At Maltese law, commercial property is defined as property which is not used for residential purposes and which is leased to primarily host activities intended to generate profit. Examples of commercial property includes stores, offices, clinics and property which is used for the sale of art or trade, amongst others.
Exceptionally, property leased to a society or to a musical, philanthropic, social, sporting or political entity which is used as a club is not deemed to be a commercial tenement, irrespective of whether part of it is being used to generate profit.
Who may lease property?
There are no restrictions as to who may enter into such a lease agreement, as long as the parties to the arrangement have legal capacity to contract. Therefore, any person who is not interdicted or incapacitated and is of age may enter into a lease agreement, irrespective of the nationalities of either party as long as they are present in Malta legally.
With regards to property owners who have acquired their property through an Acquisition of Immovable Property (AIP) permit (the permit required to buy property in Malta if you are not a resident) are not allowed to lease out their property for residential or commercial purposes since the permit only grants the permit holder the right to utilise the property as primary residence.
Who is the lessor?
Since the contract of lease does not transfer ownership, but merely the enjoyment of a thing, the lessor may be either the direct owner or else a legitimate possessor of the property. Maltese law requires that the lessor is in a juridical position to be able to transfer the tenement.
In this case, even if the right of the temporary holder is lost, the lease agreement is still upheld as Maltese law obliges the owner to acknowledge the lessee. In seeking to protect also the rights of the lessor, the lease agreement would be upheld if the lease had been granted under fair conditions and for a reasonable time. If the lease is not granted under fair conditions, he has a right not to acknowledge the lease agreement.
In the case that the lessor sells the property, the buyer is bound by the obligations of the old lessor and thus he must respect the lease.
Who is the lessee?
Various Maltese judgements have established that the relationship between the lessor and lessee gives rise to a personal right between the lessor and lessee. Notwithstanding this, the contract is not dissolved by the death of the either party. Thus, for the remaining duration of the contract, a successor of either of the parties to the commercial lease agreement will continue to enjoy the fruits yielded or be bound by obligations (as the case may be) of the said agreement.
The form of the Agreement
A commercial property lease agreement must be in writing and must include details on:
- The property to be leased
- The agreed use of the property let
- Duration of the lease agreement
- Whether the lease may be extended and in what manner
- The amount or rent to be paid
- The manner in which rent will be paid
The aforementioned details are key to the agreement, as the lack of even one of them will render the contact null and void. The Civil Code goes through meticulous detail, outlining the rights and obligations of the lessor and lessees, and contains multiple provisions which cover the termination of the lease agreement, destruction of property and the sale of property during the lease period, amongst others.
Our Commercial Property lawyers at Chetcuti Cauchi are fully geared towards providing comprehensive services which cover every aspect of the leasing of commercial property, from negotiating lease details and drafting the lease agreement, to offering a range of lease support services such as property valuations and conducting inventories as may be required. Moreover, Chetcuti Cauchi provides administrative services including timely reminders of when rent is due, payment of rent due and rent-collection services.
Commercial Property Purchase or Sale
Whilst the process to purchase or sell commercial property is relatively straightforward in Malta, guidance from legal professional is generally called for to ensure that the rights of the seller and buyer are being respected. In order to make the transaction as seamless as possible, Chetcuti Cauchi posits itself as a point of reference between clients and other stake holders such as banks, estate agents and contractors. With our 'on the ground' knowledge of the industry, we are in the position to offer the best advice possible and subsequently negotiate and draft the best possible terms on which commercial property is acquired or sold, acting in our clients’ best interest to make sure they are adequately protected and any pitfalls are avoided.