NEWS - VMY Notary

November 5, 2018 by Veronica Mizzi Young

Summary of Gov’t White Paper about Rental Market 2018

In October 2018, the Parliamentary Secretariat for Social Accommodation within the Maltese government published a 40-page white paper titled Renting as a Housing Alternative, which aimed to offer “a carefully studied approach that [provides] landlords and tenants with greater stability and security.”

This article summarises the content of the white paper and highlights the most important changes being suggested to improve management of the Private Rental Sector (PRS).

Changing society, changing households

“Homeownership [is] still perceived as an ideal in our society, [but] there are serious social indicators and cultural shifts which are pushing locals into rented accommodation.”

Recent data about the rental market confirms that the tenant population in Malta has risen significantly in recent years and that current developments in the property market are pointing towards decreasing affordability.

The white paper lists five social, political and economic forces that may explain this phenomenon:

Gentrification
Homelessness
Shared housing
Unhomeliness, transience and anxiety
Employment instability

The document also lists nine shortcomings of the current regulatory system:

Rental agreements are generally offered from six months to one year
Agreements do not always foresee the possibility for renewal
Notice periods are too short to enable tenants to find alternative accommodation
No national register for agreements
No draft contract template that ensures legal conformity
No entity capable of deciding minor issues quickly
No Tenancy Deposit Scheme which protects deposits and ensures a timely return
No system or guidelines to manage Housing in Multiple Occupancy (HMOs)
No entity to inform landlords and tenants of their rights and responsibilities

The Maltese regulatory framework from a comparative European perspective

Rent-regulating mechanisms are being revised across most European countries as the intensifying demographic pressures is threatening housing affordability and stability.

State intervention in the PRS is neither contrary to the European Convention on Human Rights nor any European Union instrument. The belief that government intervention in the PRS leads to its paralysis is an erroneous one, which is readily dispelled by the experience of other European countries.

The negative Maltese experience with rent control mechanisms stems from the fact that Government had employed extremely strict measures in the past. Since the end of the 1980s, when the Maltese economy undertook a series of pro-market policies, there has been a general negative political attitude towards any form of government intervention.

The weakness of the current Maltese regulatory model when compared with the legal regimes in place in other EU countries reveals how Malta merely conceives rentals as a short-term tenure.

Recommendations

“Measures proposed for the regulation of the PRS should only be applicable to rental agreements negotiated for a primary residential purpose.”

Reform the regulatory framework so that it also covers particular instances of short-term agreements, e.g. temporary workers and students.
Manage the sector more effectively by promoting:
- a minimum contractual term with periodical rent increases
- the capping of increases during the contractual term
- the optimisation of the rent subsidy scheme

“This White Paper puts forward two distinct frameworks, both aiming to promote a longer contractual duration for residential leases. The first framework proposes a mandatory minimum contractual duration (fig. A) whilst the second one presents a model where longer leases are promoted through fiscal incentives (fig. B).”

Contractual term

A standard minimum contractual duration of several years would go a long way in rendering leases a more stable tenure.
Medium-term contracts will not prejudice the landlords’ economic position; they are also compatible with the regular contracts of employment entered by foreign tenants as well as their average stays in Malta.
A longer contractual period would also allow local households to create homes in their rented accommodation.

Compulsory period for tenant and notice of withdrawal

Tenants should remain free to withdraw unilaterally from the contract, if they give due notice to the landlord and only after a minimum contractual period would have lapsed.

Notice of termination or renewal by landlord

The landlord would by not be bound to renew the lease; however, notice of termination must be given to the tenant by not later than a specified prior to the expiry of the agreement.
Failure to do so would result in the agreement being prolonged for a further term at the same conditions as the previous one.

Predictable rent increases

The Property Price Index (PPI) remains, for the time being, the most adequate tool to regulate increases, although government should additionally consider a cap beyond which rents would not be able to rise.

Measures to improve the functioning of the Private Rental Sector

“[During research,] both landlords and tenants expressed concerns on the poor management of the sector, starting from the formalisation of the agreement to the process of eviction in the case of contractual default.”

Amend laws to reduce court delays in the eviction process.
Submit a declaration of deposit and present an inventory with the contract.
Create a new public agency that oversees the registration and enforcement of private residential leases.
Optimise rent subsidy schemes by introducing individualised means-testing
Encourage payment by bank transfer, rather than in cash.
Give tenants direct access to the water and electricity services on their rented premises, as well as to their bills.

More affordable housing

“Beyond the measures designed to improve the management of the PRS, the ultimate solution to the rental problem lies in a stronger supply of affordable housing.”

“The most effective solution lies in the diversification of the housing market through limited profit or not-for-profit building.”

Give owners of vacant dwellings grants to carry out repairs and make the property habitable again.
Diversify the marketing with Third Sector Housing through limited-profit or not-for-profit entities tasked with constructing affordable housing on public land.
Real Estate Investment Trusts (REITs).

Other long-term measures

Identify a minimum habitability standard for rented properties.
Regulate houses in multiple occupation (HMOs), where many tenants are residing and living communally due to constraints.
Regulate estate agents and assessing which professional standards they are expected to meet.

You can read and download the full white paper at this link (opens PDF file).

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September 17, 2018 by Veronica Mizzi Young

New Office Opened in Valletta

The team at VMY is proud to welcome clients to our brand-new office at number 52, Old Bakery Street in Valletta. The opening of a second office was the culmination of almost three years of hard work to convert what was initially a disused and derelict building into a modern and comfortable workspace.

Preserving traditional Maltese architecture

We bought the property in September 2015 from a lawyer who also intended to use it as an office but never actually used it as such. The building is located at the middle of a street where all the major law firms in Valletta are situated, so it seems quite appropriate that this gem should also be considered a desirable location for a legal practice.

Even before we acquired this place, it already had somewhat of a reputation as a landmark in the area because it’s the tallest building in Old Bakery Street. Unfortunately, the building was abandoned and left to deteriorate for many years, and it was in a very bad state when we found it. The last time the building was used was by the owners of a cigarette factory around 40 years ago; fast forward to the present day, and all the apertures were broken, there was no functioning plumbing system, and a load bearing wall that was holding seven storeys had to be demolished.

Because of the huge amount of work it took just to make this building safe and prepare it for the installation of modern amenities, we had to keep this project under wraps and delay our move there for a long time. Once the structure was sound again, we immediately set to work preserving the traditional Maltese architecture that was present, including the typical stone walls and stone arches.

In keeping with the aesthetics of our Rabat office, we married the traditional look with modern features in the Valletta building too. The latter has since been converted into a clean and bright marble-clad space with various French eclectic touches.

Former home of Malta’s national poet

But the most surprising fact about Number 52 is that it used to be the home of Malta’s national poet, Dun Karm Psaila. It also apparently used to be known as no. 51, before the door changed to the present number.

Right above the building door, there is a marble plaque unveiled in 1967 that commemorates the fact that Dun Karm resided there for 26 years and wrote his first poems in Maltese while living there. This is also mentioned in Dun Karm’s biography by Ġużè Cardona, which points out that the poet rented an apartment in the building and spent a lot of time in solitude away from his friends and family. It was during this time that he wrote several of his famed poems like Quddiem Xbieha tal-Madonna and Il-Musbieħ tal-Mużew.

A humble gem shining with new purpose

The opening of the Valletta office marks a new chapter in the growth of VMY’s notarial practice. When we first began operating from the Rabat office, our scope was similar to other small, village practices that focus primarily on serving the legal needs of the people living in the surrounding community.

As our team grew and our clients’ needs increased proportionally, we started taking seriously the option of expanding to a more central location. Our new office at no. 52, Old Bakery Street in Valletta is at the heart of the nation’s legal and financial hub, which gives us a privileged position that lets us manage our work and serve our clients more efficiently.

We will still operate from the Rabat office a few days a week, however we heartily encourage our clients spread across Malta to take advantage of our new central location and come see us in Valletta.

Make a notary’s appointment here

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August 6, 2018 by Veronica Mizzi Young

How Notaries Assist Anti-Money Laundering Efforts Through Customer Due Diligence

Much to the annoyance of notaries and their clients alike, I’m afraid that the reason I, and all other notaries, ask clients for information about their personal life and financial history is not out of curiosity, but rather, the law.

I completely understand that it is annoying to divulge certain details to a notary that may or may not be a perfect stranger to the client. However, notaries have a central role to play in anti-money laundering (AML) efforts and the funding of illegal gains. According to the law, notaries have the legal responsibility of scrutinizing their clients through what are referred to as customer due diligence protocols.

The present legal provisions oblige notaries to carry out a number of procedures to prevent illicit actions by means of customer due diligence, record keeping, training of employees and internal and external reporting.

Customer Due Diligence Protocols

As a subject person, a Notary is legally bound to hand out specific forms to be filled in during the proceedings of a new transaction, as this detailed information helps to assess the nature of the deal. All necessary information is collected and a record of the procedures is kept.

It is a notary’s duty to obtain satisfactory evidence of clients’ identities and sometimes even people related to them. Occasionally, the notary may also need additional information or documentation in the context of the particular transaction. It is understandable that clients may feel uncomfortable with the process of Customer Due Diligence (CDD). It is an unpleasant thing for most notaries too!

Being compelled to perform meticulous background checks on clients is uncomfortable, taxing and could cause adverse effects to the relationship. However, this procedure is considered protocol since particular transactions involving a notary may be used to carry out illicit and criminal activities.

Consequently, the notary must ask for proof of identity upon the first client meeting and may also require a confirmation of one’s permanent residence by means of additional documentation, such as a recent utility bill. It is also common practice that the notary would ask for proof of provenance and origins of funds. This procedure is in line of Legal Notice 108/2008, in which the Notary is considered to be a subject person and is duty bound to ensure that proper Customer Due Diligence protocol is followed through.

Anti-Money Laundering Obligations

Perhaps the greatest need for Customer Due Diligence stems from the necessity to tackle illegal money laundering practices. Customer Due Diligence is central in combating the practice of generating income through illegal methods.

Law and regulations have been established to ensure that money that is gained through unethical practices can be detected. This saw the inauguration of the anti-money laundering legislation which empowers professionals to identify customers, carry out thorough background checks and report any suspicious activities.

Anti-money laundering legislation has gained international notability, and on a European level, the EU introduced an anti-money laundering directive in 2015 which aimed to prevent the use of financial systems for the purposes of money laundering or funding terrorist activities.

Locally, Malta has also adopted the Prevention of Money Laundering and Funding of Terrorism Regulations (PMLFTR), which is modelled upon the principles of the European Union’s Directive. The Act outlines what constitutes money laundering, establishes the obligations of financial institutions as well as legal persons and the competences of the Police and the Attorney General in cases when a person is suspected of being involved in money laundering.

Under Maltese law, anyone who carries out any form of financial activity is subject to the anti-money laundering obligations. In this vein, notaries have been placed at the pivot of these pre-emptive measures. Since the Maltese Act identifies financial transactions, access to savings and current accounts and overviewing the financial conditions of clients as a relevant activities, inevitably, notarial practices fall within the scope of the Act.

Because of this situation, notaries find themselves in a predicament between professional secrecy between customer relations and legal obligations towards anti-money laundering measures. Anti-money laundering and Customer Due Diligence thus work in tandem with one another whereby the procedures of the latter are precautions towards any criminal financial activity.

Compliance towards Customer Due Diligence is therefore obligatory and deemed necessary in order to clear any form of foul play and illegality. Nevertheless, despite the strain on the professional relationship between client and notary, it is essential to keep in mind that all information and documentation obtained in the course of these obligations is strictly confidential and tied with professional secrecy.

A Sign of Good Conduct and Professionalism

Notaries have a duty to adhere to the regulations of anti-money laundering provisions. Through procedures that are collectively known as Customer Due Diligence protocols, notaries can help prove that financial activity originated from legitimate sources.

Although these procedures can sometimes be uncomfortable and possibly put a strain on client relations, they are also signs of personal good conduct and a commitment towards providing a reputable service as a notary.

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October 31, 2016 by Veronica Mizzi Young

Malta Budget 2017 – Guidance Note on Acquisition of Residential Property in Gozo

Following the declarations made in the Budget Speech 2017 relating to the acquisition of residential property in Gozo, the following guidelines are to be followed:

In the case of a transfer of residential property situated in Gozo, the duty otherwise chargeable in terms of the Duty on Documents and Transfers Act (Chapter 364 of the Laws of Malta) shall be chargeable at the rate of two euro (€2.00) for every one hundred euro (€100.00) or part thereof of the amount or value of the consideration for the transfer of the property or the value of the property, whichever is the higher.

General Terms and Conditions to qualify for the benefit

1. The above-mentioned reduced rate of duty applies to a transfer of residential property in Gozo when:

i. The notice of the promise of sale agreement in relation to such transfer is registered with the Commissioner for Revenue on or after the 18th October 2016 but before the 1st January 2018;
ii. The final deed in relation to such transfer is registered with the Commissioner for Revenue by the 31st December 2018;
iii. No relief is claimed under article 32C of the Duty on Documents and Transfers Act.

2. The benefit granted under this scheme does not apply to acquisitions of property made for the purpose of demolition and the construction of more than one unit, or to acquisitions of property in the course of a trade or business.

3. The benefit granted under this scheme does not apply to acquisitions made by a body of persons.

4. Residential property includes a garage attached to or underlying such residence or a garage situated in the same block of residential apartments of which the residence forms part or a garage of not more than thirty square metres situated within five hundred metres of such residence or block of apartments, and acquired together with such residence on the same deed.

5. In the case of a transfer of land, the benefit under this scheme would only apply if one residential unit is to be built thereon. The benefit shall be forfeited in the case of a breach of this condition.

Promises of Sale made before 18th October 2016

Where a notice of a promise of sale or transfer relating to a residential property in Gozo has been registered with the Commissioner for Revenue before the 18th October 2016 and is either cancelled or expired after the said date, such notice shall be deemed to have been registered with the Commissioner before the 18th October 2016 if the said property is:

a) transferred to the same person or persons appearing on the said promise of sale which has been cancelled / expired; or

b) another property forming part of the same project or situated within the same building is transferred to the same person or persons appearing on the said promise of sale which has been cancelled or has expired.

Need help with Gozo property sale/purchase?

Contact Mizzi Young today!

This blog entry has been reproduced from this official Internal Revenue Department document.

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October 22, 2016 by Veronica Mizzi Young

Notaries Meet Citizens – Open Days. An Event Hosted by the Kunsill Nutarili ta’ Malta

The Council of the Notariats of the European Union (CNUE) is co-ordinating events by a number of Notariats within member states of the European Union to commemorate the European Day of Civil of Justice, which is celebrated on 25 October.

For this day, the Commission and the Council invite the Member States and professional organisations to organise events around this date for European citizens

The Kunsill Nutarili ta’ Malta will be participating in this in this event by providing the opportunity for the general public to visit the Information Stands on

(i) Property Conveyancing;

(ii) Estate Planning and Succession and

(iii) Matrimonial Regimes

which shall be open for the general public on both days from 10am to 2pm at the Parliament Building, Valletta.

For more information on the Notaries of Europe Open Days and the events being organised, visit https://notariesofeurope-opendays.eu.

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October 18, 2016 by Veronica Mizzi Young

Property Measures in the Malta Budget for 2017

Budget night came and went, and left with it a raft of policies, tax breaks, funding opportunities, and new taxes. But, what of property? Dr Veronica Mizzi Young’s office scrutinised the budget document in order to list the below budget measures regarding property for 2017.

First time buyers’ schemes

The much loved first time buyers’ scheme has been extended to another year. This means that individuals or couples who purchase their first property in 2017 are exempt from paying stamp duty on the first €150,000 of value of the property they buy.

Urban Conservation Areas Scheme

Two new schemes are to be launched through which first-time buyers of property situated in Urban Conservation Areas and which requires restoration, or schemed buildings in Grade 1 or Grade 2 areas can get up to €100,000 on expenses incurred on restoration works.

Buying property in Gozo

Purchases of residential properties in Gozo will benefit from a stamp duty of 2% instead of 5%. This applies to purchases for whom a promise of sale is entered into during 2017, and which is registered with the Inland Revenue Department by end of December 2017, and is only applicable if the contract is concluded by end of 2018.

Buying property in Gozo in 2017? Benefit from a stamp duty of 2% instead of 5%

Temporary Emphyteusis

Those in possession of a temporary emphyteusis over property that has either expired or is due to expire, shall have their emphyteusis renewed under the same conditions, though such renewals are subject to a revisions of the payable ground rent.

Scheme for shops outside of Valletta

The scheme for shops located outside of Valletta will be relaunched and continued. It applies to government-owned shops held under a title of lease or emphyteusis. Current recognised tenants or third party operators can benefit from a 45 year temporary emphyteusis provided certain terms and conditions are satisfied.

Inheritance of property

Property inherited after November 1992 and which is being transferred using a judicial sale at auction shall now be taxed at a final tax rate of 7% instead of the current capital gains tax system.

Rental contracts

A new system governing rental contracts shall come into force in 2017, wherein all contracts of rent entered into for periods of 3 months or longer, including renewals, are to be registered with the Inland Revenue Department. Either the lessor or lessee may register the contract, though in cases of failure to register, the lessor will subject to penalties as expounded in the Income Tax Act.

Conclusion

We’re attempted to simplify the language and clearly explain the property policies and schemes as announced in the Malta Budget 2017. Of course, if you have any need for further explanation, contact us.

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July 21, 2016 by Veronica Mizzi Young

NEW TEAM MEMBER FOR VMY NOTARY

VMY Welcomes New Team Member Nicholas Schembri

Nicholas Schembri is a legal secretary and office manager who is dedicated to taking care of the administrative side of VMY Notary and ensuring that the office runs as smoothly as possible whilst making sure that VMY Notary clients get the best service.

Nicholas is currently reading for a Masters Degree in Business after realising his career path through his first full-time job as a clerk at MCAST where he was later promoted to a clerical officer in the Human Resources Department. Nicholas is a self-taught amateur pianist and when he is not working, he composes his own music and plays football.

You can reach Nicholas by email on: n@mizziyoung.com or on the following numbers: 21451880 / 79970162

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June 16, 2016 by Veronica Mizzi Young

Pre-contractual Liability Right Recognised

Basing itself on a German judgement, the Maltese Court of Appeal recently delivered a landmark judgement on pre-contractual liability which is sure to shape local commerce. The case filed in the names Av. Peter Fenech noe vs. Department of Contracts concerned a claim for damages made by a consortium after its offer in response to a tender issued by the Department of Contracts for the provision and installation of a Traffic Management Information System was unjustly turned down. Despite the fact that the First Hall, Civil Court had established that the consortium had been unreasonably disqualified on 27^th June 2008, the consortium could not materially be reconsidered in the selection process as the tender had been given to another entity in the interim.

Although the judgment handed by the Court of First Instance had cited previous decisions delivered by the Maltese courts dealing with pre-contractual liability, namely Giuffrida vs. Borg Olivier, Pullen pro et noe vs. Matysik et, Cassar vs. Campbell Preston, Grixti vs. Grech, Busuttil vs. Muscat noe, Portelli noe vs. Falzon et and Seguna et vs. Kunsill Lokali Żebbug as a basis for its decision, the facts of the case in question did were deemed not give rise to pre-contractual liability.

Findings by the Court of Appeal with regards to Pre-contractual Liability

However, when the case was taken to the Court of Appeal, the Court cited a 1911 German court decision referred to as Linoleumfall which established that when a legal relationship is born between parties in preparation for a purchase, it is very similar in properties to a contract producing legal obligations, thereby recognising the contractual basis of pre-contractual liability. Thus, it was decided that the Director of Contracts should in fact be held responsible for damages on the basis of the legal notion of pre-contractual liability. The court further stated that once a consensual legal relationship was created between the parties, the Department of Contracts could not ignore the consortium’s offer unless there was a valid legal reason. Thus, if one does not fulfil the conditions of his tacit obligation, it is equivalent to a party not observing contractual obligation. This was decided on the on 29^th April 2016.

The Court ordered the Department of Contracts to provide compensation based on the damages which the company had incurred as losses in the submission of the tender bid, rather than loss of profits or lucrum cessans. This judgment is expected to be the cornerstone for further recognition by Maltese courts of the contractual basis of the notion of pre-contractual liability.

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June 1, 2016 by Veronica Mizzi Young

Property Sales to Foreigners in Malta

The Law on Property Sales and Foreigners

According to provisions made in Chapter 246 of the Laws of Malta with regards to property sales, citizens of all European Union member states who have resided in Malta on a continuous, uninterrupted basis of a minimum period of five years BEFORE the date of acquisition of immovable property may freely acquire such property without the necessity of obtaining an acquisition permit (AIP). However, individuals who are not citizens of a European member state may not acquire any immovable property unless they are granted an acquisition permit issued by the Maltese tax authorities. With regards to those who need an AIP, the minimum price is also set in stone with foreigners being legally obliged to spend at least €104,500 for the purchase of a flat or maisonette and at least €174,000 for the purchase of any other immovable property.

Areas of Interest for Foreigners

While some may view these price ranges as being somewhat restrictive, Finance Minister Edward Scicluna recently said in parliament that almost 1,000 properties worth €400 million have been sold to foreigners over the last four years and that almost half of that number were in areas such as St Julian’s, Sliema, Swieqi, Gżira, Msida, Pietà, Ta’ Xbiex, Pembroke, San Ġwann, Qormi, Birkirkara, Ħamrun and Santa Venera, showing an overall preference by foreigners for the Northern Harbour district. Given that these areas are notoriously pricier than the south, it comes as no surprise that the value of the 482 properties mentioned by Mr Scicluna amounted to the princely sum of €175 million with an average of €363,881 being spent on each. The lowest number of property sales was registered in Żejtun, Birżebbuġa, Gudja, Għaxaq, Kirkop, Marsascala, Marsaxlokk, Mqabba, Qrendi, Safi and Żurrieq where a mere 38 properties were purchased and the total sum spent in this area was valued at €5.5 million. Moreover, in an interesting twist, a total of 115 properties collectively worth €25 million were bought by foreigners in the sister island of Gozo and despite the fact that properties in Gozo are markedly cheaper than in Malta, the average price of each property purchased was €220,801.

Why is this happening?

Given past trends, this boom in market dynamics and property sales is being ascribed to the revamped residency and visa programme launched last August which allows third country nationals to gain residence permits against an investment in interest-free government bonds of €250,000. Due to the fact that individuals given a residence visa can travel in the Schengen area as well as reside in Malta itself, it is of little wonder that investments in our little island have sky rocketed and property sales have increased.

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May 16, 2016 by Veronica Mizzi Young

Civil Code Amendments on Inherited Vacant Properties

With regards to the matter of inherited vacant properties, the coming into force of the Civil Code amendment to the current laws regulating inheritance on the 1^st of April 2016 was seen as a welcome change for many heirs who previously had to wait for five or ten years to find any possible resolution to internal disagreements regarding the sale of their empty properties. Indeed, thanks to Act No. XIV of 2016,

“The periods of ten years previously provided for in articles 495(3) and 495A(1) (prior to their amendment) and of five years previously provided for in article 495B (prior to its substitution) respectively and as in force prior to the 1st April 2016 shall no longer apply as from the 1st April 2016”

Instead, heirs are now allowed to conduct the sale of inherited vacant properties after a mere three years, provided that more than 51% of the heirs are in agreement.

So what does this mean for Maltese families and their inherited vacant properties?

Prior to this amendment which was proposed in the 2016 budget in an effort to free up a number of the estimated 41,232 inherited vacant properties on the island, many families were forced to spend years wrangling over whom to sell to and what kind of cut they would receive, with the effect of some of the heirs actually passing away themselves and the properties in question degrading to irretrievable states. These inherited vacant properties do not only pose safety issues due to a lack of maintenance, but such empty spaces also have a habit of attracting vandals, squatters and other mischief makers looking for a private space to hide out. This recent amendment also makes for one of the most effective pro-environment measures proposed by this legislature.

In essence, this recent amendment to the Civil Code hopes to significantly reduce the number of vacant properties which populate our island in a much shorter time frame than ever before, whilst safeguarding the rights of the majority who do want to sell.

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