Landlord cannot claim full di fermo period if property is rented to third party

A landlord may not claim the rent for the full di fermo period if the same landlord had rented the property to a third party after the tenant vacated the premises. This was held in Gismond Attard -v- Yog.Art Catering Limited a judgement delivered by the Rent Regulation Board presided by Magistrate Dr Josette Demicoli on 31 January 2022.

The landlord filed an application stating that he rented a shop in St Julians to the Defendant company for ten years. The first three years were di fermo up to March 2017. However, a few months after the lease started the Defendant company informed the Applicant that it could not continue rented the property. The Applicant did not accept the keys of the property and the Defendant company deposited them in court. The Applicant, Attard, claimed that he is owed €63,387.50, together with €2676.35 representing a pending ARMS bill.

The company defended itself by stating that it had a good and legal reason why it should have terminated the lease agreement and anyhow, the Applicant had rented the premises to a third party shortly after.

The director of the company testified and told the Board that the company was selling frozen yoghurt from this shop, however, the business was not doing well and ran into financial difficulties. The company’s accountant pointed out that the company was insolvent. He received legal advice not to continue trade if the company is insolvent. The company argued in its submissions that the directors have a legal responsibility not to trade if they know that the company cannot pay its bills.

The Board held that there was no evidence of insolvency of the company, apart from the director’s affidavit. The Board commented that even though the company is insolvent, it is obvious that the company did not make the proper calculations when it entered into the lease agreement. Although it could have been the correct decision, the landlord should not pay for this miscalculation.

The Board then dealt with whether there were any consequences when the landlord rented the property to third parties and whether this amounts to renunciation of the lease agreement. The Boarded quoted from a Superior Court judgement Mary Ciantar -v- Ladislao Giuseppe Micolucci et decided on 27 April 2010. Renunciation of a right has a number of elements.  The first is that right may be retained. The renunciation has to be specific and not general and that it must reflect the precise wish of who is renunicating his or her right. In this case quoted, the landlord had accepted the return of the keys of the property rented and therefore the renunciation was proved.

In this case, the Defendant company had informed Attard that it cannot continue rented the shop and Attard did not accept the return of the keys. Here the Board held that the company failed to observe the lease agreement and was in breach. However, when Attard accepted to rent the same shop to a third party, it is evident that he took possession of the shop. He presented a copy of the new lease agreement with the third party, which was dated 16 February 2015. The Board considered that day as the day that the lease with the company was terminated.

The Board then calculated the pending rent due and this amounted to Euro 9,720. Neither could the Board concern whether there were damages because the Applicant had rented the property to a third party. Together with this sum, another €2,676.35 which represents the pending utility bills. However, the company had paid €16,000 as a deposit and therefore, the total sum of €12,396.35 should be paid through the deposit.

The Board then to moved to have the sums due to the Applicant be reduced from the deposit paid.