Assignment of Lease v. Sub-lease Under Maltese Law

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Maltese law recognises both institutes of assignment of lease and sub-lease as viable options to lessees party to lease agreements. In fact, Article 1614 of the Maltese Civil Code, Chapter 16 of the laws of Malta, provides that “the lessee is not entitled to sub-let a thing or to assign its lease, unless such right was agreed upon in the contract.” In default of additional explanation provided by law, one may question what the difference between said institutes really is.

The principal difference between an assignment of a lease and a sub-lease is that the former contemplates a transfer whilst the latter contemplates the creation of a lease on top of an existing lease. Baudry-Lacantinerie aptly explains this difference in ‘Tratto di Diritto Civile – Contratto di Lacazione’, and states, “Sublocare vuol dire dare in locazione la cos ache si tiene gia a questo titolo, o, in alter termini locarla di seconda mano in tutto o in parte ad un’altra persona. Vi sono allora due locazioni sovrapposti, il sublocatore è impegnata in ambedue; conduttore nella prima diviene locatore nella seconda… Cedere la propria locazione vuol dire trasmettere ad un altro, a titolo di cessione, i diritti risultanti da un contratto di locazione, nel quale si figura a titolo di conduttore. La cessione della locazione è un transferimento del diritto di godimento risultante da una locazione.”

In an assignment, the lessee to a lease agreement is almost succeeded in title by a new lessee. For an assignment to be perfected it must be in writing and include the involvement of all interested parties (namely, the lessor and lessee of the original lease agreement, and the assignee). Their involvement is required in order for a direct relationship between the lessor and the sub-lessee to be established. A sub-lease is considered to be dual in nature. On the one hand, it is entirely distinct and autonomous from the original lease agreement as it is considered to co-exist with the latter. Its distinctiveness emanates most clearly in the fact that the sub-lessee is considered to be in a relationship with the sub-lessor and not the original lessor. Unlike in an assignment, in a sub-lease, there is no new lessee but a sub-lessee who acquires a relationship with the sub-lessor and not the original lessor. On the other hand, a sub-lease is also dependent on the original lease agreement. So much so that the sub-lease

is regulated by the same provisions which regulate the lease agreement, as per Article 1613 of the Maltese Civil Code.

It is worth noting that according to Maltese jurisprudence, courts presented with a dispute often go beyond the letter of the law in interpreting whether the parties before it entered into an assignment of lease or a sub-lease. Maltese courts do not give weighting to the terminology used in an agreement but will often look at what the parties intended in their agreement. As such, notwithstanding the inclusion of the term “assigns” in an agreement, if it is shown that the parties actually intended the execution of a sub-lease, then the court will consider there to be such. In view of this, it is important that parties to an agreement are aware of the differences between these two institutes as notwithstanding the terminology they choose to use in their agreement, it is the content of what is intended that the court will choose to consider.