Lands Authority announces overhaul of commercial leases on Government properties

The Lands Authority has launched a new scheme in relation to commercial leases, with rental values set to increase in line with a pre-established formula in a bid to encourage new investors to pursue their ventures and commit towards Government property for commercial purposes

This change also applies to situations where a lessee’s heir inherits the lease, removing the need for an estimate of fair market value upon the lessee’s passing.

Launched by Minister for the Economy and Industry Silvio Schembri during a press conference, the scheme will benefit over 400 commercial leases on Government properties which have expired or are about to expire, as well as a large number of renewals which are also on hold in view of the rise in rental value.

Much of these commercial leases are generally considered to be traditional, family-run businesses with a limited turnover.

An exploratory analysis of the current situation showed a rise in the increase of the revised rental value, leading the Lands Authority to intervene.

The Minister explained that the scheme is limited to those leases which have expired, those pending renewal, and those which are due to expire in the near future, up to the end of year 2023. The scheme shall take into account all requests for recognition of heirs up to the end of the year 2023.

Minister Schembri explained that the Lands Authority identified three scenarios in which the scheme would be beneficial to owners.

The first scenario is lease holders with expired leases or leases about to expire, but only up to the end of 2023, who have either refused new terms or haven’t applied for renewal. In this case, commercial leases entered into prior to 25th April 2017, and which have now expired or shall expire before the end of 2023, shall be automatically renewed with a standard annual increase of five per cent for a date of expiry up to the 1st June 2028.

The second scenario is that of lease holders who have accepted the renewal and are paying the revised rates, but whose lease will expire before 1st June 2028. In this case, an automatic extension up to 1st June 2028 applies, together with a refund of the difference in rates, by giving notice of a credit note, as well as establishing a new rental value of plus five per cent per annum as of the last expiry date.

Commercial leases entered into prior to 25th April 2017 and which have now expired or shall expire before the end of 2023 shall be automatically renewed with a standard annual increase of five per cent from date of expiry up to 1st June 2028.

The third scenario is that of lease holders who have already accepted the renewal and are paying the revised rates and will have their lease expire after 1st June 2028. In this case, lease holders can retain the current lease agreement, together with the current rental rates and relative expiry date, or accept the renewal of commercial leases and revision of rental rates of 2021, in which case the lease expiry date shall be changed to 1st of June 2028.

With regards to the recognition of heirs upon demise of the lessee, Minister Schembri explained that before, when a commercial lease was passed from father to son, the ‘stima peritali’ (estimate of fair market value) was done. Now, the heirs will be recognised and the five per cent rental increase per annum will be applied.

Minister Schembri said that official letters will be sent to all owners who will benefit from this scheme.

“It is with great satisfaction to note that, amid these circumstances, as a government we sought to leave nobody behind, and through this scheme we sought to ease hardships as well as reach out to all businesses. Moreover, we are looking at replicating such a scheme in other areas related to leases to pursue our drive in lessening bureaucratic procedures,” Minister Schembri concluded.

Chief Executive Officer of the Lands Authority Robert Vella explained that owners who qualify for the scheme will be notified and will receive an invoice with the new rates.

Moreover, those owners who have already paid the market value rate will be contacted by the authority to explain the scheme in detail – that they could be refunded and that they shall start paying according to the new rates.

“This is being doing to ensure an equitable solution, including amongst those who have paid or accepted the new rates. Concurrently, the authority is currently looking into new schemes aimed at tenants in order to ensure that it is constantly responsive and to encourage new investors to pursue their ventures and commit towards government property for commercial purposes,” said Mr Vella.