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Court ruling puts spotlight on rent control

Successive governments have a maintained a policy of rent control despite increasing awareness that the measure could impact on the maintenance of Gibraltar’s older buildings.

That was one of the observations made by a Supreme Court judge in a judgement on a legal challenge arising from a 2013 amendment to housing legislation.

The case against the Attorney General was filed by Peter Montegriffo, QC, and Isabella Lugaro as trustees of the estate of Lewis Francis, which includes Matilde Francis Building.

Prior to the amendment, the law set fixed rents for pre-2008 tenancies in buildings built in 1945 or earlier. The amendment changed the qualifying period to buildings built between 1945 and 1959.

Matilde Francis Building was built in the early 1950s and the practical effect of the change was a reduction in the amount of rent recoverable from tenants.

Before the change in the law, rents in the property had been determined by the rent assessor at below market rates depending on the size of the property. After the change, they became fixed statutory rents.

Lawyers for the claimants argued the change was unconstitutional but Puisne Judge Karen Ramagge Prescott disagreed.

“It may indeed be that subjecting a landlord to receipt of fixed rent when he was previously in receipt of assessed rent causes him some disadvantage, but that does not of itself make that measure unconstitutional,” Mrs Justice Ramagge Prescott said in a 42-page judgement.

“I find the 2013 Act to have a legitimate purpose, to be of general application for public benefit and to be part of a rent control scheme.”

The judgment offers insight into the concept of rent control, an issue that has long proved controversial but which can be traced back to 1938 in Gibraltar’s legislation.

Since then, it has been maintained by successive administrations.

But the measure, while beneficial to tenants, can present landlords with a challenge in terms of ensuring the upkeep of ageing properties.

“It is not disputed that restriction of rent may in certain circumstances impact upon a landlord’s ability to maintain a building,” Mrs Justice Ramagge Prescott wrote in the judgement.

“Successive governments as far back as 1938 who were mulling over the issue of rent control, must have been and become increasingly aware that rent control would likely have some effect on the level of upkeep of old buildings in Gibraltar.”

“Notwithstanding the policy of rent control by Parliament has continued to date.”

The judge said that with the 2013 amendment, Parliament had confirmed its intention to preserve the concept of fixed rents, notwithstanding any possible negative impact that might have on relevant buildings.

“If Parliament were to find that the fixed rent regime does not allow landlords generally to meet their obligations in terms of maintenance and repair, and as a result some of Gibraltar’s historic buildings risk becoming derelict, then it may be that they might wish to consider revising the level of statutory fixed rents but of course that must be a matter for the legislature,” the judge added.

“Similarly if by operation of law tenants are paying rents which by any means of computation are low, it may be that they are moved by a concern for the preservation of the building in which they live to make a voluntary contribution into a repair fund by way of a maintenance charge, but of course that must be a matter for them.”

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