When a landlord does not accept the termination of a lease agreement, but rents the same property to a third party, this would in fact mean that he would be legally accepting the termination. This was held in Gismond Attard et -v- Yog.Art Catering Limited decided by the Court of Appeal on 2 November 2022, presided by Mr Justice Lawrence Mintoff.
Attard filed an appeal from a judgement delivered by the Rent Regulation Board on 31 January 2022. The Board had upheld Attard’s claims in that the company should pay €9720 in rent and that since the deposit of €16,000 was not returned, then the rent should be reduced from that sum. A further €2,676 should be also reduced representing the consumption of electricity.
The Court of Appeal analysed the case. The Defendant Company, Yog.Art Catering Limited rented a shop in St Julians. The first 3 years of the lease were di fermo at a rate of €90 per day in rent. A few months in the lease the company wanted to terminate the lease. The appellant refused to accept the keys. Since the three years di fermo period was not used, the appellant presented a claim of over €79,000. If the deposit of €16,000 had to be deducted, then the claim should be €63,000. Furthermore, there was an additional claim of €2676, which represented an unpaid ARMS bill of electricity.
In his cross-examination, the Appellant confirmed that the shop was rented out to another company in March 2015.
The Defendant Company argued that it was not in a financial position to continue with the lease. More importantly the Appellant accepted the termination because they had rented to the property to a third party. A director of the company testified that he had noticed that the shop was rented out to others a few weeks after they informed the owner that they were terminating the lease.
The Court of Appeal analysed the Board’s decision. The Board had quoted from a number of judgements which dealt with the renunciation of a lease. In Mary Ciantar – v- Ladislao Giuseppe Micolucci of 27 April 2010, the Court had listed the elements of renunciation. The renunciation must be clear, it must not be general neither open to interpretation. The renunciation must show a precise legal. The Board held that when the company informed the Appellants that he wanted to return the keys, the lease was not terminated. However, when the property was rented to a third party, it was at this time the lease to the company was terminated. The Appellants obviously took possession of the shop. In fact, the Appellants presented the lease agreement which was signed by the Appellants and the third party. It was the date of this second lease agreement that terminated the first. The Court calculated that the pending rent is €9720 plus €2676.35 which represents the ARMS bills.
The Appellant argued that this decision should be overturned, since the di fermo period was binding. The Appellant explained that they rented the property to the third party at a lesser rent. The Appellant claimed that the keys of the shop were not accepted and the fact the keys were deposited in Court, this did not change the legal position. The company replied and held that once the Appellant rented the shop to a third party, they renounced the rights listed in the lease agreement. If the Appellant wanted the rent, they should have left the property vacant.
The Court of Appeal dealt with the ground of appeal on the di fermo period. Case-law shows that when the owner accepts the keys from the tenant, the lease agreement is terminated. In this case the Appellant, as owner, did not accept the keys.
The Board held that the Appellants could withdraw the keys from Court. The Court agreed with Board’s legal reasoning. The Appellant entered into a new lease agreement and therefore did not want to continue with their commercial relationship with the company. As a consequence, the Appellant was renouncing their right to the full amount.
The Court then moved to turn down the appeal.
Av. Malcolm Mifsud
Partner
Mifsud and Mifsud Advocates
The article may also be accessed on Malta Today.
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