MDA and tenants’ union clash over pre-rental deposits

The Malta Development Association (MDA), which represents landlords, and tenant union Solidarjetà have crossed swords over allegations of abuse arising from a legal lacuna regarding rental deposits.

Each has accused the other of missing the point and muddying the water after Solidarjetà released several tenants’ horror stories, where they lost deposits given to reserve a property before they even spent a night in what should have been their new home.

The three incidents mentioned did not arise from a change of heart on the part of the tenant, but involved one case where a property was no longer available, another which had the previous tenants’ belongings still in it, and a third where a dispute between the tenant and the landlord escalated to the point of aggression.

Pre-contractual deposit ‘standard practice’ – MDA

In a reaction issued on Tuesday (today) morning, the MDA objected to the one-sided portrayal of landlords, “which ignores the systemic issues landlords themselves routinely face and mischaracterises the legitimate use of pre-contractual deposits.”

The association explained that a pre-contractual deposit “is not a hidden trap or exploitative tactic but rather it is a standard practice in both local and international rental markets.”

Its primary purpose is, according to the MDA, is to secure a commitment from the tenant while the formal contract is being finalised, to protect the landlord from losing potential income or other tenants during this waiting period, and to ensure the property is held exclusively for the prospective tenant, often leading the landlord to turn away other interested parties.

“If tenants were allowed to unilaterally change their minds after the landlord has withheld the property from the market, the landlord would bear the full financial and practical burden of this indecision,” said the MDA, including vacant periods, unearned rent, and a loss of alternative tenants who were refused.

“In such cases, the only remedy available to the landlord is the retention of the deposit which is a basic pre-agreed upon form of compensation for lost opportunity and wasted time.”

‘A completely unregulated space’ – Solidarjetà

However, Solidarjetà has pushed back on the MDA’s arguments, saying they do not address the core issue wherein “tenants are increasingly reporting situations in which they are asked to pay deposits and fees for properties they ultimately do not move into, without any plausible legal remedy available to them.”

While stressing that the incidents in question do not involve tenants who changed their mind, but rather “cases of broken promises and abusive practices,” the union questioned the need for such pre-rental deposits, saying that tenants are often “pressured” into paying them by estate agents.

Asked what would happen in cases where a prospective tenant themselves requests to pay a deposit to reserve a property, Mr Attard dismisses the concern: “It never happens. It is just agents pressuring people to pay by playing up the fear that other potential tenants are lining up to take it. It is just a way for them to close a deal – but the money paid for this reason enters a completely unregulated space, and many are finding that it can be close to impossible to get it back.”

Responding to the argument that pre-rental deposits serve as protection against vacant periods and unearned rent for landlords, the Solidarjetà president questioned why the rental market needs to operate differently to property sales.

“When buying a property, the only deposit paid is when sitting down with a notary. We believe the system for renting should be the same, with a deposit only paid when the contract is signed. After all, the same risks apply when selling as when letting.”

A starting point for reform?

Despite the gulf in approach towards pre-rental deposits, from “standard practice” for the MDA to calls for an outright ban by Solidarjetà, the two organisations did agree that the pre-contractual process would benefit from additional regulatory clarity.

The MDA encouraged all parties to formalise pre-contractual steps, noting that deposits given to reserve a property could be subject to an agreement regulating the terms of the deposit.

“A functioning rental market relies on clear written agreements at all stages of the transaction and balanced legal protections that recognise the risks and rights of both parties,” it said.

While welcoming the MDA’s call for discussion, Solidarjetà highlighted the “clear legislative gap” in the Private Residential Leases Act, which does not cover these per-contractual arrangements, “leaving tenants vulnerable to financial loss without any plausible legal avenue for recovery.”

With both organisations clear in their call for legal clarity, the harrowing experiences of those tenants could yet serve as the basis for reform.