In Malta, when a purchaser has decided on a property and the price has been verbally agreed, a legally binding agreement is drawn up by a Notary where both parties meet and sign it. This is known as the ‘Konvenju’ and is often referred to as a Promise of Sale or Preliminary Agreement. It is a binding contract through which the prospective vendor obliges themselves to sell a property to a prospective buyer, who in turn, commits themselves to purchase the property.
Through this agreement, the vendor and purchaser commit to the transaction at a particular price and time-frame together with a list of any conditions. The ‘Konvenju’ includes details of both parties, the price and payment terms agreed upon, a description of the property, whether any furniture is included in the price, the period of validity of the contract and any terms and conditions agreed upon by the parties. This Promise of Sale agreement is valid for a specific amount of time, usually ranging from 3-6 months.
Furthermore, it is legally required that the ‘Konvenju’ is registered with the commissioner of the Inland Revenue, together with the part payment of 20% of the total stamp duty, which is paid by the purchaser. However, this is typically taken care of by the Notary.
What is required of the seller?
The seller should provide some form of official documentation for personal identification, such as a passport or ID card, as well as a copy of the original purchase contract, together with any plans and/or relevant building permits. If the property was acquired during marriage, then both individuals will need to be present during the signing process.
What is required of the purchaser?
The buyer is expected to provide some form of official documentation for identification, such as their passport or ID card. At this point, the buyer will need to pay a Notary fee, which is normally 1% of the sale price, and 20% of the total stamp duty (with the remaining 80% due at the final contract).
Besides this, the buyer will need to pay a deposit. As standard procedure, this is usually 10% of the agreed sale price of the property. This amount is paid on the ‘Konvenju’ by the purchaser as a deposit, especially in the case where a bank loan is required. The parties may agree that the deposit is given directly to the vendor or alternatively, is kept by the Notary until the sanction letter is issued by the bank or upon the publication of the final contract.
Other Terms and Conditions
Following the ‘Konvenju’ the Notary will conduct searches to ensure that there are no legal claims, loans or litigation that can impair or withhold the sale.
The purchaser is not obligated to purchase the property in the case that:
- a bank loan is not granted
- the vendor’s legal title to the property being sold is not in order
- building permits are not in order
- any other conditions agreed upon by the parties has not been satisfied
In this case, the purchaser has the right to pull out of the agreement and their deposit is returned.
In the case that the purchaser is not a Maltese citizen, then an AIP (acquisition of immovable property) permit is required.
Provisional Duty
Unless the 2014 measure on exemption on duty for first-time buyers applies, the purchaser is obliged to pay 20% of the total duty due upon the final contract of sale as provisional duty on the ‘Konvenju.’
For persons who do not require an AIP permit and are purchasing a property to establish therein or for construction for their sole, ordinary residence, the total amount of stamp duty is calculated at the rate of 3.5% on the first EUR 150,000 and at a rate of 5% on the remaining balance of the selling price. For persons purchasing their secondary residence, the total amount of stamp duty is calculated at a rate of 5% of the purchase price.
If you’re looking to begin your search for your new home, look no further than Island Properties. We have a wide range of properties suited to every client situated all over the Maltese Islands.
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