedly found that the sums awarded in compensation for past violations by the Constitutional Court did not constitute adequate redress, as the later has persistently reduced the compensation awarded by the first‑instance courts for no valid reason.[9] Therefore, the reported alignment of the recent domestic awards of compensation to the amounts awarded by the European Court in similar cases is a highly positive development. However, to assess the long-term sustainability of this positive trend and coherence of practice, the Committee might invite the authorities to submit further examples of this type of cases.

B.    Measures to address the violation of Article 14 in conjunction with Article 1 of Protocol No. 1

The Court found in the Cassar judgment that by applying an across-the-board legislative measure which failed to treat the applicants (whose property was large, of a high standard and in a sought-after area) differently, the State violated the applicants’ right not to be discriminated against in the enjoyment of their rights under Article 1 of Protocol No. 1 to the Convention. The general measures necessary to redress this violation are thus closely linked to the adoption of a mechanism that would enable due consideration of the owners’ interests. While the mechanism introduced in 2021 maintains a certain level of protection for the tenants by providing for a capped rent, the capping is with reference to the market value of the property and all owners may apply for an increase in rent accordingly. Thus, in practice, different properties would be treated differently, despite the capping.

In addition, as the authorities explained in their latest action report, the market value is calculated without deducting the improvements made by the tenant, so, any increase in the market value of the property in question due to the tenants’ works is an added value for the owner, who would potentially benefit from a higher rent for a higher value property. The Committee might therefore note that the new mechanism introduced in 2021 is alleviating some of the effects of controlled rents on owners by providing non-discriminatory enjoyment of their rights under Article 1 of Protocol No. 1 and conclude that the violation of Article 14 was fully addressed by the authorities, and therefore close the supervision of this issue.

C.    Measures intended to reduce the length of civil proceedings and ensure an effective remedy

It is recalled that the issue of the length of proceedings is being examined in the context of the group of cases Galea and Pavia.[10] It is proposed therefore to concentrate in the present groups of cases on the property related issues and continue to supervise the issue of the length of proceedings in the Galea and Pavia group of cases.

Proposal to continue the supervision of these groups of cases under standard procedure

Although there are some outstanding individual measures and further information is awaited on the practical implementation of the new legal framework in place since 2021, the extent and the complexity of the problems revealed by the Court in these cases have been significantly reduced following important general measures adopted by the authorities. The Committee might therefore consider triggering this group of cases down from enhanced supervision procedure to the standard supervision procedure, where the impact in practice and long-term stability of the measures taken so far in respect to the right to the peaceful enjoyment of property can be assessed.

Financing assured: YES