Bartolo Parnis and Others v. Malta: rigid rent controls that violate property rights call for effective future remedies, not necessarily an eviction

Introduction

Bartolo Parnis and Others v. Malta (Bartolo Parnis) is the last in a series of judgments in which Maltese landlords have been contesting before the ECtHR the remedy afforded to them by the domestic Constitutional Court, after concluding that strict rent controls were in breach of their property rights. The finding of such a violation should lead us to consider the position of the tenant, and more specifically, whether it would entitle the landlord to claim the tenant’s immediate eviction from the property, or, in the alternative, the remedy that should be awarded. Bartolo Parnis must also necessarily be understood in the light of fifteen years of ECtHR jurisprudence against Malta on the specific matter of rent controls.

Facts

The applicants inherited an apartment which had been granted to the tenant’s predecessors (by virtue of a temporary emphyteusis) between the period of 1957 and 2002. Following the lapse of the stipulated time, the tenants remained in occupation of the property. In 2007, the Government introduced a law entitling the occupants to prolong their occupation under the title of an indefinite lease at a slightly reviewed rent (in line with the applicable conditions for other rent controlled properties in Malta). The applicants contested this imposition and, in April of 2018, the Constitutional Court upheld their claim. It awarded them a sum in pecuniary and non-pecuniary damages. It also declared that the tenants could no longer rely on the relevant laws to extend their tenancy, should the landlords challenge them in a subsequent civil suit for eviction.

The Constitutional Court, therefore, limited the compensation to past breaches without ordering any future remedy; instead of directly ordering the eviction of the tenants, it left it up to the landlord to file new proceedings before the competent judicial board – the Rent Regulation Board (RRB) – if they wanted the tenants to be evicted.  In the meantime, the government had introduced a new procedure, which allowed landlords in a similar position as the applicants to subject the tenants to a means test before the RRB by virtue of a new law that applied retrospectively to April 2018. Depending on the outcome of such means test (i.e., on whether or not the tenant deserves further legal protection due to their level of capital and income), the RRB would either allow the tenant to retain the title on the property at a rent which would not exceed 2% of the freehold value of that property, or grant them five years to vacate the property.

The applicants claimed a violation of Article 1 of the First Protocol of the European Convention on Human Rights (P1-1) before the ECtHR due to the allegedly inadequate compensation awarded by the Constitutional Court. They argued that the compensation following the finding of a breach of their property rights covered only a minimal part of the actual losses that they suffered. They also claimed a violation of Article 13 of the Convention. They contended that the adequate remedy following the breach would consist in the Constitutional Court directly ordering the eviction of the tenants.

Judgement

In essence, the ECtHR had to decide whether the Maltese Constitutional Court had effectively allowed the breach of the applicants’ property rights to continue by limiting the compensation to damages for the duration of the violation and directing the applicants towards further judicial proceedings before the RRB in order to determine a remedy for the future (namely, either a rent increase in favour of the landlord or the eviction of the tenant).

With respect to P1-1, the ECtHR found that despite the favourable judgement by the Constitutional Court, the applicants had maintained their victim status and that they were in fact, still suffering from the violation. In its assessment of Article 13, the ECtHR underlined that eviction would “not always be necessary” since measures which “pursue a legitimate aim (such as the social protection of needed tenants), the adaptation of future rent to present circumstance might be sufficient to bring the violation to an end” (this had also been previously stated in the judgement of Portanier v. Malta).

That being said, the judgement has harsh criticism towards the Constitutional Court’s excessively formalistic adherence to judicial competences, and more particularly its reliance on the argument that an eviction could only be ordered by the judicial board vested with the official competence to evict tenants (§§63-64).  The ECtHR even stated that the Maltese Government was “[missing] the wood for the trees” (§65) in adopting such stances. It also dismissed the Government’s claim that a further examination of title by the RRB was necessary following the Constitutional Court’s decision, in order to make sure that the tenants did not hold any other title capable of prolonging their occupation of the premises. The ECtHR, in fact, held that any such title would have inevitably been raised during the course of the proceedings before the Constitutional Court in order to avoid the violation in the first place.

The ECtHR, therefore, decided that the Constitutional Court had effectively failed to prevent the continuation of the violation by not deciding to either order a rent increase or evict the tenant. As a result, it found a violation of Article 13 in conjunction with P1-1 of the Convention and awarded the applicants €4,000 in non-pecuniary damages. The ECtHR declined to award further pecuniary damages to those which had been set by the Maltese Constitutional Court due to the past violation.

Importance and Possible Future Impacts of the Judgement

The importance of Bartolo Parnis is twofold. Ithas, firstly, put renewed pressure on the Constitutional Court with respect to the remedies awarded in rent control cases, even if the scope of this judgment seems to be mostly related to those cases which were filed prior to the introduction of the remedial laws of 2018 and 2021 (applicants filing their claims following the amendments would not have exhausted all the remedies made available to them, although some landlords are still attempting to challenge the recent amendments themselves, see Cauchi v. Malta below). Secondly, this decision is also important because it sheds light on the consequences of a violation of P1-1 when the breach has its origin in disproportionately rigid rent control measures.

A) Relevance of Bartolo Parnis vis-a-vis the judicial and legislative solutions to the Maltese rent control problem

The judgment in Bartolo Parnis must be viewed in light of the previous two decisions in Portanier and Cauchi,which expressed criticism towards the hesitancy of both the domestic Constitutional Court as well as the Maltese Parliament. The long-winded saga of the compatibility of Maltese rent controls with the Convention has now been lasting for over 16 years. During this period, ECtHR standards have led the Maltese Constitutional Court to acknowledge the rigour of Maltese rent controls as a violation of the landlords’ rights under Article 1 of the First Protocol of the Convention (P1-1). It has also impacted the interpretation of the Maltese Constitution, which is now understood as giving property owners the same degree of protection as the Convention. Moreover, the ECHR has also set standards for compensation for past breaches of P1-1, urging the Maltese Constitutional Court to grant an effective remedy against the prolongation of the violation.

The above narrative must be understood in view of the local housing context in which up to 10,545 households (Fiott, 2021) – representing an estimated 6% of the local housing market – are tenants protected by legislative rent controls imposed as early as World War I and which were not “reformed” until 2010.  Legislative intervention only came as a response to the first ECtHR judgments of Ghigo v. Malta, Camilleri and Fleri Soler v. Malta and Edwards v. Malta delivered in 2006. These judgments consolidated the landmark Grand Chamber decision in Hutten-Czapska v. Poland in which landlords’ “right to derive profit” from their rented properties was first asserted. As early as 2008, the ECtHR had directed Malta to devise new rent-control criteria according to what might be considered, at that time, a “tenant in need”, “fair rent”, and “decent profit” in its award of just satisfaction to the applicant in Ghigo v. Malta.

Despite the manifest urgency of the matter, both the Maltese Parliament as well as the domestic Courts appeared to be almost dismissive of the true ramifications of the judgments being delivered against Malta. Parliament’s timid legislative intervention in 2010 was deemed to be inadequate as early as 2010 in Anthony Aquilina v. Malta, and eventually, more assertively, in Montanaro Gauci v. Malta. The Government appeared fearful of amending the law due to the relatively high amount of elderly households, which would have had to face significantly more onerous conditions and possibly face the threat of eviction. In the meantime, however, the Government seemed to be misconceiving the fact that by effectively keeping the burden of the provision of social housing on private landlords, hence, prolonging the state of the violation, it was rendering the position of protected tenants increasingly vulnerable.

Throughout this process, the domestic Constitutional Court seemed similarly wary of accelerating an eviction crisis. In several judgments, it seemed more concerned with limiting the scope of the ECtHR judgments, rather than giving them a full effect.  In an early series of cases, the Constitutional Court would exclude any human rights violation if the landlord would have entered the lease whilst being in full knowledge of the applicable controls. This reasoning was strongly contradicted in Zammit and Attard Cassar v. Malta where the ECtHR held that acceptance to rent property under a rent regime could not be deemed as a “waiver” of one’s right to contest its disproportionality over time (this was also in line with its previous judgments such as in R & L, s.r.o. and Others v. the Czech Republic). In a second line of cases, the Maltese Constitutional Court would accept the existence of a violation, yet it would significantly limit the amount on the basis of the delay with which the landlord would have instituted the proceedings. The ECtHR also criticised this interpretation in Apap Bologna v. Malta since it held that the Constitutional Court had only provided a partial redress, rather than putting the applicant in the position that they would have been in, had the violation not occurred.  Eventually, this led the Maltese Constitutional court to revise its criteria for the determination of both pecuniary and non-pecuniary awards.

In the meantime, however, the Constitutional Court stood firm in its position that until the Government reformed the law according to the guidelines set by the ECtHR, it would have no option but to declare the rent control provisions inapplicable due to their incompatibility with human rights standards. In that case, the tenant would be left without any defence in an eventual action for eviction filed by the landlord before the RRB. Despite putting pressure on the legislative side of government, the Constitutional Court has adamantly refrained from ordering either the tenant’s outright eviction or to stipulate a rent increase by equitable discretion.

Effective legislative action was ultimately taken, firstly in 2018 (limited to certain categories of controlled leases) and then, more comprehensively, in 2021. The main characteristics of these new laws are: the tenant’s immediate subjection to a means test in order to determine whether or not they are deserving of social protection, and in case that they are, the revision of the rent to up to 2% of the freehold market value of the property. Should the means test yield a negative result, the tenant will be granted a period of time to vacate the property.

The ECtHR has criticised the Maltese judiciary and legislative arms of government for their respective stances, which were deemed to be tentative and insufficient. In Zammit Maempel v. Malta and subsequently in Portanier the ECtHR had considered the Maltese Constitutional Court’s failure to grant a future remedy as an abdication of the responsibility assigned to it by the Constitution. The Constitution does, in fact, give courts of a constitutional jurisdiction the power to make such orders and give such directions as they may consider appropriate.

In Cauchi, the ECtHR criticised the remedy granted by the Constitutional Court, which was similarly found to have failed to bring the violation to an end. It also found a breach of the Convention regarding aspects of the new remedial legislation introduced by the Government in 2018. The ECtHR specifically took issue with the granting of an additional five years to tenants who would not have been found deserving of social protection at only double the censured rent and the dependence of the new revised rent on the means and age of the tenant. According to the Court, these specific measures justified the prolongation of the controls even in the absence of a legitimate interest while they practically failed to ensure the shifting of the burden of social housing provision from the private sector onto the state, in every case.

The 2021 amendments have promptly addressed the shortcomings identified by the ECtHR in Cauchi. First of all, the period within which undeserving tenants would have to leave the properties was shortened from five to two years. Secondly, the Government has announced a new rent subsidy, covering up to €10,000 in annual rent, to help tenants shoulder the imminent increased rent and, thereby, making the means of the tenant irrelevant to the calculation of the revised rent. Therefore, it may be said that the State has only recently properly assumed the duty of carrying the burden for the accommodation of those rent-protected tenants.

In the meantime, whilst the threshold of 2% of the freehold value of the property is yet to be formally sanctioned by the ECtHR (a formal pronouncement is expected in the judgments that will follow), Bartolo Parnis will inevitably prompt the Maltese Constitutional Court to reconsider its position on the future remedies afforded to, at least, all those P1-1 cases filed prior to the introduction of the 2018 and 2021 amendments. It is suggested that in similar cases, the Constitutional court could either conduct the means testing of the tenant and, eventually, revise the rent (or order the eviction) itself, or else order an interim rent increase until the landlord undergoes the ordinary rent increase procedure before the RRB.

B) Relevance of Bartolo Parnis vis-a-vis P1-1 to violations originating from rent controls

More broadly, Bartolo Parnis, along with the judgments that preceded it, mainly Portanier and Cauchi, have confirmed the important principle that in case of property rights violations due to rigorous rent control impositions, the tenant does not necessarily need to be evicted. The ECtHR has, in fact, confirmed that a court order intended to raise the rent to more commensurate levels would suffice in bringing the violation to an end. This interpretation is in line with the reasoning of other Council of Europe monitoring bodies, mainly the European Committee on Social Rights, which has asserted the housing rights of formerly protected tenants when their status is threatened by liberalising housing reforms.

Conclusion

Malta’s process of reforming its rent control laws during the past 15 years proves the catalysing action that the Council of Europe mechanisms can have with respect to addressing flagrant human rights violations. This is especially true for a state which too often fails to deplore, at least in a timely manner, its own human rights violations and remains indecisive when it comes to offer remedies. The ECtHR has, in fact, not only introduced a deeper level of scrutiny for state intervention in the control of private property, but also ensured a greater level of objectivity in the assessment of such cases. This has, so far, resulted in the recalibration of rent control legislation, the awarding of adequate compensation for past breaches and, conceivably after the decision in Bartolo Parnis, a more immediate future remedy following the confirmation of such a violation.