Purchasing a property is an important step. This step should be taken with care and awareness of the rights and duties connected to such a deal. At Island Properties, our agents, with the support of office managers and a series of advisors expert in purchasing property in Malta, we can give our clients guidance when choosing from a large number of apartments, modern houses or houses of character for sale.
At all times we are prepared to hear what you have to say and answer all your questions. This document offers a written detailed guide explaining the process of about buying property in Malta
The Initial Approach
You will need to think of your exact wishes and needs for the type and size of the property as well as how such a property will suit your changing needs in the long term.
- Do you need an area for entertaining, either indoors or outdoors?
- Do you want a modern or traditional property?
- Does it need to be close to your workplace or the kids’ school?
- Should the property have space for a home office, hobby or a kid’s playroom area?
- Where will financing for the purchase come from? Will the banks be involved?
Answering all the questions above might not be as easy as it looks, especially for first-time buyers with no experience in the property market. A meeting in our offices with one of our agents could help you form a more detailed idea of what you’re looking for.
In addition to this, our agent can help you browse through a number of properties available. Many of them are complete with images, which will help you decide which properties you are truly interested in. After this first meeting you will have a list of properties for viewing. The agent will then book appointments to view.
Normally, this is the most demanding part for the client. At Island Properties we are aware of potential issues that may arise and have the knowledge through experience to avoid or tackle them in the easiest way possible.
After Property Selection, What Follows?
After the property has been chosen and the price and conditions have been discussed and agreed on, an appointment is scheduled for the Promise of Sale Agreement’s signing (or ‘Konvenju’ in Maltese) This agreement is binding for both the buyer and seller, for finalizing the sale transaction on a set date (or term of Konvenju). A list of compulsory and optional conditions follows:
- The selling cost approved by buyer and seller.
- Ground rent where appropriate (perpetual or temporary)
- Any tasks the seller needs to finalize, if any (usually attached in the form as a list).
- Whatever movable items are incorporated in the selling price, if any (usually attached as a list).
- Whatever other specific terms requested for and agreed on from either party, such as ‘subject to permits or bank loan’.
- Terms of payment (sometimes payments are spaced out if building works still have to be carried out) if the seller requests.
- Term of Konvenju (period between when the Promise of Sale Agreement is signed and when Final Deed is signed). Unless another agreement is reached this is normally three months.
The Notary Public usually selected by the buyer writes the Konvenju, When the Konvenju is being signed, a sum usually equal to 10% of the final price is paid by the buyer as a deposit. This kept by the Notary till the Final deed is signed.
It is vital that the payment is acknowledged by the two parties as a ‘deposit’ for the property and never referred to as ‘earnest’ (Maltese kappara), which is not legally binding to any of the two parties since it does not compel either of them to be present at the signing of the final deed.
On the other hand, the ‘deposit’ is binding and if the buyer is not present for the ‘final deed of sale’ with no concrete lawful reason, the sum is forfeited by method of pre-liquidated damages, in favour of the seller.
When all the parties involved have signed the Promise of Sale Agreement, the Notary Public has a 21-day period to register this document and settle a stamp duty of 1% of the purchase price to the Department of Inland Revenue.
The amount should be paid when this Konvenju is being signed by the buyer as a section of the overall amount due, indicated underneath, by the buyer in each case when buying immovable property.
What takes place in the course of ‘Term of Konvenju’?
The Notary Public carries out essential searches to confirm the seller’s legal title to the property and to make sure no debts such as liens or property hypothecs are outstanding. The buyer should complete each of the special conditions e.g. make preparations for a bank loan, examine permits for building, etc. as decided with the seller and set out in the Konvenju.
The seller will finalize all conditions listed in the Konvenju e.g. finish the structure or specific works as agreed with the buyer.
Attaining Total Ownership
After all concerned parties have met the conditions of the Konvenju, an appointment is fixed for signing the Final Deed. The Notary Public is responsible for monitoring this document and making sure that the real term of Konvenju doesn’t lapse.
It is vital to note that the expiry date of the term of Konvenju establishes the last date when the two parties need to meet for the signing of the final deed. However, if both parties are content that all the conditions have been met and are in agreement this document can be signed any time in the course of term of Konvenju.
The selling process is easy and safe. When you find a buyer for your property and the sale price and the terms and conditions are agreed on, you sign a Promise of Sale Agreement with the buyer.
The buyer’s Notary Public draws up this agreement, which is binding to the two parties until the final deed of sale is signed. When the POS Agreement is signed, a deposit of 10% of the sale price is usually lodged by the buyers with the Estate Agent or Notary.
This deposit will be forfeited by the buyer in your favour if the buyer does not sign the final deed for any lawful reason. The POS Agreement’s term of validity can be agreed on between the two parties; but, normally agreements are applicable for three months.
During this time, the Notary registers the POS Agreement in law terms, conducts title searches and makes applications for any permit if required.
No limitations exist on property owners to sell at any price. Mostly, when it comes to foreign nationals, the proceeds from the sale after tax including the proceeds of any movables may be sent back abroad. In this case, the Notary applies for authorization from the authorities (Department of Inland Revenue) before signing the final deed of sale.
Capital Gains Tax
Tax on capital gains may be charged on the proceeds of sale of immovable property. If sale of the property occurs within 12 years from acquisition date, the seller can select to be taxed:
1) A capital gains tax depending on gains obtained after considering the price of buying and selling and the cost of any improvements and expenses conducted, on the property.
2) A last Capital Gains withholding tax equal to 12% of the immovable property’s selling price.
If the seller has owned the property for more than 12 years, tax is charged at a 12% rate of the selling price of the immovable property.
There is no Capital Gains tax when the property sold has been the owner’s personal home for a minimum of 3 consecutive years instantly following the transfer date and it has been sold within 12 months of moving from the property.
A Capital Gains tax at a rate of 12% is imposed after the sale of property obtained via inheritance (Causa Mortis). This is for the surplus of transfer value over acquisition value as stipulated in Causa Mortis deed. If the property was inherited prior to 25 November 1992, the tax rate is equal to 7% of transfer value.
Repatriation of Proceeds from Sale
After the final deed of sale is signed, Island Properties will instantly repatriate the proceeds from the sale to the seller’s account abroad. In addition, via arrangements we have with top foreign exchange brokers as well as financial institutions, we can offer favourable exchange rates.
The transfer of money to the seller’s account will be made in the shortest time possible.