1. Could tenancy be a real alternative to homeownership as far as housing access is concerned? A comparison (Maltese, Spanish and Portuguese legal systems) Tartu, TENLAW Meeting 8-5-15 Year1948195719671985199520052011 Owner occupied 23.1%26.1%32%53.9%68%75.2%76.5% Rented76.9%73.9%68%46.1%23%20.7%17% Table A. Evolution of the percentage of tenure in Spain Table B. Trends of Owner Occupied and Rented dwellings in Malta Year1948195719671985199520052011 Owner occupied 23.1%26.1%32%53.9%68%75.2%76.5% Rented76.9%73.9%68%46.1%23%20.7%19.9% Percentage of tenure; which are the underlying reasons?

2. Could tenancy be a real alternative to homeownership as far as housing access is concerned? Tartu, TENLAW Meeting 8-5-15 Preferences under a lease contract of a dwelling

3. SpainPortugalMalta Lack of reliable housing data (how many dwellings are actually empty, number evictions, etc.) There is no single definition of dwelling; or common requirements to declare it vacant (3,5 million); evictions data are not reliable, etc. 735,000 empty dwellings (most are over 50 years old). 125,000 are new homes More accurate data (eg. 2011 census) in relation to housing, although data on evictions only take into account those seeking social housing Relevant black market rate (tax evasion, unprotected tenants, etc.) 55% in 2008There are no statistics, but common among students and foreigners A significant amount Recent reforms in tenancy eviction procedure making it more efficient 2000 2009 2011 2013 1990 2006 2012 In 2010 a summary procedure allowing the court to decide the issues in a single hearing was introduced Reforms reducing the mandatory duration of tenancies From 5 (1994) to 3 (2013) years In 2012 disappeared the compulsory duration of 5 years From a lifelong duration until 1995 to the absence of a minimum since that year Common elements in relation to tenancy (I) Could tenancy be a real alternative to homeownership as far as housing access is concerned? Tartu, TENLAW Meeting 8-5-15

4. SpainPortugalMalta Tenancy is socially perceived as inferior land tenure Yes Homeownership is regarded as the only guarantee against the social risks High rate of vacant dwellings (various reasons) 13,7%12%According to the census 2011, 18.4%, while only 13.3% is seasonal. Pendulum legislation: old controlled tenancy vs recent liberalization 1889, 1920, 1946, 1956, 1964, 1985, 1994, 2013 1990 2006 2012 1925 (subsequently extended indefinitely in 1931), 1944, 1959, 1979, 1995, 2010 Absence of strong tenants associations There are not significantTenants Association Lisbonense Nonexistent both locally and nationally. The most vulnerable tenants rely on the government intervention Could tenancy be a real alternative to homeownership as far as housing access is concerned? Tartu, TENLAW Meeting 8-5-15 Common elements in relation to tenancy (II)

5. HomeownershipTenancy Traditional tax incentives in homeownership.Tax benefits are more recent (2010 and 2011, essentially). Housing plans and policies oriented towards the construction and acquisition (subsidization) of homeownership The Housing Plan 2013-2016 is the first purely dedicated to the promotion of tenancy Structured finance market, supervised by a public authority, at least since 1981 Lack of a structured market, poorly professionalized. The Law has never paid attention to this issue. REITs have also been amended, in key aspects, by Law 16/2012. Certainty of the rights of the buyer and the lenderThe bundle of rights of landlord and tenant has been changed since the civil war, without finding, for now, the right balance so as to make tenancy more attractive Quick mortgage enforcement procedure Inefficient eviction system, in constant reform (the latter, Law 4/2013). The transfer of the ownership passes all the risks and costs of the property The landlord transfer all possible expenses to the tenant Property transactions and related financing are controlled by notaries and registrars (gatekeepers) 55% black rental market; many undocumented transactions. Unstructured and uncontrolled market. Some improvement in this regard by Law 4/2013. The property and tenancy markets in Spain (I) Could tenancy be a real alternative to homeownership as far as housing access is concerned? Tartu, TENLAW Meeting 8-5-15

6. Certainty of the market Transparency, security and stability of the market (ownership; land register; enforcement procedure; gatekeeper…); REITs are not relevant so far. Inefficient market Since the 60's housing policy in Spain has promoted homeownership Recent changes has decreased tenant’s protection. Affordability and Stability 27,2% homeownership; 33,3% tenancy. Recent changes has decreased tenant’s protection. Subsidies Main objective in decades: homeownership Conclusion -> tenancy is not a real alternative. Could tenancy be a real alternative to homeownership as far as housing access is concerned? Tartu, TENLAW Meeting 8-5-15 The property and tenancy markets in Spain (II)

7. HomeownershipTenancy Tax incentives, e.g. tax breaks for residential dwellings for first-time homebuyers between 05/11/2013 and 31/12/2014 in the first € 150,000 Landlords have the option to pay a final rate of 15% in relation to the revenues of urban leases. Tenants are not subject to taxation. The Housing Authority has promoted homeownership, even in housing with public task; there are also measures so as to incentive construction and maintenance works The Housing Authority has in mind subsidies for rents and maintenance works Financial and credit institutions are supervised by the Banking Supervision Unit of the Malta Financial Services Authority. Domestic banks have a traditional business model, funded by deposits of residents Real estate funds are regulated by the MFSA Property Funds Policy. Possible securitization of rental income, although most landlords operate with complete autonomy from each other Certainty; the rules on sale and the guarantees remain essentially unchanged since the Civil Code 1868. Legislation has ranged from a lifetime tenure to a liberalized system in which landlords are not subject to any restriction Banks are slow to execute eviction titles, so contact debtors amicably before starting the standard procedure Landlords can evict tenants through the summary procedure established in 2010 The transfer of the property involves the transfer of risks and costs related to the domain Landlords are not legally required to provide nothing but structural repairs in the building; tenants can be taxed with the costs associated with the maintenance of the common parts Real estate transactions, such as sale or mortgage, must be registered in the Public Registry There is no register for leases; thriving black market among the most vulnerable classes Could tenancy be a real alternative to homeownership as far as housing access is concerned? Tartu, TENLAW Meeting 8-5-15 The property and tenancy markets in Malta (I)

8. Certainty of the market Frezee of rents and long-term tenancy contracts in the 1970s No limit in the initial diposit; problems with subletting, transmission or withdrawn Trend towards liberalisation Affordability A special bank was established to promote homeownership. Mortgage loan more affordable than tenancy rents Subsidies Main function of the Housing Authority Act = promote homeownership Conclusion -> tenancy is not perceived as a real alternative. Could tenancy be a real alternative to homeownership as far as housing access is concerned? Tartu, TENLAW Meeting 8-5-15 The property and tenancy markets in Malta (II)

9. Certainty of the market Impact of the crisis -> TROIKA imposed liberalisation New tenancy law in 2012: no compulsory extension; eviction through the BNA; no legal protection... New mortgage loan in 2012 -> help borrowers in difficulties Flexibility Problem to withdrawn from the tenancy contract. Tax Incentives They are not a key factor any more Conclusion -> the current legislation does not give the tenant the necessary stability and flexibility Could tenancy be a real alternative to homeownership as far as housing access is concerned? Tartu, TENLAW Meeting 8-5-15 The property and tenancy markets in Portugal

10. 3. Conclusions -> They have opted clearly to promote home ownership and to reformed the existing legal framework to boost the tenancy market. -> Landlords are encouraged to put their homes on the market (e.g. due to fast eviction process); but less stability and affordability for tenants. -> While limited or referenced income (Malta, Spain) or tenancy contracts with complusory minimum duration for years (Portugal, Spain) have historically been perceived as causes for the stagnation or decline of tenancy, protectionist measures seem to be key to the success of tenancy in the three countries with the highest tenancy rate in Europe (Switzerland, Germany and Austria). -> Next step? Could tenancy be a real alternative to homeownership as far as housing access is concerned? Tartu, TENLAW Meeting 8-5-15