Commercial leases of government properties have become more affordable
The global crisis has had an impact on the Maltese property market. Activity in the sector has declined significantly, particularly in the commercial property sector. The local government has taken it upon itself to address this issue by introducing new mechanisms. This will make commercial leases more affordable.
The changes aim to improve control over the property sector. The innovations include the creation of clear criteria for property leases applied to publicly owned properties for rent.
Features of the commercial leases mechanism
The new rules will affect large and small companies that lease state property. At the same time, the new mechanism does not apply to the following objects:
– kiosks;
– boathouses;
– Class 1 and 2 buildings;
– real estates partially owned by the government;
– properties assigned initially for use by a decision of the authorities.
Robert Velle of the Land Office has highlighted groups of claimants who must comply with the new lease. These included shopkeepers who legally have a contract with the government. They also include tenants of properties with casa-bottega status (the shop is part of a residential building).
The new scheme involves several steps:
1. The first step is to assess the market value of the property.
2. The price of the property determines the rent. It must be 2% of the current market value.
3. The rate should not be less than the current tenant rate.
4. Rates increase by 10% of the current rate every ten years.
This scheme will be favourable to applicants whose contracts are about to expire. They can renew or renegotiate for up to 50 years. In this case, the rate will be recalculated, taking into account the current value of the object.
Innovation benefits
This mechanism also opens up investment opportunities. A loan for the designated commercial property is possible with a current lease agreement.
The government notes that such a system provides better guarantees for tenants. They can count on a stable rate, regardless of fluctuations in the property market. The government, in turn, receives a long-term investment that will help keep government property in good condition and ensure its sustainable operation in the future.
The scheme is already in place for shops in the Maltese capital, Valletta, and on the island of Gozo.
Leases under the scheme are available on payment of a fee of €1,500, which is non-refundable in the event of cancellation. The tenant must pay an additional fee if the premises’ area exceeds 1500 square metres. This is €1 for each additional square metre. At the same time, the amount cannot be less than €1,500 and cannot exceed €5,000.