Communicated on 30 November 2016

FOURTH SECTION

Application no. 22456/15 Franco BUTTIGIEG and others against Malta lodged on 4 May 2015

STATEMENT OF FACTS

A list of the applicants is set out in the appendix. The applicants are represented by Dr M. Camilleri and Dr E. Debono , lawyers practising in Valletta.

A. The circumstances of the case

The facts of the case, as submitted by the applicants, may be summarised as follows.

1. Background to the case

The applicants are owners of apartment no. 3 situated at 94 , Melita Street, Valletta. This apartment was inherited by the applicants from their father, who died in September 2006.

Initially, the apartment belonged to the applicants ’ late father and his brothers. On 4 August 1981, the late father of the applicants and his brothers entered into a contract granting a temporary emphyteusis for seventeen years to couple S. The seventeen year temporary emphyteusis was to commence on 12 August 1981 and the groun d rent to be paid was set at 12 Ma l tese liri (MTL) (around 280 euros (EUR)) annually.

In 1988, one of the co-owners had taken legal action to collect arrears of ground rent for eleven years and to evict couple S. By a judgment of the Court of Appeal (civil jurisdiction) of 27 May 1992, couple S. was ordered to pay the arrears; however, the court did not order their eviction.

According to the applicants, in 1992, their late father had entered into negotiations with couple S., in order to reach a new lease agreement and increase the rent. Couple S. did not accept the terms of the new lease and did not pay outstanding arrears.

On 17 October 1994, a deed of partition was signed by the siblings and the apartment in question was assigned in its entirety to the late father of the applicants.

On 11 August 1998 the tempor ary emphyteusis came to an end. Nevertheless, couple S. continued to occupy the apartment by title of lease since the law (Article 12(2 )( b)( i ) of the Housing (Decontrol) Ordinance as amended by Act XXII of 1979 – see Relevant domestic law below) provided for the conversion of a temporary emphyteusis into a lease, irrespective of the owners ’ consent. As a result, couple S. could in practice reside indefinitely in the applicants ’ premises.

The rent established at the time, calculated in accordance with the law, was MTL 170.70 (around EUR 397.62) annually and was to be revised every fifteen years (according to Articles 12 and 13 of the Housing (Decontrol) Ordinance). The next revision of the rent was scheduled for 2013 and the new rent established was EUR 568.06.

Neither the applicants, nor their late father ever accepted any rent paid by couple S. on the following grounds: the rent due as calculated according to the law was far less than the rental market value of the apartment; the law in question (Article 12 of the Housing (Decontrol) Ordinance) was in breach of their rights as stipulated in Article 1 of Protocol No. 1 of the Convention; the conditions imposed by Article 12 of the Housing (Decontrol) Ordinance were disproportionate and did not pursue a legitimate aim; the owners were being denied enjoyment of their own property; and structural changes had been made to the premises without the applicants ’ late father ’ s permission (or of any of his brothers).

According to a report of an ex-parte architect issued on 25 January 2011, the market value of the apartm ent at the time was that of EUR 125,000.

2. Constitutional Redress Proceedings

(a) First-instance

On 18 October 2012, the applicants fil ed proceedings before the Civil Court (First Hall) in its constitutional jurisdiction. They alleged that their predecessors had no alternative but to enter into a contract of temporary emphyteusis in order to prevent the apartment from being requisitioned, and once that contract of temporary emphyteusis had been converted into an indefinite lease, by imposition of the law and against their will, the applicants had lost the property for an indefinite period and had no means of recovering it. The applica nts argued that had the Housing (Decontrol) Ordinance not been amended by Act XXII of 1979, the temporary emphyteusis on their apartment would have simply come to an end and they would have recovered their property. However, due to the change in law (brought about by Act XXII of 1979), couple S. had remained therein rendering it impossible for the applicants to regain possession of their apartment. Furthermore the rent due to them, as established by the law, failed to strike a fair balance between the rights of the owners and the rights of couple S. They also argued that they needed the apartment for their own use. The applicants requested that the court provide them with the necessary compensation for the damage they had suffered.

On 29 January 2014, the Civil Court (First Hall), in its constitutional competence, found against the applicants, dismissed their claims and ordered them to pay the expenses of the proceedings.

Relying on Zammit v. Malta (no. 1676 6/90, Commission decision of 12 January 1991, Decision and Reports 68) the court held that state intervention in socio economic matters such as housing is often necessary in securing social justice and public benefit. In this area the margin of appreciation available to a legislature in implementing social and economic policies was necessarily a wide one, both with regard to the existence of a problem of public concern warranting a measure of control and as to the choice of the rules for the implementation of such a measure. Recognis ing that a balance between the right of owners, the state, and the person occupying the apartment needed to be struck, and that according to the European Court of Human Rights such balance had not been struck in the case of Amato Gauci v. Malta (no. 47045/06, 15 September 2009 in connection with the laws pertinent to this case), the court noted that neither the Convention nor the Constitution established an absolute right of property.

The court held that Article 12 of the Housing (Decontrol) Ordinance did not deprive the applicants of their property, but it impacted the ability of the applicants to use the apartment. Furthermore, the rent payable to the applicants did not reflect the value of the property in question – the court appointed expert had established that the rental value of the apartment in 2014 was EUR 3,000 annually, and that the rental value of the apartment in 1998 had been EUR 2,000 annually. However, in the court ’ s view the applicants could not validly argue that Article 12 of the Housing (Decontrol) Ordinance, as amended by Act XXII of 1979, had infringed their rights since the temporary emphyteusis had been entered into in 1981, when the amendments to the Housing (Decontrol) Ordinance by Act XXII had already been introduced. At the time, the consequences of the law as amended by Act XXII were clear and foreseeable; nevertheless, the applicants still chose to enter into such an agreement, and did so freely.

(b) Appeal

On 31 January 2014, the applicants appealed the above decision.

On 6 February 2015, the Constitutional Court dismissed the applicants ’ appeal and upheld the decision of the first-instance court. The Constitutional Court ordered the applicants to pay for the costs of the appeal proceedings.

It found that the inflation rate was established by the Principal Government Statistician, as required by Article 13(2) of the Housing (Decontrol) Ordinance. Having no proof to the contrary, it had to be assumed that the inflation rate established was correct and objective. The calculation of the rent due for the lease (upon conversion of the temporary emphyteusis to a lease), did not only depend on the inflation rate but also on the ground rent that had been payable at the time of the temporary emphyteusis . Thus, the rent was low not as a consequence of the inflation rate, but as a result of the ground rent, established voluntarily by the applicants ’ predecessors, which was lower than it should have been at the time. The Constitutional Court considered that the ground rent payable at the time of the temporary emphyteusis for the property at issue should have been EUR 1,476.27 a year (based on the inflation index for 1981 as being 408.16, and in the light of the fact that the inflation index for 1998 was 580.61 - time when the court expert had estimated the rental value of the apartment for that year at EUR 2,100) and not MTL 120 (around EUR 280) as the parties had agreed. The Constitutional Court observed that when the temporary emphyteusis agreement was entered into, two architects had been present alongside the applicants ’ predecessors (then owners of the apartment). Therefore, the applicants could not argue that their predecessors had not known the value of the apartment.

The Constitutional Court therefore concluded that the owners of the apartment (which had now been inherited by the applicants) knew that: i ) they were agreeing on a ground rent that was relatively low in amount; ii) when the temporary emphyteusis ended it would be converted into a lease that could be inherited and renewed (because Article 12 of the Housing (Decontrol) Ordinance as amended by Act XXII was already in effect at the time the temporary emphyteusis agreement was entered into); and iii) that the value of the rent would be worked out on the basis of the ground rent that was being paid, in proportion to the rise in living standards. In consequence they were aware that the rent would remain relatively low, like the ground rent had been.

The Constitutional Court also found that the applicants ’ need for the apartment, namely to place their mother who was herself living in a rented apartment paid for by the applicants (at EUR 400 a month), was not a good reason to have the property back.

Lastly, the Constitutional Court did not deny that the applicants ’ predecessors were faced with a possibility that the apartment would be requisitioned, since the apartment was empty (and empty properties could be requisitioned). However, entering into a temporary emphyteusis agreement was not the only choice they had: the applicants ’ predecessors could have sold the apartment or rented it for commercial purposes. Furthermore, the Constitutional Court argued that the owners could have requested a higher ground rent. Nevertheless, they didn ’ t and they had entered the contractual relationship voluntarily fully aware of the consequences that would ensue.

B. Relevant domestic law

In so far as relevant, Article 12 of the Housing (Decontrol) Ordinance, Chapter 158 of the Laws of Malta, (as amended by Act XXIII of 1979) reads as follows:

“(1) Notwithstanding anything contained in the Civil Code or in any other enactment the following provisions of this article and of article 12A shall have effect with respect to all contracts of temporary emphyteusis made at any time.

(2) Where a dwelling-house has been granted on temporary emphyteusis -

( a ) for a period not exceeding thirty years, if the cont ract was made before 2lst June, 1979, or

( b ) for any period, if the contract is made on or after the date aforesaid,

- and on the expiration of any such emphyteusis the emphyteuta is a citizen of Malta and occupies the house as his ordinary residence, the emphyteuta shall be entitled to continue in occupation of the house under a lease from the directus dominus -

( i ) at a rent equal to the ground-rent payable immediately before the expiration of the emphyteusis increased, at the beginning of the lease of the house by virtue of this article, and after the lapse of every fifteenth year thereafter during the continuance of the lease in favour of the same tenant, by so much of the ground-rent payable immediately before such commencement or the commencement of each subsequent fifteen year period, being an amount not exceeding such ground-rent, as represents in proportion to such ground-rent the increase in inflation since the time the ground-rent to be increased was last established;

(ii) under such other conditions as may be agreed between them, or failing agreement, as the Board may deem appropriate. ”

Article 13 of the Housing (Decontrol) Ordinance, Chapter 158 of the Laws of Malta, reads as follows:

“ (1) The index of inflation for each of the years from 1947 until 1978 shall be that shown in the Schedule to this Ordinance, taking 1946 as a basis at 100 points.

(2) The index of inflation for each year after 1978 shall be established by the Principal Government Statistician as percentage points for each of such years in continuation of the Schedule aforesaid and on the basis of the all items retail price index, or a similar index replacing it, and shall be published by him in the Gazette not later than the end of March immediately following the year to which the index refers.

(3) An increase in inflation shall be established by taking the difference between the percentage points for the two relevant years, as shown in the Schedule or as published in the Gazette, as a proportion of the first of such years.”

COMPLAINT

The applicants complain their property rights were being infringed as a result of the law which imposed upon them a unilateral lease relationship for an indeterminate time without reflecting a fair and adequate rent in violation of Article 1 of Protocol No. 1 of the Convention.

QUESTIONS TO THE PARTIES

1. Has there been an interference with the applicant ’ s right to peaceful enjoyment of their possessions, within the meaning of Article 1 of Protocol No. 1?

2. If so, was the interference in question in the public interest, within the meaning of Article 1 of Protocol No. 1?

3. If so, did that interference impose an excessive individual burden on the applicants? In particular, was the rent received by the applicants proportionate to the interference complained of?

4. Did the applicants have at their disposal adequate procedural safeguards ensuring that the operation of the system and its impact on their property rights as landlords were neither arbitrary nor unforeseeable?

Appendix

N o .

Firstname LASTNAME

Birth date

Nationality

Place of residence

Franco BUTTIGIEG

18/02/1963

Maltese

Balzan

Maria BORG COSTANZI

18/08/1960

Maltese

Naxxar

Alessandra KIRKPATRICK

13/02/1959

Maltese

Sliema