Court of Appeal Confirms that in pre-1995 Commercial Leases, if the Parties Agreed on Periodic Rent Increases, Such Increases are to Prevail over the Increases Contemplated in Article 1531D (1) and (2) of the Civil Code.

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On the 5th November 2021, the Court of Appeal (Inferior Jurisdiction) delivered a judgment confirming a decision of the Rent Regulation Board in the case bearing reference number 29/2019/1 LM.

The appellant is the owner of a commercial premises which is leased to the appealed party. The appellant acquired the premises in 2017 together with the lease which was already in place in favour of the appealed party. The appealed party had acquired the lease in 2004 by means of an agreement which established that the rent due amounted to LM 600 per year, which amount was to be paid every three months in advance with payments of LM150 each time and which rent was to be revised every five years at the rate of 5% over the rent agreed.

The appellant filed a case before the Rent Regulation Board arguing that since no agreement on the rent increases was reached after the 1st January 2010 and there was no agreement in writing prior to the 1st June 1995 with regards to a lease which would still be in its original period on the 1st January 2010, the increases contemplated in Article 1531D(1) and (2) of the Civil Code should apply to the lease in question. The appealed party argued that these articles do not apply to this case as, in terms of Article 1531D(3) of the Civil Code, if there was an agreement between the parties for periodic rent increases, it is such agreement which is to apply and not the increases contemplated in Article 1531(1) and (2) of the Civil Code.

The Rent Regulation Board, whilst acknowledging that there existed no judgments which provide a clear interpretation on this matter, agreed with the appealed party's interpretation and argued that sub-article 1531D (1) of the Civil Code was not applicable to the case at hand since, in the 2004 agreement, that is the agreement by means of which the appealed party acquired the lease, the parties to that agreement had agreed that the rent was to be revised every 5 years at the rate of 5% over the rent agreed. The Court of Appeal agreed with the Rent Regulation Board's interpretation and stated that just like the Rent Regulation Board it was of the opinion that the appellant's argument could not hold water in light of what is stated in Article 1531D (3) of the Civil Code as the aim of the legislator was certainly that any agreement entered into between an owner and a lessee is to prevail in all circumstances, including over the exclusions which sub-article (1) provides for. It stated that just as decided by the Rent Regulation Board if the legislator intended that agreements on increases are to apply only in the exclusive cases indicated in sub-article (1), he would have provided for this. The Court of Appeal further held that it also agreed with the Rent Regulation Board when it argued that the legislator wanted to provide a mechanism for rent increases where this was not contemplated or agreed to between the parties but which does not apply in cases where there already exists an agreement between the parties, and thus that is why there was the need for Article 1531(D) of the Civil Code.

The appealed party was represented by Dr Jonathan Abela Fiorentino and Dr Nicole Fenech.


Disclaimer

This document does not purport to give legal, financial or tax advice. Should you require further information or legal assistance, please do not hesitate to contact Dr. Jonathan Abela Fiorentino or Dr. Nicole Fenech

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