Lands Authority failed to recoup over €10 million in lease payments

The Lands Authority is owed over €10 million in overdue lease payments, the National Audit Office (NAO) concluded in its latest report.

The Authority’s lack of automated monitoring of payment defaults and its failure to adequately pursue leaseholders for outstanding payments are listed as the key reasons why these dues were allowed to accumulate.

To put the amount owed to the Lands Authority in perspective, €10 million is equivalent to the Authority’s earnings for 2024.

One glaring example cited by the NAO refers to an unnamed company that accumulated €9 million in overdue payments, agreed to an “active repayment programme”, but failed to make any additional payments beyond 2021.

“Notwithstanding this, there was no follow-up,” the auditors noted.

This serious failure to pursue a private operator for lease payments owed to the state is emblematic of systemic problems uncovered by the NAO.

Records of all government properties managed by the Authority are kept in the Land and Estate Management Information System (LEMIS). Lands officials are responsible for updating and maintaining this system and ensuring that all contractual obligations dictating the use of government land are being respected.

The Authority’s internal protocols outline a series of actions officials can take to follow up with leaseholders. Such actions include telephone reminders, submission of arrears letters, formal correspondence, negotiation of repayment agreements, and service of judicial letters when faced with a lack of cooperation.

“Thus, the follow-up process is manual and heavily reliant on the active involvement of officers, including their consistent and timely action, which also includes manually documenting any action taken,” the report states.

“Consequently, any delays or inconsistencies in the intervention of the responsible officers may lead to some cases being overlooked and even becoming statute-barred,” the report adds, further noting that this cumbersome system “increases the risk of unrecoverable revenue.”

Based on its audit, the NAO confirmed that around €4 million, or 37% of the total outstanding fees, have been due for between five and 15 years.

Over €2 million, or 22%, were debts incurred between two and five years ago. The remaining €4.4 million, or 41%, was accumulated over the past two years.

Beyond making phone calls and issuing arrears letters, officers “at times” failed to escalate their enforcement further. The report lists further documented instances in which these enforcement failures enabled private operators to saddle the Authority with debt that is unlikely to be repaid.

One company was struck off the business registry by the time the Authority came around to collect €480,000 in outstanding rent.

In seven other cases, the NAO explicitly notes that “action was only taken during the course of the audit and was limited to the issuance of a letter or just flagged for further follow-up by the responsible officers.” Those seven different leaseholders owed an aggregate of around €880,000.

The Authority even failed to recoup owed dues in cases when it actually bothered to sue in court, with auditors noting that “no efforts were subsequently made to recoup what was due”.

One of the companies owed over €5.2 million, with the authorities later confirming that the company was inactive and had failed to file audited accounts with the Malta Business Registry. Similarly, the other company, which was taken to court, was in dissolution by the time a judge ordered the entity to pay the €850,000 it owed.

Given its central role in the management of government property, the Lands Authority has been at the centre of every public land scandal to date.

It was recently cast in the spotlight over the dubious manner in which Fortina’s owners paid just €8.1 million for a prime tract of public land on Sliema’s strand that was subject to wildly different valuations from multiple entities.