Unlike the case of acquisition of immovable property, taking immovable property on lease (or rent) is restricted only in terms of general contract law. Thus, provided that all the parties to the lease agreement have the legal capacity to contract, they can freely rent immovable property in Malta. The exception to this is in relation to Immovable property for which an AIP Permit was required, as such property cannot be rented out.
A contract of lease is merely a right of enjoyment of the immovable property for a specified period of time and against the payment of a specified amount of rent. The rent agreement does not transfer ownership to the party who is taking the property on lease (‘the lessee’ or ‘tenant’). The person giving the property on lease (‘the lessor’) may be the owner of the immovable property (the ‘landlord’) or also a lessee, in the case of a sub-lease.
A lease agreement may be made either verbally or in writing. However, a contract of lease for urban property, of a residence or of a commercial property entered into after the 1st January, 2010 must be in writing and must contain at least the following stipulations, failing which, the contract would be null:
– a clear identification and specification of the property to be leased;
– the agreed use of the property let;
– the period for which that property will be let;
– whether such lease may be extended and in what manner; and
– the amount of rent to be paid and the manner in which such payment is to be made.
In addition to the above, we would recommend that the following matters should also be considered and crystallised within the lease agreement:
- Terms of payment of the rent (e.g. monthly in advance), whether utilities and other costs are included, whether rent increases each year by a designated amount or by cost of living increases.
- Payment of a deposit and the circumstances where the deposit will not be refunded (e.g. where the lessee has caused damage to the property).
- Whether there will be a period during which the lease cannot be terminated by the lessee (‘di fermo period’).
- An inventory listing the items in the property and their condition, where applicable.
- Whether any ‘key money’ is due. Key money is a payment required from a new lessee of a rented property in exchange for the provision of a key to the property.
- Restrictions to the use of the property (e.g. the property cannot be used as a restaurant; its use cannot cause disturbance to neighbours, the tenant cannot keep pets; the tenant cannot sublet).
- Which party shall be responsible for obtaining any necessary licences or permit where the property is to be used as a commercial premises.
- Whether utilities will be transferred in the lessee’s name.
- Whether structural alterations are permitted and if so, under which circumstances.
- Who is responsible for ordinary & extraordinary (structural) repairs. By default, at law, structural repairs are the responsibility of the lessor, while all other repairs must be carried out by the lessee, who must carry out such works up to a good standard of workmanship.
- Who can terminate the agreement, the circumstances which lead to termination, the termination process.
- A penalty for ‘mere delay’ where the lessee has not given up possession after termination of the lease agreement.
Equinox is able to assist any prospective lessor or tenant of immovable property to draw up a lease agreement which will clearly state all of the parties’ intentions and bring to the fore any matters which the parties themselves may not have considered.
For further information on lease of immovable property in Malta, please contact us on firstname.lastname@example.org