American University of Malta tries to nullify €2.7 million purchase of Tarxien hostel

Less than a year after paying €2.7 million for a Tarxien hostel to use as dormitories for its foreign students, the American University of Malta (AUM) is seeking to rescind a 2017 agreement for Bowyer House in Tarxien after it uncovered a number of illegalities on the property.

Sadeen Education Investment Limited paid €2.5 million to HF Investments Limited in an agreement on 30 August 2017 for the sale of Bowyer House, in Main Street, Tarxien, and an additional €200,000 for the furnishings on the property.

But on 23 July this year, the company – whose university in Bormla has had trouble recruiting international students to its courses – filed a legal claim to the sale declared null and void.

Sadeen claims that as part of the purchase agreement, HF Investments had provided a number of certified guarantees, among others warranting that the property was “built in accordance with all permits required by the competent authorities and in compliance with all plans approved by the competent authorities” and that it had “all the permits, licences, authorisation and approvals necessary to operate as a hostel and as a dormitory”.

Sadeen said that HF Investments had also guaranteed that “all services and utilities provided to the property, including phone bills, water and electricity services, have been paid in full by the vendor”.

And it was these services and utilities that initially led Sadeen to uncover a number of illegalities in the property.

Soon after the purchase agreement was signed, Sadeen discovered that Bowyer House did not have electricity and water meters on site and that it was getting its water and electricity from an adjacent property, which also belonged to HF Investments.

Sadeen claims that it had been assured by HF Investments that they had already applied for a transfer of services and for the installation of meters. But after weeks elapsed, Sadeen appointed an architect to investigate why the applications were taking so long to be approved.

It was then that Sadeen discovered that the property was not built according to issued permits and that therefore a compliance certificate – which would green-light the installation of services meters – could not be granted.

Sadeen also discovered that sections of the property, which were listed as compulsory when the original licences and certificates for the hostel and dormitory had been issued, had not been included in the purchase agreement and had not been transferred to them.

In its application, Sadeen claims that these shortcomings were in clear violation of the guarantees and declarations HF Investments provided with the purchase agreement and that they should be considered “untrue and fraudulent”, thereby nullifying the purchase agreement.

On 7 February 2018, officers of the Malta Tourism Authority’s enforcement directorate carried out an inspection at Bowyer House and confirmed that certain areas of the establishment did not form part of the property purchased by Sadeen and that those changes did not have the necessary prior approvals of MEPA or the MTA.

In a letter dated 10 May 2018, the inspectors said that a number of changes had been noted: the reception area, which should be situated at Level 0 as originally approved by MEPA and the MTA, was instead found to be on a different level and accessible from a different street; a common area facility no longer existed for guests, which area was originally served by Kastell Restaurant, which was in turn segregated and longer formed part of the hostel.

Sadeen asked the Court to void the purchase agreement, to order HF Investments to repay the €2.7 million, and to hold HF Investments responsible for any financial loss Sadeen may have suffered in renovations and the appointment of architects, because of the inability to operate the property as a dormitory and for loss of income incurred due to a drop in student numbers and other lost opportunities.