Court does not give weight to government rent subsidy in deciding rent increases

The Court will not take into consideration whether a tenant is entitled to a subsidy when establishing a fair rent. This was held by the Court of Appeal on 23 June 2021 in Albert Naudi et -v- Patricia Gauci and Awtorita tad-Djar. The Court of appeal was presided by Mr Justice Lawrence Mintoff.

The appeal was filed by Patricia Gauci following a decision given by the Rent Regulation Board, after it turned down most of her pleas and upheld the Applicants’ request to increase the rent of the residence to €12,000 for the first 6 years and then it would be revised.

This case concerned a lease of a property in Rabat, where she paid €591.90 per year.  She was occupying the property under the title of ground rent.  The Applicants, represented by Albert Naudi, had instituted an action before the Rent Regulation Board to increase the rent, after a  means test allowed by the Civil Code. Gauci objected to this. The Rent Regulation Board in its decision on the plea that there are two concurrent actions, referred to a constitutional case between the same parties.  The Court held that for this plea to succeed the subject-matter must be identical. 

The Court made reference to a previous judgement, Crocifissa Sammut et v Joseph Spiteri, decided on 10 October 2003, where the element of the case is that the parties, the object of the case and the claims must be identical. However, it was not proved that the subject- matter of both actions are identical.  The action before the Rent Regulation Board (RRB) is for it to perform the means test and increase the rent.  The Constitutional Court Case was challenging the validity of the articles of the law. As to the merits of the case the RRB, the ground rent had started in April 1964 at Lm55 per annum for 17 years. After the 17 years the ground rent was converted into a lease. The RRB did carry out a means test and concluded that Gauci, an 80 year old did pass from this test and therefore, entitled to continue to rent her residence.

The Board also valued the property as being €600,000, however, Gauci claimed that the true value was €520,000. In terms of Article 23(3) of the Reletting of Urban Property (Regulation) Ordinance, the Chairman of the RRB is bound by its Architect’s report. Article 12B(6) allows the RRB to take into consideration the means and the age of the tenant and if requires that the increase will be gradual. The RRB held that in the circumstances of the case, a just and equitable rent, being 2% of the value of the property, to be €1,000 per month. Gauci appealed from this decision  on the ground that the rent almost exceeds her income and should have been a gradual increase and that the RRB . Naudi and his siblings disagreed. Gauci explained that there is no assurance that the Housing Authority will give her a subsidy of rent.

The Authority agreed that there should have been a lower rent than that given and increase gradually. According to the Authority was introduced to address the disproportionality that existed between the rent payable the restrictions upon the property. The tenants in these cases were following the law. The Court judgements were giving compensation to the owners of the properties for the breach of their constitutional rights.

The Authority further argued that if the RRB was establishing a maximum rent, it should be convinced that the tenant is capable of paying such rent. As to the subsidy it gives to tenants, this is not established on the amount of rent but is calculated according to a policy it adopts. On the other hand, Naudi argued that Gauci should surrender the property and find a more modest property.  Mr Justice Mintoff held that the RRB decision is just and it was right in establishing the maximum of 2% of the value of the property, as Gauci’s annual rent. The Court pointed out that in the means test it resulted that Gauci did have considerable capital at her disposal and it would have been unjust if it did not take this into consideration.

The Court further pointed out that the Appellees, should not bear the burden of whether Gauci should retain the property or otherwise. Her responsibility is that she pays a fair rent. Neither should the Court take into consideration whether the tenant is entitled to any subsidy or not.

The Court then moved to reject the appeal.