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Procedures For Purchasing Immovable Property

Buying a property is a big step in any one’s life. It is a step that needs to be taken carefully and in full knowledge and understanding of one’s rights and obligations involved in such a transaction. At RE/MAX our associates, backed by the experience of the respective office managers as well as a host of related professional buying property malta advisors, are well equipped to be able to guide the client through this whole process, always ready to listen and answer to the various concerns normally accompanying such an undertaking.

In preparing this document we have called upon our knowledge and experience and put down in writing a step-by-step guide that can better explain the normal procedure involved when making such an investment.

As a first approach:

Try to have a clear idea as to what the requirements are, the type, the size, thinking in terms of some years into the future
Is it a must to have entertaining area, indoor, outdoor?
Is it going to be a modern or a more traditional if not a character property?
The location. Is it important to be in a particular location, due to work-place or children’s schools perhaps?
Does the property need to have room for say, a children’s playroom or a hobby room?
How is the purchase going to be financed? Are the banks being involved?

Of-course answering all of the above may not be completely possible especially if one is a first time buyer and has no experience or feel of the market prices. Our suggestion would be to form the best idea possible and then put it forward to one of our associates, preferably scheduling an office meeting where amongst other things, our associate will be able to call up on computer all the available properties, most of which complete with pictures, that suit the requirements.

property malta Once this initial meeting has been held and a list of properties to view has been selected, the associate will proceed to organise the viewing appointments. This is typically the most demanding part of the whole process on the part of the client. At RE/MAX we know the pitfalls and how to avoid them. Our associates are well drilled in the importance of being respectful towards the client starting from our strict dress code to punctuality to polite manners and a general pleasant attitude. In this way we hope to turn this task into something of a pleasant and less stressful experience.

Property has been selected, what next?

Once the immovable property has been selected and the price as well as any special conditions duly negotiated and agreed upon an appointment is set to sign the Preliminary Agreement or what is commonly known as ‘konvenju’. This is essentially an agreement binding both the purchaser and the vendor to conclude the transaction within an established date (term of konvenju) subject to a set of conditions as listed below:

The agreed selling price
Ground rent, if applicable, temporary or perpetual
Any works to be completed by the seller, if any, (normally attached in list form)
Any items (movable) included in the selling price, if any, (normally attached in list form)
Any other particular terms as requested and agreed upon form either party, eg subject to bank loan, subject to permits
Conditions of payment (at times scheduled with works) as requested by vendor
Term of konvenju, (time between the signing of the Preliminary Agreement and the signing of the Final Deed) unless otherwise stated, is valid for three months

This konvenju is written by a Notary Public, normally chosen by the client (purchaser).

All the above mentioned points, as a minimum or as the case may be, will be drawn up and attached to form an integral part of this important document.

At the time of the signing of the konvenju, a sum equivalent to 10% of the final selling price, as is usually the norm in such circumstances, is paid to the vendor as deposit on account. It is very important to ensure that this payment is in fact recognised by both parties as being a property malta deposit and never termed as ‘earnest’ which is not as binding to either party as it does not oblige either one to appear on the final deed of purchase. This deposit is binding and should the purchaser not appear for the final deed of sale without a valid reason at law the sum is forfeited by way of liquidated damages in favour of the vendor.

Once the konvenju is completed and duly signed by all parties concerned, the Notary Public has a period of 21 days during which to register this document at which time he is required to effect payment of 1% stamp duty to the Commissioner of Inland Revenue. This sum is therefore to be paid at the time of signing of this konvenju by the purchaser as part of a total sum due, detailed below, by the purchaser in all cases when purchasing immovable property.

What happens during the ‘Term of Konvenju’?

Notary Public carries out the necessary searches to verify legal title and to ensure that there are no outstanding debts, hypothecs or liens on the property
Purchaser is to complete all the special requirements e.g. organise bank loan, check on building permits, etc. as agreed upon with seller and stipulated in the konvenju
Vendor will complete all special requirements e.g. complete the building, or finishing certain works etc. as agreed upon with buyer and stipulated in the konvenju

During this time RE/MAX as agents can be called upon to assist in any queies the client might have. We have very good relationships with all the leading banks on the island and can therefore also assist you as the client in setting up meetings with the bank of your choice.

As mentioned before we also have access to a host of professional people amongst which Notary Publics and Architects to mention two categories. These people can easily be contacted through us to assist in any questions a client might have, ensuring not only reliable but also timely replies.

Achieving full ownership

Once all the above has been completed by all parties concerned a date is set for the actual signing of the Final Deed.

A property malta gain the duty for the preparation of this document lies upon the Notary Public who in fact will keep track of and ensure that the actual term of konvenju does not lapse. It is perhaps important to note at this stage that the date of expiry of the term of konvenju determines the final date by which both parties have to meet to sign the final deed but as long as both parties are satisfied that all is in order this document can be signed at any time within the term of konvenju.

The Notary Public will advise the purchaser and vendor as well as the RE/MAX Office/Associate of the day on which to meet to sign the Final Deed:

In the case where a bank loan is involved the parties will be asked to meet at the bank’s legal office, otherwise this document will be signed either at one of RE/MAX Offices or at the office of the Notary Public
Contract is read out and as long as all parties are satisfied that all is in order it is signed
Balance due (total selling price less previously paid deposit) on selling price are paid to seller
Purchaser settles the remaining balance due to the Commissioner of Inland Revenue by way of Stamp Duty (rate as described below) as well as the notary’s fees
Both parties settle their respective expenses due as described in detail below

Expenses involved when buying/selling immovable property

All expenses as described below become due upon signing of the Final Deed and are to be settled at the same time

Purchaser dues

Notary fees – Elected by the Purchaser

Amounting to approximately 1% of the selling price of the immovable property

Stamp Duty – Due to Commissioner of Inland Revenue

In the case where the property being purchased is to be the main residence and no other property malta/property in malta property results to be under the name of the vendor in question, then a special concession is made whereby the first Lm30,000 (thirty thousand malta liri) are subject to a discounted rate of 3.5%. The remaining balance will be subject to the normal rate of 5%.

This concession is applicable only to EU citizens taking residence in Malta.

In all other cases this cost is established at a fixed rate of 5% of the total selling price of the immovable property.

Laudemium – Due to vendor or third party

In the case where Ground Rent is due, a one-off payment (laudemium) equivalent to a one-year’s ground rent is to be paid to the legal title holder of this said right.

In the case where the vendor is imposing this Ground Rent for the first time then no laudemium is due but instead a one-time recognition fee of Lm100 (one hundred malta liri) is due as stamp duty to the Commissioner of Inland Revenue

Vendor

There exist two schemes of settlement of payments due by way of tax when selling immovable property in Malta. Whilst every case must be taken under its own merits the following could be taken as a general guide line. Specific advice should be sought in each case even through our agency but ideally directly from one’s own personal accountant or tax advisor:
Either one of these schemes has to be applied in all instances except in cases when:

• The immovable property has been the registered main residence of the vendor for a minimum of three years and is being sold within a year of when it is being vacated.

• The garage (if any) being sold is attached to or underlying the property being sold, even in cases where the property forms part of a block of flats.
• The garage is not more than 30 square metres, and although not attached it is situated within 500 meters of the residential property and transferred through the same deed.

This exemption is granted by the Department of Inland Revenue upon application prior to the signing of the Final Deed of Sale.

Applicable Schemes:

Scheme 1: Capital Gains Tax

At the time of signing of the Final Deed of Sale the vendor can choose between two schemes of tax settlement with r a provisional tax amounting to 7% of the total selling price is to be deposited with the Notary Public to be passed on to the Commissioner of the Inland Revenue

As mentioned above the tax being paid at this time by the vendor is only a provisional tax. The definite amount due is calculated by computing the capital gains less a series of expenses sustained at the time of purchase as well as maintenance and inflation allowance, brokerage fees (limited to 5% of the selling price) and other eligible costs sustained during the time of ownership of the property in question. This sum is then added to all other incomes of the vendor for the current year and the income tax for that year is worked out. Rebates or additional payments are then received or to be deposited as the case may be.

Needless to say, this calculation is highly intricate but RE/MAX can offer their assistance should it be required.

Scheme 2: Final Withholding Tax:

Vendor can opt to choose a system whereby the Tax due is calculated at 12% of the selling price less any Estate Agency fee (if applicable). In this case the amount being paid is as the name implies in full and final settlement.

Estate Agency Fees – Payable only once the sale is concluded

3.5% of the total selling price in the case where the seller has chosen RE/MAX to be the Sole Agency promoting the sale of the property , or 5% in case of an open agency.