Cannabis firm ordered to pay €2.4 million after 'persistent' late rent sparks termination of land lease

A medical cannabis company has been ordered to pay €2.4 million in penalties and vacate its Ħal Far industrial premises after the Rent Board ruled its long-running pattern of late rental payments triggered the automatic termination of a 15-year lease.

In a judgment delivered on Friday, Magistrate Joseph Gatt, presiding over the Rent Regulation Board, found that JMCC Life Sciences Europe Ltd, formerly Materia Malta Operating Ltd, had fallen into repeated arrears and had retained possession of the property for 480 days after the lease was terminated by an express contractual clause.

The dispute centred on a large industrial unit, HHF308 in the Ħal Far Industrial Estate, leased by CHAS Ltd to JMCC under an agreement running until 2036, with a protected di fermo period until May 2028.

From autumn 2023, the board heard JMCC began to pay rent and “key money” instalments increasingly late, at times over two months past the deadline, despite a contractual obligation to pay 10 days before each rental period. Staff salaries were also paid months late, witnesses confirmed.

By August 2024, when CHAS filed proceedings, the tenant was in three months’ arrears totalling €51,397, plus utility recharges. CHAS issued three judicial letters warning JMCC to cure the default, the last being notified on 20 August 2024.

Under Clause 10.02(a) of the contract, failure to pay after such notice constituted a material breach, causing the lease to terminate automatically after 15 days.

JMCC insisted the arrears had been settled before the first hearing through a €75,194 payment made by a third-party company belonging to its CEO, Diane Scott.

It argued that because the board had not yet terminated the lease, contractual penalties, including a lump-sum claim for the entire di fermo period and a €5,000-per-day fee for failing to vacate, had not become due.

The board rejected this reasoning, stressing the lease was terminated by operation of the contract itself, not by its judgment.

JMCC also blamed chronic banking delays linked to the cannabis industry, but the Board noted that these issues were foreseeable and never communicated to the landlord.

While acknowledging that JMCC had indeed paid the arrears – meaning those claims were effectively settled – the Board ruled that the daily penalty clause was fully enforceable.

Because JMCC had remained in illegal possession from 20 August 2024 until the date of judgment, the €5,000-a-day clause amounted to €2.4 million, plus legal interest.

However, the board refused CHAS’s separate claim for €923,523 in remaining di fermo rent, saying the landlord could not “double recover”. Once the tenant chose to retain the premises unlawfully, the applicable sanction was the daily penalty, not the accelerated rent.

Had JMCC vacated promptly, it would have owed the remaining di fermo rent – but not the €5,000-a-day penalty.

The board declared the lease terminated on 20 August 2024, ordered JMCC to vacate the premises within 40 days, imposed the €2.4 million penalty plus interest and awarded all legal costs to CHAS Ltd.

In its concluding remarks, the Board underlined that the contract “is the law between the parties”, and that the parties themselves had crafted two separate remedies, one applying upon prompt vacancy, and the other upon unlawful retention. JMCC’s conduct had clearly activated the latter.

Lawyers Joseph Gerada and Axl Camilleri appeared for CHAS Ltd.