Sub-Letting of Commercial Tenements After 31st May 2018 – Let it Be!

Proposed amendments being discussed in Parliament aimed at providing sub-lessees of commercial premises, whose sub-lease is going to end on 31st May 2018 by operation of law, with an option to demand the Rent Regulation Board to allow them to continue the sub-lease under revised conditions reflecting market conditions for a maximum period of 10 years.

In terms of article 1531I of the Civil Code, as introduced by the amendments to the rent laws in 2009, a lease of commercial premises made before the 1st June 1995 shall terminate on 31st May 2028, unless a specific period has been stipulated in a contract and subject to the other specific provisions contained in this provision as may be applicable in a given case.

In the case of sub-letting of commercial tenements made before the 1st June 1995, these shall terminate on 31st May 2018. This cut-off date does not apply if the sub-lease was made by agreement with the lessor.

A Bill was introduced in Parliament on 29th January 2018 intended to amend this provision regulating the sub-letting of commercial tenements, by providing sub-lessees currently managing their business from premises held under title of sub-lease terminating on 31st May 2018 by operation of the law with the option of requesting an extension of the term of the sub-lease to the Rent Regulation Board (RRB).

This Bill is currently being debated in Parliament and is in its second reading. The proposed amendments contained in the said Bill set out the parameters within which a request for an extension of the term of the sub-lease may be made and/or granted, and these are the following:

1. The sub-lessee shall have the right to continue managing the business from the sub-leased tenement after 31st May 2018 under those conditions determined by the RRB for a further period of a maximum of 10 years;
2. The request shall be made by the sub-lessee to the RRB by means of an application (rikors) filed by not later than the 31st May 2018 stating the reasons why the request is made. The sub-lessee must satisfy the RRB that he will suffer serious prejudice if the request is not upheld;
3. Both the owner and the lessee shall be notified with the application and shall have the right to oppose the request;
4. The RRB has the right, during the proceedings, to fix the amount of compensation to be paid by the sub-lessee to the owner or lessee or both during the pendency of the proceedings. Such order of the RRB is non-appealable;
5. In the event that the RRB upholds the demand for extension of the term of the sub-lease, the RRB shall establish the rent payable by the sub-lessee after 31st May 2018, which amount must reflect the market lease value of the property for the year 2017 for the same use that was being made of the tenement. In the event that the RRB is satisfied that payment of the said market value would impose harsh consequences on the sub-lessee prejudicing his living or that of persons working with him, the RRB may order payment of rent below the said market value. In such case however, the RRB shall order for the rent to increase yearly until it reaches the said market value by the year 2027;
6. The RRB may order that the new rent it establishes be divided between the owner of the tenement and the lessee and this according to such terms as it may establish;
7. The rent established by the RRB shall be payable by the sub-lessee as from 1st June 2018. Any compensation fixed by the RRB to be paid by the sub-lessee during the pendency of the proceedings, shall be deducted from the arrears due.

These are in brief the proposed amendments contained in the Bill. Until the Bill passes through Parliament and is enacted in to law, these proposals may be further changed and amended. Mamo TCV will be following the evolution of this Bill and will be reporting further in due course as soon as the final Act of Parliament amending the Civil Code is enacted.