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Sub-lease of Commercial Property

Dated: [bxcode.pagedata.date]

The Civil Code, Chapter 16 of the Laws of Malta provides that commercial sub-leases entered into before the 1st June 1995, should be terminated on the 31st May, 2018, unless the parties agreed to terminate on a specific date.

Act VIII of 2018 has introduced amendments to the Civil Code specifically to Article 1613 which regulates commercial sub-leases, whereby commercial sub-leases entered into before the 1st June 1995 and are to terminate by the 31st May, 2018, may opt to apply to the Rent Regulation Board (RRB)for an extension of the sub-lease.

Such extension may be sought if the following conditions and requirements are satisfied:

i.               In the absence of an agreement between the lessee and the person who is the sub-lessee before the 31st May, 2018 who has an interest in remaining in the tenement in case of a sub-lease that expires on the 31st May, 2018, where the sub-leased tenement  consists  of  commercial  premises  which  in  the  year preceding the 31st May, 2018 is managed by the sub-lessee, the person who before the 31st May, 2018 was the sub-lessee shall have  the  right  to  continue  managing  his  business  from  the tenement, under those conditions as may be determined by the RRB, for such period as may be established by the Board which shall not be longer than the period of the lease or be more than ten years, whichever is the shorter.

ii.             The application needs to be filed by the sub-lessee before the RRB by not later than the 31st May, 2018. The RRB shall not accede to the request unless the applicant satisfies the Board that the sub-lessee will suffer serious prejudice if the lease is terminated.  

iii.           The sub-lessee needs to notify the owner of the application submitted who in turn has the right to oppose the request.

iv.            At any stage of the proceedings, the RRB has the right to establish or change the amount of compensation which the person who was the sub-lessee before the 31st May, 2018 is obliged to pay to the owner or to the lessee or both while the proceedings are pending. There will be no right of appeal from the decree establishing the said compensation.

v.              If the RRB accedes to the request for the applicant to continue managing his business from the premises, the RRB shall establish the rent for the period after the 31st May, 2018 at the market value of commercial leases during the year immediately preceding the 31st May, 2018.

vi.            It is at the discretion of the RRB to order the payment of rent below the said market value if it is proven that the payment of the said market value would impose harsh consequences on the sub-lessee’s business on condition that such rent is to be increased every year until it reaches the said market value by not later than the first expiry of rent due in the year 2027.

vii.          RRB on establishing the new rent shall also have the power to determine how such rent shall  be  divided  among  the  persons  having  a  right  over  the tenement and particularly between the owner of the tenement and the person having another title of tenancy over the premises and the manner in which such lease is to be divided.

viii.        When the rent that must be paid by the person who was the sub-lessee before the 31st May, 2018 is established in a final manner, that rent must be paid as from the 1st June, 2018 in a way that any compensation paid during these proceedings shall be deducted from the amount of arrears due.

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