What is Ground Rent?

Do you know what ground rent is? Read this article to know find out more.

The concept of ground rent, historically known as emphyteusis, was once a very popular contract condition in the transfer of property, but it fell into disuse over the years.

Ground rent is a contract where one party in an agreement grants to the other a tenement against yearly rent or ground rent which the latter party agrees to pay the former.

In Malta, a ground rent clause is still fairly common on the property market and is known in the Maltese language as Cens. It can be granted for a set period (temporary) or permanently (perpetua).

Ground Rent – How it came about in Malta

In the past, when Malta was still developing its housing market, the government offered plots for sale in return for ground rent. This was called the Home Ownership Scheme and was introduced by the Commissioner of Land. This is why you can often come across such conditions when buying on the market.

In some instances, tenements come with a condition of revisable In some instances, tenements come with a condition of revisable ground rent, meaning that the fee may be increased over time, or as defined in the contract. In legal terms, the person granting the property against ground rent is called the dominus, which the person entering the property is known as the emphyteuta.

The contract may also restrict what the acquirer of the property may, The contract may also restrict what the acquirer of the property may, or may not, do with it. This could include structural alterations or even the purpose of use. It is dependent on the agreement signed between the two parties.

Perpetual Ground Rent

As touched on earlier, perpetual emphyteusis is permanent, however, it may be redeemed by the acquirer of the property by paying 20 times the ground rent. This procedure is known as ‘jinfeda’ in Maltese. The right to do this is absolute and may be done by both parties before or a notary public, or through the courts by filing a specific suit known as a ‘cedola’.

Temporary emphyteusis contracts expire when the stipulated time frame lapses. This means that the property should be passed back to the dominus. However, under stipulated conditions, Maltese law allows for the emphyteuta to convert the title into a lease or perpetual emphyteusis, provided that the tenement in question is their primary residence.

Revisable emphyteusis

The third and final form of emphyteusis is of revisable ground rent, which will increase according to the terms of the contract. However, there are variations in the format that could stipulate, for example, that ground rent would double, or triple, every 25 years.
The formula also allows for ground rent to increase in response to extraneous factors such as an increase in inflation or the minimum wage by law.
As with temporary emphyteusis, the acquirer of the property may redeem the ground rent if they want to, but only within one year of a ground rent revision. This means that the emphyteuta would redeem the ground rent against the new, revised, and increased ground rent.