Temporary Emphyteutical Concessions of Government-Owned Commercial Property

A new set of regulations regulating the grant of a temporary emphyteutical concession to the emphyteuta, tenant or operator of Government-owned commercial property came into force on 4th June 2024 in virtue of Legal Notice 131 of 2024 (the “Regulations”).

Eligibility

Applications for the granting of a temporary emphyteutical concession of Government-owned commercial property (please refer to the First Schedule to the Regulations) are to be submitted to the Lands Authority (the “Authority”) by an applicant, being any natural or legal person, and having any of the following: (a) a valid emphyteutical concession recognised by the Authority; (b) a valid commercial lease granted by the Authority; (c) an ongoing operations agreement with a tenant authorizing him to operate a commercial property; or (d) a valid title of a casa bottega recognised by the Authority prior to the date of entry into force of the Regulations. Where the property is subject to an ongoing operations agreement between the tenant and the operator, the application shall include a sworn declaration signed by both parties clearly indicating the operator as the applicant. On the other hand, the Regulations shall not be applicable to the following properties: (a) kiosks; (b) boathouses; (c) scheduled properties; (d) properties which are not fully owned by the Government and which were not registered accordingly; and (e) properties originally disposed of by a Special Resolution of the House of Representatives.

An application involving property that originally consisted of separate tenements granted to different emphyteutae and/or tenants which over time became merged into one tenement without the Authority’s prior consent, such tenements are to be combined and considered as one and the applicant is to provide a sworn declaration signed by all the involved emphyteutae, tenants and/or operators, as the case may be, attesting their consensual agreement by clearly declaring which one of these parties shall be considered by the Authority as the applicant. In the event of any illegal occupation of adjacent Government owned property by the applicant, an administrative fine of Euro 500 for every square metre occupied illegally shall be imposed on the applicant. Such fine does not apply to merged properties covered by a valid legal title. Moreover, an application will be refused by the Authority if it transpires that the property is not covered by a valid development permission or in the event of a breach of third-party rights.

Term

The new emphyteutical concession in terms of these Regulations shall be for a period of 50 years which shall start running from the date of publication of the emphyteutical deed. However, when the property subject to the emphyteutical concession has a footprint exceeding an area of 1500m2, the transfer of such property shall be subject to the provisions of Article 31(c) of the Government Lands Act (Chapter 573 of the Laws of Malta).

Ground rent amount

The applicable annual ground rent will be equivalent to 2% of the freehold value of the property as determined by the valuation carried out in terms of Article 79 of the Government Lands Act and will be payable one year in advance with the first payment becoming due on the date of signing of the emphyteutical deed. Such valuation should take into account the market value of the property as at the submission date of the application to the Authority and the condition of the property, including any improvements made by the tenant, however excluding any commercial benefits resulting from external areas granted on encroachment terms by the government. If, after carrying out the valuation of the property, it transpires that the ground rent or rent due is lower than that of the former emphyteutical concession or lease, then the higher ground rent or rent will be applicable and will be reflected in the emphyteutical deed. The annual ground rent will be increased every 10 years at the rate of 10% calculated on the current ground rent.

On the date of signing of the emphyteutical deed, the applicant has to pay any fees and expenses relating to the valuations carried out by periti and experts, a premium equivalent to one-year ground rent, any arrears due, and any other expenses relating to the granting of the emphyteutical concession.

Future Transfers

An applicant will have the right to transfer an emphyteutical concession granted in terms of the Regulations and approved by the Authority in favour of any third party provided such transfer is made in whole and not in part and provided that a recognition fee (laudemium) equivalent to one year’s ground rent be paid to the Authority. Transfers by title of sub-emphyteusis are prohibited, will be deemed null and void, and can lead to the termination of the emphyteutical concession. However, the emphyteuta may lease the property to third parties subject to the payment of an administrative fee of 50% of the annual ground rent determined by the Authority, provided that a written authorisation is obtained from the Authority in advance of the said lease.

Both in the event of a transfer of the emphyteutical concession and of a lease in favour of third parties, the transferor would be obliged to send a copy of the emphyteutical deed or lease agreement, as the case may be, to the Authority within sixty days from execution thereof, failing which, an additional administrative fee of Euro 100 per day will be imposed on the transferor as long as the failure persists.

General Conditions

The property granted by title of temporary emphyteusis in terms of these Regulations will be granted tale quale with the exclusion of all warranties, and will be transferred as subject to any latent defects, in its present state and condition. The Authority will be entitled to conduct random site inspections as it deems fit. The submission of any application in accordance with these Regulations shall automatically render null any other pending application and/or request for repairs.

Any existing encroachment concessions will remain unaffected subject to the Authority’s discretion and will be precluded from forming part of the new emphyteutical concession. Moreover, the new emphyteutical concession shall be subject to, and shall not prejudice, any existing servitudes.

Where the emphyteuta is a company, at least one of the directors or any person who is not a juridical entity, subject to approval by Government, must constitute himself as a guarantor in favour of the Government, in relation to all the obligations being undertaken by the emphyteuta in the emphyteutical deed, which obligations include, but are not limited to, the payment of ground rent, damages, expenses, payments and obligations that may be suffered by the Government directly or indirectly due to such grant.

Any emphyteutical concession granted in accordance with these Regulations cannot be subject to redemption and conversion to perpetual emphyteusis. Following the grant of the emphyteutical concession in accordance with these Regulations, the current title will cease ipso jure.

Application Process

An application submitted to the Authority in terms of these Regulations will be considered valid once all the requirements listed in the application form have been satisfied and the administrative application fee (as set out below) in terms of the Second Schedule to the Regulations is paid. The Authority always reserves the right to request further documentation. It will have the right to suspend, and where it deems necessary, also deny, any application in the event that there is a legal challenge in respect of the property.

In addition to the application, the applicant must also provide a signed declaration confirming that all the contents of the application are correct and that no other relevant facts, information or documentation have been omitted, which, if known by the Authority, would have led to the rejection of the application. Moreover, the applicant may not justify his failure to omit other facts, information or documentation relevant to the application on the basis that these are already known to the Authority. In the event that the applicant has made a false declaration, the Authority shall: (a) in cases where the Authority became aware of such false declaration prior to the finalisation of the application process and the publication of the deed, revoke the application and all fees and expenses will be payable by the applicant; or (b) in cases where the Authority became aware of such false declaration following the finalisation of the application process and the publication of the deed, the Authority shall have the right to bring any action before the First Hall, Civil Court requesting the rescission of the emphyteutical concession in terms of Regulation 20(3).

Insofar as fees are concerned, all applications are subject to an initial and non-refundable fee of Euro 1,500. Applications for properties with a footprint exceeding an area of 1500m2 will be subject to an additional fee of Euro 1 per square metre, subject to a minimum additional fee of Euro 1,500 and to a maximum of Euro 5,000, and such additional fee shall be requested and levied upon written confirmation of the approval of the application. All fees and expenses incurred by the Authority are to be borne and paid by the applicant and the applicant will not be entitled to any reimbursement of payments effected in relation to the application in the event that the applicant withdraws the application at any stage of the process prior to finalisation of the application process and publication of the deed.

Following the submission of an application, a change of the applicant during the application process is only allowed if it results from a causa mortis declaration that the rights over that property which is the subject of the application have been transferred to the person who is requesting such change.

An additional payment equivalent to the ground rent or rent previously paid and duly apportioned pro-rata for the additional occupancy period is to be paid in full upon signing of the new emphyteutical deed in case of emphyteutical concessions or leases which lapse during the application process.

The Authority shall have the right in its sole discretion to reject any application submitted to it in accordance with the Regulations, provided that this is communicated to the applicant in writing, even by electronic means, which communication must include the reasonthat led to the refusal of the application.

The Authority will also have the right to bring any action before the First Hall, Civil Court requesting the rescission of the emphyteutical concession if such concession has been issued on the basis of a false declaration, incorrect information, or resulting from an error. The Authority will not be liable to any form of damage or compensation in the exercise of its functions in accordance with these Regulations.

Right to Appeal

An applicant will have the right to appeal from a decision of the Authority taken pursuant to these Regulations under the terms of Article 57 of the Lands Authority Act (Chapter 563 of the Laws of Malta).

The full text of Legal Notice 131 of 2024 may be accessed through this link: https://legislation.mt/eli/ln/2024/131/eng