Fair rent under the Rent Control Law

The concept of “fair rent” under the Rent Control Law is not synonymous with what each landlord or tenant may subjectively consider a “reasonable” rent. The legislator has set specific criteria and procedures through which the Rent Control Court is called upon to strike a balance – to safeguard a reasonable return on the landlord’s investment without imposing an excessive burden on the statutorily protected tenant.

The court’s determination is not abstract; it is grounded in market realities and the particular circumstances of each case, as these emerge through the procedure and the evidence presented.

In practice, this means that the discussion over rent levels shifts from negotiation to proof. The court does not accept general assertions such as “rents in the area are high” or “the shop is old and needs work.”

Instead, it requires evidence of the average rent in the “small locality,” expert valuation reports, and specific testimony regarding the characteristics of the premises. Only then can it determine the fair rent as of the date the application was filed, as the law provides.

Central to the analysis are comparative rents, the condition of the property, and the manner in which experts substantiate their opinions.

Judgment of the Rent Control Court

A recent judgment of the President of the Limassol–Paphos Rent Control Court, dated November 25, offers a useful illustration.

The landlord of a small 48 sq.m. shop, operating for many years as a mini-market/kiosk on a tourist avenue, sought a substantial increase in rent, from €520 to €930 per month. The rent had remained unchanged for 16 years, prompting the landlord to apply for a determination of fair rent.

The landlord relied on a private valuer’s report using the comparative method, arguing that the fair rent should be significantly higher than what was being paid.

The tenant challenged both the average rent claimed for the small locality and the private valuation itself, and declared willingness to accept the amount arising from the report of the Department of Lands and Surveys’ valuations officer appointed by the court as part of its independent inquiry.

Assessment of the valuation reports

A central issue in the judgment was the comparison between the private valuation and the report prepared by the valuations officer. The court reiterated that expert witnesses must assist with independent and objective opinions, clarifying how they defined the “small locality,” which comparable properties they selected, whether the adjustments made to rents of comparable properties were excessive, and whether the claim for a much higher market rent was justified.

The court concluded that the methodology of the valuations officer was more balanced, both in the selection of comparable properties and in determining the average and market rent.

Taking the average rent and the market rent into account, it set the fair rent at €604 per month based on 90 per cent of the average.

Since the tenant had already agreed to pay a higher amount, the court, adopting this consent, ultimately fixed the rent at €650 per month, effective from the date of filing of the application.

Proof of the tenant’s expenditure

The tenant also claimed to have spent €50.000 on renovations and improvements to the shop. If proven, such expenditure could, in principle, be a factor the court considers when examining the condition of the property, the amenities provided and other relevant circumstances.

However, the court emphasised that a mere reference to a round figure is insufficient without receipts, invoices or other supporting documentation.

Because the tenant produced no evidence for the alleged expenditure, it was not established that the renovations added lasting value to the property for the benefit of the landlord, and the court rejected the claim.

The practical takeaway from the judgment is twofold. First, for landlords, seeking an excessive increase based on selective comparable and extreme assumptions about market rent may not only fail but may also have cost consequences.

Second, for tenants, investments in renovations and improvements must be thoroughly documented if they are to be relied upon as an argument to limit an increase.

In a period of significant pressure in the property market, “fair rent” remains above all a matter of evidence, not impressions.