On the 4^th of October 2022 the minister responsible for agriculture, Hon. Anton Refalo read the First Reading of the Act to amend the Agricultural Leases (Reletting) Act, Chapter 199 of the Laws of Malta.

This bill follows a white paper which the Ministry released for consultation some days prior entitled “Agricultural Land Reform” which encapsulates the government’s plans and vision for the sector. Indeed, excerpts of the said white paper have been codified into this bill.

Of course, at this stage this bill is merely a draft which is to be scrutinized and amended by the legislator, however, a sense of vigour to promulgate such into law is palpable. This urgency is undoubtedly motivated by the fact that a reform in agricultural leases has been in the waiting for many years and more so, as the government is beginning to feel the pinch with a series of constitutional cases being filed by landlords against it attacking Chapter 199 of the Laws of Malta, on the grounds that such laws protect the farmers absolutely with complete disregard to the landlords rights to enjoy their property as guaranteed under Article 37 of the Constitution and to a greater extent, under Article 1 of Protocol 1 of the European Convention. This follows a similar trend already experienced in respect of residential and commercial leases.

The forma mentis of the legislator in respect of the proposed agricultural reform can be analysed by a look at the white paper which in no unclear terms provides the government’s affirmation to continue controlling the acquisition and possession of agricultural land. The white paper provides: “When the acquisition and possession of land are not controlled, there is a risk of farmers losing agricultural land, to the detriment of their livelihood, as well as to the country’s ability to produce food and safeguard the rural environment.”

The white paper provides that the intention of the proposed reform is for the law to achieve a greater balance between the competing rights of landlords and farmers, in line with the Constitution of Malta and the European Convention on Human Rights.

A look at the present position paints a dire picture on the rights of ownership over agricultural land when these have been rented out (in Maltese: “imqabbla”) to farmers (in Maltese: “gabilott”). Under the existing regime, provided under Chapter 199 of the Laws of Malta, owners have limited remedies if they wish to regain possession of their land or if they wish to change conditions of the lease. This is further exacerbated by the fact that this law, akin to leases regulated under Chapter 69 and Chapter 158 of the Laws of Malta, provides for automatic renewal of lease under the same conditions when the lease term elapses. Moreover, the law provides for an automatic right for descendants of the farmer and other family members to continue the lease upon the death of the farmer.

This led and continues to impose an absurd situation were not only are owners of agricultural land obliged to continue a particular tenant-landlord relationship indefinitely but also at fixed conditions, notably rent (qbiela) at a pittance. This does not make sense in today’s world when one considers the ever-increasing market value of land, including rural land.

The case of J&C Properties Ltd vs Nazzareno Pulis et decided by the First Hall of the Civil (Constitutional Jurisdiction) and confirmed on appeal was a watershed moment. The court declared that the fundamental right to property of the landlord company, that was assisted by Dr Edward DeBono and Dr Karl Micallef from Fenech and Fenech Advocates, had been violated by the operation of Articles 3, 4 and 14 of Chapter 199 of the Laws of Malta.

The reform proposed to Chapter 199 of the Laws of Malta appears to be the last of a series of lease reforms across different categories of leased property in response of the chastising by the Constitutional Court and the Strasbourg Court in several judgments. The process, initially starting with reforms to Chapter 158 by means of Act XXVII of 2018 in respect of former emphyteutical concessions followed by similar reforms by means of Act XXIV of 2021 to Chapter 69 in respect of other residential and commercial leases and now with the bill proposing a reform in agricultural leases.

Any reforms made to such law with the intent of restoring a fairer balance between the competing rights must ensure that even though the state has a degree of latitude within which it can restrict the right to property, any restriction, imposed by law, must be in the public interest and satisfy the principle of proportionality as often reverberated by the European Court of Human Rights. This means a restriction to the enjoyment of a right must be proportionate to the aim sought to be achieved which in any case must be in the public interest.

Delving deeper on the proposed amendments to Chapter 199, the bill provides for the introduction of a mechanism by which the landlord may change the conditions of the lease by increasing the rent (qbiela) payable on agricultural land by a maximum of 1.5% of the value of the land in the open market when the land is valued for agricultural use. The law also envisages a situation where a farmhouse forms part and parcel of the agricultural land and which is used by the lessee as his residential premises. In such instances the demand may include an increase of rent over the farmhouse of up to 2% of the market value of such farmhouse although the bill provides that the lessee can decide to renounce the lease of the farmhouse and mantain the lease over the agricultural land.

Illustrating the proposed amendments with an example, imagine a landlord owning 1.1 tumoli of land which has been leased to a farmer for several decades. Of this land, 1 tumoli is being used for agricultural purposes and is valued at €75,000 whereas over the remaining portion a farmhouse is built which forms the ordinary resident of the lessee (gabilott), the latter valued at €200,000. Through this new proposed mechanism and using this example, the Rural Leases Control Board, may increase the rent (qbiela) up to a maximum of €5,125 per annum of which €1,125 is payable over the agricultural land whereas €4,000 payable over the ordinary residence of the farmer. In any case, the farmer can decide to renounce the lease over the farmhouse and retain the 1.0 tumoli of land for a lease (qbiela) of €1,125 per annum.

The Board is not bound to increase the rent up to the maximum rate; indeed, the law provides that the Board can provide for incremental increases on a yearly basis, which increases however can never exceeds the 1.5% / 2% threshold. The owner can make an additional request to increase further the rent according to the market value but only after 8 years from when the rent was revised under the proposed amendments.

In an application filed by the landlord to increase the rent (qbiela) under the proposed mechanism, there is a peculiar requirement which is not akin to those introduced under Chapter 158 and Chapter 69 of the Laws of Malta in respect of residences. This is because in the application the landlord must indicate by how much the rent should be increased and the lessee must indicate what in his opinion the rent should be. For the landlord to do so he inevitably would have to procure an ex parte expert to draw such figures which would mean additional expenses. This exercise is somewhat futile since for the Board to determine the fair rent to be imposed it nevertheless must rely on an independent valuation of the property which is conducted by the technical experts which constitute the Rural Leases Control Board. The percentage increase in rent ordered by the Board would of course be based on its own valuation and therefore the need for such ex parte rates appear irrelevant.

The bill also proposes an amendment to Article 19 of Chapter 199 of the Laws of Malta, empowering the minister responsible for justice with agreement with the minister for agriculture to enact regulations on the procedure, method and criteria which are to be followed when valuating agricultural property, agricultural leases, and agricultural products. The amendment also clarifies that in the promulgation of such guidelines, a fair balance must be maintained between the rights of the landlord, the rights of the lessee and the national interest in maintaining local agriculture.

The importance of such criteria cannot be underestimated. The valuation given to the agricultural land shall have a great bearing on the impact such amendments will have on the landlord rights and consequently the increased rent the landlord shall receive., It is important that such regulations are not only promulgated but a fair balance between the competing interests is kept. Ultimately, this is the all-important test that must be satisfied for restrictions to the right of ownership to satisfy the principle of proportionality.

There are some caveats noteworthy to mention in this proposed bill. It is immediately apparent that the law is excluding the possibility of factoring in the land’s potential when making the valuation for the purposes of increasing the rent. This is because the bill as it stands clearly provides that any percentage increase in rent must be calculated against the market value of the land specifically valued for agricultural use. This means that any other considerations, such as the possibility to use the land for other purposes such as development, entertainment, commercial uses are to be ignored even if the landlord for instance manages to bring evidence that permits for such uses may or have been issued. Undoubtedly, at the very least, this will cause debate.

Moreover, although the white paper appears to distinguish between the farmer’s status, such as between active farmers versus hobby farmers, the amendments to Chapter 199 proposed by the said bill do not appear to cater for such. This is a significant shortfall of what owners expected. Without further amendments, this would mean that once this bill is promulgated into law, owners shall continue to face the same difficulties to obtain re-possession of their land even if for instance the land is being tilled by a farmer for the sake of a hobby or for private consumption.

It is difficult to justify why the state should intervene to restrict the rights of ownership to safeguard the hobby of a lessee who might grow crops for his personal enjoyment or that of his family. Without such distinctions being made in the amended law, it is unlikely that such amendments would satisfy a future human rights test notwithstanding the new remedy offered to owners catered for in this bill.

As a result, it is imperative for the legislative amendments to safeguard against abuse to ensure that restrictions on the rights of ownership provided under Chapter 199 of the Laws of Malta achieve not only a fair balance between the competing interests of the owners and the farmers but apply and protect only genuine bona fidei farmers, the protection of which is necessary, as their produce serves a public interest. Without such safeguards and distinctions being made blanket deprivations to the right of ownerships shall continue despite this amendment. Laws which simply continue to protect lessees on the basis that the land leased to them can or is occasionally tilled by hobby farmers or tilled for private consumption is likely to continue resulting in a violation of human rights, specifically the right to property protected under the Constitution and the European Convention on Human Rights.

One augurs that before the bill is promulgated into law, genuine consultation with all stakeholders is made which caters and is holistic enough to stand the test of time and more importantly to achieve a fair balance between the rights of the owners, farmers and community as a whole.

By Christian Ellul, Associate, Fenech & Fenech Advocates