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 professionalbuying property malta advisors, are well equipped to beable 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.
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
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.
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 an enjoyable and least stressful possible experience.
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:
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 maltadeposit 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 pre-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.
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 queries 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.
Once all the above has been completed by all parties concerned a date is set for the actual signing of the Final Deed.
Aproperty maltagain 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:
All expenses as described below become due upon signing of the Final Deed and are to be settled at the same time
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 maltaproperty results to be under the name of the vendor in question, then a special concession is made whereby the first €116,468.67 / Lm50,000 (fifty 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 up 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 – Recognition Fee - Due to vendor or third party
In the case where Ground Rent is due, a one-off payment (laudemium - recognition fee) 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.
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:
This exemption is granted by the Department of Inland Revenue upon application prior to the signing of the Final Deed of Sale.
In all other cases the following Tax Regime will apply:
At the time of the signing of the Final Deed of Sale, provided the property in question has been in the ownership of the seller for not more than 5 years, seller is given two options from which to choose, based on whatever may be the most beneficial to the seller at the time. Once the period of 5 years of ownership of the property has been exceeded the possibility of choosing is lost and the applicable tax will be that of Final Witholding Tax as defined in 'a' below.
Calculated on the selling price of the immovable as declared on the Final Deed of Sale (Contract of Sale) less Agency Fees (if any paid and up to the allowed maximum of 5% plus VAT) with the resulting balance becoming subject (by default) to a FWT of 8% as governed by the final tax regime under article 5A of the Income Tax Act.
There are a total of five exceptions, outlined below, in which case the FWT will be calculated at a different rate:
Exceptions Governing Qualification:
Additional payments / refunds, as applicable, are to be settled at this stage.
Needless to say this calculation is highly intricate but RE/MAX can offer their assistance should it be required.
3.5% (plus 18% VAT) 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% (plus 18% VAT) in case of an open agency.
Disclaimer: The information hereunder was accurate at the time of publication. RE/MAX Malta always recommends to their clients to seek legal and financial advise from a professional.