European Court of Human Rights

 

 

THIRD SECTION

 

CASE OF MONTANARO AND OTHERS v. MALTA

(Application no. 29964/18)

 

 

 

 

JUDGMENT

STRASBOURG

1 September 2020

 

 

 

 

This judgment is final but it may be subject to editorial revision.

 

In the case of Montanaro and Others v. Malta,

The European Court of Human Rights (Third Section), sitting as a Committee composed of:

          Georgios A. Serghides, President,
          Erik Wennerström,
          Lorraine Schembri Orland, judges,
and Olga Chernishova, Deputy Section Registrar,

Having regard to:

the application (no. 29964/18) against the Republic of Malta lodged with the Court under Article 34 of the Convention for the Protection of Human Rights and Fundamental Freedoms (“the Convention”) by seven Maltese nationals (“the applicants”), whose details are indicated in the appended table;

the decision to give notice of the application to the Maltese Government (“the Government”);

the parties’ observations;

the death of one of the applicants Ms Frances Montanaro on 17 January 2020 and the letters of 14 and 23 January and 21 February 2020 whereby the Court was informed that the remaining applicants, also her heirs, wished to continue with the proceedings;

Having deliberated in private on 30 June 2020,

Delivers the following judgment, which was adopted on that date:

INTRODUCTION

1.  The case concerns rent laws in Malta, in particular, the amendments introduced by Act XXIII in 1979 to Chapter 158 of the Laws of Malta, which granted tenants the right to retain possession of premises (rented under title of temporary emphyteusis) under a lease, imposing on the owners a unilateral lease relationship for an indeterminate time at controlled rents.

THE FACTS

2.  The applicants were born on different dates between 1927 and 1983 and live in different cities in Malta (see Appendix). The applicants were represented by Dr M. Camilleri and Dr E. Debono, lawyers practising in Valletta.

3.  The Government were represented initially by their Agent, Dr P. Grech, Attorney General, and subsequently by their Agent, Dr V. Buttiġieġ, State Advocate.

4.  The facts of the case, as submitted by the parties, may be summarised as follows.

I. THE CIRCUMSTANCES OF THE CASE

A.    Background to the case

5.  The applicants own property No. 32, St. Scholastica Street, Birgu (“the property”), which the applicants inherited.

6.  On 24 June 1985, the applicants’ ancestor rented (under title of temporary emphyteusis) the property to a third party, for twenty-one years, at 80 Maltese liras (MTL) (approximately 186 euros (EUR)) per year. The Government alleged that, at the time, the property was in a bad state of repair and that the third party had borne the expenses to make it habitable.

7.  In June 2006, on the expiry of the contract of temporary emphyteusis, the third party relied on Act XXIII of 1979 amending Chapter 158 of the Laws of Malta, the Housing (Decontrol) Ordinance, (hereinafter “the Ordinance”) to retain the property under title of lease, at the rent applicable according to law. Thus, the applicants recognised the tenant and the lease at the rent stipulated by law, in their case MTL 160 (approximately EUR 373) per year.

B.     Constitutional redress proceedings

8.  The applicants instituted constitutional redress proceedings claiming that Article 12 of the Ordinance, as amended by Act XXIII of 1979, which granted tenants the right to retain possession of the premises under a lease imposed on them, as owners, a unilateral lease relationship for an indeterminate time without reflecting a fair and adequate rent, in breach of Article 1 of Protocol No.1 to the Convention. They requested the court to award compensation for the damage suffered. The applicants argued that while it was true that at the time when the property was rented out in 1985, the law was already in force, they could not have foreseen the extent of inflation in the property market in the following decades. Moreover, they had no other option than to rent the property under title of temporary emphyteusis, in order to avoid it being requisitioned as was common at the time.

9.  By a judgment of 11 May 2017 the Civil Court (First Hall) in its constitutional competence found a violation of the applicants’ property rights and awarded EUR 10,000 in pecuniary and non-pecuniary damage combined. It accepted that the applicants’ property could have been at risk of being requisitioned, which explained their choice to rent out the property under title of temporary emphyteusis. The regime under which the applicants had rented their property could not be considered proportionate as the applicants received an extremely low amount of rent, i.e. EUR 372.20 annually (which will not change until 2021) while according to the court appointed architect in 2006 the market value was around EUR 4,692 annually, in 2011 it was EUR 4,947 annually and in 2015 EUR 5,100 annually. In awarding damage it also took account of the fact that it was ordering that the tenant would no longer be able to benefit from the amended law as well as the fact that the applicants’ ancestor had freely set the original rental value. It ordered that costs be paid by the defendant.

10.  On appeal by both parties, by a judgment of 13 April 2018 the Constitutional Court revoked the first-instance judgment and rejected the applicants’ claim. The court considered that the applicants had not proved that they had had no other choice but to rent their property. While it was true that there was a possibility of requisition, they had not shown that there was a probability of this occurring. It noted that the applicants were aware of the law at the time when they decided to rent the property and yet they had not demanded a higher rent or any other more favourable conditions which could have prevented a disproportionate result. Moreover, by means of recent amendments the rent payable would be adjusted every three years and the right of the lease being inherited would be restricted. All costs of both instances were to be paid by the applicants.

C.    Subsequent proceedings

11.  Following the above-mentioned judgment and the introduction of the application with the Court, the applicants filed a case with the Rent Regulation Board (‘the RRB’) requesting an increase of the rent in question at the rate of 2% of the market value as per the newly introduced Act XXVII of 2018.

12.  Pending these proceedings the applicants and the tenants reached an agreement. As a result the tenants vacated the property in June 2019 and in September 2019 the applicants withdrew their case before the RRB.

13.  On 21 January 2020 the property was sold to a third party.

II. RELEVANT LEGAL FRAMEWORK

14.  The relevant domestic law in relation to the present case is set out in Amato Gauci v. Malta (no. 47045/06, §§ 19-25, 15 September 2009), Anthony Aquilina v. Malta (no. 3851/12, §§ 28-29, 11 December 2014) and Portanier v. Malta (no. 55747/16, § 18, 27 August 2019).

THE LAW

I. PRELIMINARY ISSUES

15.  Following the introduction of the application, one of the applicants, Ms Francis Montanaro, died on 17 January 2020. The Court was informed that the remaining applicants who are relatives of the deceased and her heirs, wished to pursue the application.

16.  In its case-law, the Court has differentiated between applications where the direct victim has died after the application was lodged with the Court and those applications where he or she had already died before the lodging of the application. Where the applicant has died after the application was lodged, the Court has accepted that the next of kin or heir may in principle pursue the application, provided that he or she has sufficient interest in the case (see Centre for Legal Resources on behalf of Valentin Câmpeanu v. Romania [GC], no. 47848/08, § 97, ECHR 2014).

17.  Having regard to the circumstances of the present case, the Court accepts that the remaining applicants, all heirs of the deceased victim (who had lodged the application before her death, together with the remaining applicants), have a legitimate interest in pursuing the application also in the late applicant’s stead, apart from their own. The Court will therefore continue dealing with the case in respect of all the applicants.

II. ALLEGED VIOLATION OF ARTICLE 1 OF PROToCOL No. 1 TO THE CONVENTION

18.  The applicants complained that Section 12 of the Ordinance as amended by Act XXIII of 1979 ‑ which granted tenants the right to retain possession of the premises under a lease ‑ imposed on the owners a unilateral lease relationship for an indeterminate time without reflecting a fair and adequate rent, in breach of Article 1 of Protocol No.1 which reads as follows:

“Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law.

The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties.”

A.    Admissibility

19.  The Court notes that the application is neither manifestly ill-founded nor inadmissible on any other grounds listed in Article 35 of the Convention. It must therefore be declared admissible.

B.     Merits

1.    The parties’ submissions

(a)    The applicants

20.  The applicants submitted that, despite the fact that the concession expired in 2006, by virtue of the law (as amended in 1979), the tenant had the right to continue occupying the premises on title of lease. This new relationship, imposed by law, allowed the tenant to reside indefinitely in the premises and no effective remedy existed to take back possession of the premises not even if the owner needed the premises for his own use. The possibility of the increase in rent was only made possible by means of a new procedure introduced by Act XXVII in 2018. Until then, according to the applicants, the law was not precise and foreseeable and it had not provided for any procedural guarantees.

21.  While it was true that the applicants had knowingly entered into the concession they argued that temporary emphyteusis was the only way to save the property from a formal expropriation and/or a requisition order and from the draconian rent laws in force at the time which in all circumstances limited the owners’ right of enjoyment of immovable properties. They considered that the ground rent in 1985 had been adequate for the property at the time. The violation only occurred on the termination of the concession at which point the rent received was no longer fair in view of the circumstances and social realities of 2006 and after, which could not have been envisaged by the applicants in 1985. They referred to the difference in the rent received and that payable on the market as established by the court‑appointed expert (see paragraph 9 above) and noted that the blanket provision had not taken into account the interests of owners. Relying on domestic and ECtHR case-law they considered that there had been a violation of the invoked provision.

22.  The applicants further submitted that Section 12B of the Ordinance introduced by Act XXVII in 2018 did not address the issue of proportionality and lack of procedural safeguards and was, in their view, yet another barrier adding uncertainty on the owners. Indeed it had not been due to this provision that the applicants regained possession of the premises but only due to their negotiations with the tenants.

(b)    The Government

23.  The Government submitted that the interference was lawful and pursued the general interest, namely the protection of tenants. They also considered that it was proportionate; in particular, they noted that the applicants’ ancestor had himself established the rent payable in 1985 at MTL 80, at a time when he knew the laws in force - in particular the law complained of had already been in force for six years. Thus, the owner was aware, or should have been aware, that the tenants would have been able to continue to reside there even after the expiry of the emphyteusis and that the rent would only increase according to the index of inflation. Thus, the situation was different to that in Amato Gauci v. Malta (no. 47045/06, 15 September 2009). Moreover, as confirmed by the Constitutional Court the applicants had not shown that they had had no other option but to rent the property to avoid it being requisitioned. It was thus indisputable that the applicant had voluntarily entered into such an agreement and it was not for the Court to dispute the facts established by the domestic court.

24.  Furthermore, on the expiry of the temporary emphyteusis in 2006, through the operation of Article 12(2)(b)(i) of the Ordinance, the rent doubled to MTL 160 (EUR 372), which in the Government’s view was sufficient given the legitimate interest at play, namely social housing, irrespective of any evaluations reflecting the market value.

25.  Lastly, the Government relied on the newly enacted Section 12B of the Ordinance, introduced by Act XXVII of 2018, which entered into force on 1 August 2018, and which provided relevant procedural safeguards in the applicants’ situation.

2.    The Court’s assessment

26.  The Court refers to its general principles as set out in Amato Gauci, cited above, §§ 50-59.

27.  The Court observes that in the present case the Constitutional Court reversed the first-instance judgment of the court of constitutional competence. The Constitutional Court did not find a violation of the applicants’ property rights given that the applicants’ ancestor was aware of the applicable regime when he rented the property in 1985. However, the Court notes that it has already held, in similar circumstances, that, at the time, the owners (ancestors of the applicants) could not reasonably have had a clear idea of the extent of inflation in property prices in the decades to come, and that the decisions of the domestic courts regarding their request challenging such laws constituted interference in the applicants’ (heirs) respect (see, mutatis mutandis, Zammit and Attard Cassar v. Malta, no. 1046/12, §§ 50-51, 30 July 2015). Further, the applicants in the present case, who inherited a property that was already subject to a lease, did not have the possibility to set the rent themselves (or to freely terminate the agreement). It follows that they could not be said to have waived any right in that respect (ibid.).

28.  Accordingly, the Court considers that the rent-control regulations and their application in the present case constituted an interference with the applicants’ right (as landlords) to use their property (ibid.).

29.  The Court finds that the measure complained of, which affected the applicants as of 2006, was imposed by Act XXIII of 1979 and was therefore “lawful” within the meaning of Article 1 of Protocol No.1. The Court further considers that the legislation at issue in the present case pursued a legitimate social policy aim, namely the social protection of tenants (see Amato Gauci, cited above, § 55).

30.  As to whether a fair balance was struck, the Court notes that, as in other similar cases, the application of Act XXIII of 1979 amending the Ordinance had a considerable impact on the applicants’ property (see for details, Amato Gauci, cited above, § 61). As to the amount of the rent, the Court notes that the court-appointed expert’s valuation in the present case shows that after 2006 the applicants were receiving, in rent, less than 10% of the rental market value. That is sufficient for the Court to conclude that the rent received by the applicants was disproportionately low in the period between 2006 until June 2019 when the tenants vacated the property following negotiations with the applicants. The Court reiterates that State control over levels of rent falls into a sphere subject to a wide margin of appreciation by the State and its application may often cause significant reductions in the amount of chargeable rent. Nevertheless, this may not lead to results which are manifestly unreasonable, such as amounts of rent allowing only a minimal profit (ibid., § 62).

31.  Furthermore, the Court considers that - without having to address the effectiveness or otherwise of the procedure introduced by Act XXVII of 2018 for the purposes of the present case - even assuming that the new Section 12B of the Ordinance provided for relevant and effective safeguards, these had no bearing on the situation suffered by the applicants until the introduction of these amendments in 2018. As to the period preceding Act XXVII of 2018, the Court has previously found that, whereas the RRB could have constituted a relevant procedural safeguard by overseeing the operation of the system, it was devoid of any useful effect, given the limitations imposed by law (see, mutatis mutandis, Amato Gauci, cited above, § 62, and Anthony Aquilina v. Malta, no. 3851/12, § 66, 11 December 2014) and that consequently, the application of the law itself lacked adequate procedural safeguards aimed at achieving a balance between the interests of the tenants and those of the owners (ibid.; and, mutatis mutandis, Zammit and Attard Cassar, cited above, § 61).

32.  The foregoing considerations are sufficient to enable the Court to conclude that the applicants have suffered an excessive individual burden from 2006 to June 2019. It follows that the Maltese State failed to strike the requisite fair balance between the general interests of the community and the protection of the applicants’ right of property.

33.  There has accordingly been a violation of Article 1 of Protocol No.1 to the Convention.

III. APPLICATION OF ARTICLE 41 OF THE CONVENTION

34.  Article 41 of the Convention provides:

“If the Court finds that there has been a violation of the Convention or the Protocols thereto, and if the internal law of the High Contracting Party concerned allows only partial reparation to be made, the Court shall, if necessary, afford just satisfaction to the injured party.”

A.    Damage

35.  The applicants claimed 60,000 euros (EUR) in respect of pecuniary damage based on the difference between the valuations by the court‑appointed expert and the rent they were receiving which only reflected a fraction of the market value (1/12 in 2006 and 1/16 in 2015), and EUR 15,000 in non-pecuniary damage. They considered that the Court should give weight to this independent valuation and not that commissioned by the Government, which nevertheless arrived at similar conclusions, for example, the reports estimated the sale value in 2015 as being EUR 170,000 and EUR 167,480 respectively.

36.  The Government submitted that the finding of a violation would be sufficient just satisfaction. In any event, the valuations of the court‑appointed expert were significantly inflated and the applicants had not justified the request of EUR 60,000. The Government, thus, commissioned its own architect report for the purposes of these proceedings, who without having had access to the property, estimated its sale value at EUR 239,500 and the total rent it could have received between 2006 and 2019 was estimated at EUR 45,000. However, the Government considered that such estimates had not taken account of various factors such as the probability of the property having been rented out throughout, the expenses incurred by the tenants, and that measures intended to achieve greater social justice did not require payment at market values. Thus, they considered that a joint award in pecuniary damage should not exceed EUR 10,000 and EUR 1,500 in non-pecuniary damage, particularly given that the tenants had now vacated the property.

37.  On the basis of the considerations relevant in such cases, (see for example, Portanier v. Malta, no. 55747/16, §§ 62-64, 27 August 2019) in the circumstances of the present case, the Court considers it appropriate to award the applicants EUR 25,000, jointly, in pecuniary damage for the loss of rent as of 2006 until June 2019 and EUR 2,500 jointly, in respect of non‑pecuniary damage, plus any tax that may be chargeable.

B.     Costs and expenses

38.  The applicants also claimed EUR 12,817.71 for the costs and expenses incurred before the domestic courts and this Court, which included EUR 2,769.63, and EUR 2,594.96 (as per taxed bill of costs), which they were made to pay for each of the parties involved, as shown by the judicial taxed bill of costs submitted to the Court.

39.  The Government did not dispute the claim of EUR 3,916 covering the costs of the Government and the court-appointed architect in the domestic proceedings, but disputed the rest as they had not been properly explained and justified. As to costs relating to these proceedings they considered that they should not exceed EUR 1,500.

40.  Regard being had to the documents in its possession and to its case‑law, the Court considers it reasonable to award the applicants the sum of EUR 11,000, jointly, for costs and expenses in the domestic proceedings and this Court, plus any tax that may be chargeable to the applicants.

C.    Default interest

41.  The Court considers it appropriate that the default interest rate should be based on the marginal lending rate of the European Central Bank, to which should be added three percentage points.

FOR THESE REASONS, THE COURT, UNANIMOUSLY,

1.      Declares the application admissible;

2.      Holds that there has been a violation of Article 1 of Protocol No. 1 to the Convention;

3.      Holds

(a)   that the respondent State is to pay the applicants, jointly, within three months, the following amounts:

(i) EUR 24,000 (twenty-four thousand euros), in respect of pecuniary damage;

(ii) EUR 2,500 (two thousand five hundred euros), plus any tax that may be chargeable, in respect of non-pecuniary damage;

(iii) EUR 11,000 (eleven thousand euros), plus any tax that may be chargeable to the applicants, in respect of costs and expenses;

(b)  that from the expiry of the above-mentioned three months until settlement simple interest shall be payable on the above amounts at a rate equal to the marginal lending rate of the European Central Bank during the default period plus three percentage points;

4.      Dismisses the remainder of the applicants’ claim for just satisfaction.

Done in English, and notified in writing on 1 September 2020, pursuant to Rule 77 §§ 2 and 3 of the Rules of Court.

Olga Chernishova                                                            Georgios A. Serghides
Deputy Registrar                                                                       President

 

 

APPENDIX

List of applicants

 

No.	Applicant’s Name	Birth date	Nationality	Place of residence
1.	Godwin MONTANARO	1948	Maltese	St Julians
2.	Josette CASOLANI	1946	Maltese	Sliema
3.	Alan MONTANARO	1962	Maltese	Siġġiewi
4.	Alexander MONTANARO	1952	Maltese	San Pawl Tat‑Tarġa
5.	Anthony MONTANARO	1987	Maltese	Naxxar
6.	Frances MONTANARO	1927	Maltese	Naxxar
7.	Malcolm MONTANARO	1983	Maltese	Swieqi