A Closer Look at the Proposed Condominium Law Reforms in Malta 

20 March 2024

Introduction

Malta’s burgeoning urban landscape, characterised by a rising number of apartment buildings and condominiums, has placed increased strain on the existing Condominium Act enacted in 1997 (Chapter 398 of the Laws of Malta). Despite serving as the primary legal framework alongside Chapter 16 of the Civil Code, the Act is perceived as outdated, struggling to address the complexities of contemporary condominium living.  

This perceived inadequacy, amplified by a thriving economy and the increase of high-rise buildings, has fuelled demand for legislative modernisation and guidance regarding condominiums. In response, a recently published white paper proposes significant reforms to the Condominium Act, aiming to tackle challenges in governance, maintenance, and management of shared spaces.  

This article delves into these proposed amendments, offering a critical analysis of their potential impact on the legal landscape of condominium living in Malta. 

Unveiling the ‘Reforming the Condominium Act’ White Paper 

Within the current Act, administrators are obligated by law to register with the Land Registry, yet the profession remains unregulated, leading to gaps that need addressing. Additionally, the Condominium Act governs common parts owned by unit-owners through shared ownership, with customary rights of use. However, challenges arising from this approach are not yet regulated by the Act. 

The Maltese government’s “Reforming the Condominium Act” white paper proposes a series of transformative amendments that promise to reshape the landscape of condominium living in the country. Though these proposed amendments are currently undergoing evaluation and await formal legal implementation, these reforms demonstrably signal a shift towards more structured governance and efficient dispute resolution mechanisms. The proposed reforms to the Condominium Act primarily involve introducing a condominium regulatory body, establishing a new tribunal for Condominium Affairs, granting legal status to condominiums, ensuring administrators’ competence, and mandating professional insurance for administrators along with compulsory property insurance for common areas. 

Proposal 1: Introducing a Condominium Regulatory Body 

A key proposal involves the creation of a Condominium Regulator that would form the foundation of an innovative governance framework. This regulator would be responsible for maintaining a registry of qualified administrators and establishing benchmarks for optimal practices in condominium management. Its role would be to ensure that sector standards are upheld without bias and foster ongoing development in the best interests of both condominiums and their service providers. Additionally, the Regulator would provide information, training, and set standards for Administrators, improving governance within condominiums. The composition of the board of directors of the Regulator will be based on expertise in condominium affairs, with an advisory role to the Government.  

Proposal 2: Establishing a new Tribunal for Condominium Affairs 

Resolution of disputes under the current Condominium Act currently involves compulsory arbitration with a right of appeal, but this process can be expensive and lengthy. The proposed legislation advocates for the establishment of a Condominium Affairs Tribunal, designed to provide an efficient and cost-effective dispute resolution mechanism. This entails incorporating mediation and, if required, expedited adjudication, ultimately enhancing access to justice for condominium residents. It will guarantee more cost-effective procedures and remedies, particularly in cases involving disputes among condominium residents, the Administrator, and third parties. The Tribunal is intended to have jurisdiction over various condominium matters, ensuring efficient resolution. Online Dispute Resolution (ODR) could also be implemented, drawing from successful experiences of similar domestic tribunals for practical and cost-effective resolutions. 

Proposal 3: Granting of Legal Status of Condominiums  

Contracts of sale commonly include an obligation for purchasers to join a condominium owners’ association. Despite this, no association with legal personality has been formally constituted and registered. The White Paper proposes the establishment of an owners’ association endowed with legal personality. This measure aims to enhance the management and legal representation of condominiums. Granting legal personality ensures seamless continuity, eliminating disruptions such as the need to close the condominium’s bank account with each change in Administrator. The Condominium Act could be amended to allow for the registration of a legal entity, such as an owners’ association, with the condominium members as its members and managed by the Administrator. This entity could be created through the deed of sale or a statute, with its rules registered accordingly. 

Proposal 4: Ensuring Administrators’ Competence 

The Office of the Administrator retains a pivotal role in the conservation and administration of the condominium. Amendments to the Condominium Act will distinguish between professionals and co-owners serving as Administrators. A Register of Condominium Administrators will be established under the Regulator, with set criteria for inclusion. These amendments will ensure that Administrators meet specific qualifications, including age, solvency, and adherence to fiduciary obligations. Convictions for certain crimes or involvement in money laundering preclude eligibility. Administrators must possess relevant qualifications and undergo specialized training. Professional indemnity insurance will be mandatory for those operating professionally, and timeframes for handover will be introduced to ensure efficiency. These amendments aim to ensure that both individuals and professional corporate service providers are competent to fulfil the Administrator’s functions without any legal or criminal impediments. 

Proposal 5: Mandating Professional Insurance 

The proposal mandates the requirement of professional insurance for administrators, coupled with compulsory property insurance for common areas, serving as protection against potential liabilities. Recognizing the Association as a legal entity would facilitate separate insurance contracts on its behalf and on behalf of owners. 

Proposal 6: Meeting Procedures 

The procedures for General and Extraordinary Meetings of Condomini need updating, especially regarding notifications, proxies, and participation via physical presence or electronic communication. New provisions will address the appointment of representatives for large complexes. 

How we can Help 

The proposed amendments to the Condominium Act seek to address current deficiencies but also present potential hurdles. While the establishment of a Condominium Regulator and Tribunal is a positive step, their efficacy depends on resource allocation and efficient procedures. Moreover, the anticipated changes are expected to bring about additional administrative responsibilities and higher expenses for both Administrators and owners. Therefore, comprehensive guidance will be crucial for navigating these changes and ensuring successful implementation. 

While details remain subject to change, understanding the potential impact is imperative for condominium administrators and residents alike. If you have any questions about interpreting these proposed reforms or have any condominium-related concerns, do not hesitate to reach out to Dr Joseph Grech at jgrech@ae.com.mt. 

Key Contacts

Kris Scicluna Director, AE Business Advisors

Kris Scicluna

kscicluna@ae.com.mt

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