Buying a property is a huge decision and massive undertaking both from a personal and financial perspective, so it’s important to know the details that are involved in this life-altering transaction. Nevertheless the process in Malta is a fairly straightforward one.
Preliminary Procedure when buying property in Malta
The type of property that you opt for depends on your tastes and your budget, the steps following that decision are fairly standard regardless of whether you’ve chosen to buy an apartment or a townhouse. Clearly, as with any property purchase, it’s normal to see whether you can negotiate on the price - this is expected from the seller; however, they will usually have a bottom line that they will just not cross so it’s advisable to keep your offers within a certain bracket of the asking price.
Once the selling price has been established, all parties concerned will meet in the presence of a notary public (chosen by the purchaser) to sign the preliminary agreement/promise of sale, or what is known in Maltese as the kunvenju. As the name indicates, this is an agreement whereby the vendor ‘promises’ to sell the house to the buyer (and no one else) and the buyer promises to buy it, all within an established period of time. A typical kunvenju is set for six months; however, the parties can agree to have a shorter agreement of three months or a longer one for a year. The agreements and contracts are written in English.
The transaction between the vendor and the buyer is subject to a set of conditions:
- The agreed selling price
- Ground rent, if applicable, temporary or perpetual
- Any works to be completed by the seller, (normally attached in list form)
- Any items (movable) included in the selling price, (normally attached in list form)
- Any other particular terms as requested and agreed upon from either party, e.g. subject to bank loan, subject to building 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 agreed, is typically three or six months.
The promise of sale is the first legally binding stage of purchasing a property. Along with signing the document, the purchaser pays a sum, (usually) equivalent to 10% of the final selling price, as a deposit on account. This deposit is binding and should the purchaser not turn up for the final deed of sale (unless there is a valid reason recognised by the law), then the deposit money is forfeited in favour of the vendor. Although the promise of sale has an expiry date by which the final deed needs to be signed, if both parties agree then the final deed can be signed within this interim period.
Once the promise of sale is complete and signed by all parties concerned, the notary has 21 days during which to register the document and upon which to pay 1% of the stamp duty (total of 5%) to the Commissioner of Inland Revenue. This sum is paid by the purchaser to the notary when signing the promise of sale.
Apart from registering the promise of sale, the notary is also engaged to carry out the necessary researches into the property to verify legal title, ensure that there are no outstanding debts, hypothecs or liens on the property, as well as submit the application for a permit to purchase, to the Ministry of Finance, if such permit is necessary.
Once the relative permit has been issued and the researches have not uncovered any obstacles, the final contract of sale may be entered into. The deed of sale is drawn up by the purchaser’s notary. The notary will advise the purchaser and vendor 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 at the office of the notary.
On the signing of the contract the purchaser pays: the remaining balance of the purchase price, balance of stamp duty, and legal expenses. Ownership of the property then shifts from the vendor to the purchaser.
Expenses when buying property in Malta
- The cost of the chosen property
- 5% stamp duty (there are lower fees when buying property in Gozo)
- 1% to 3% notarial fee (this depends on the respective rates)
- €600 searches and registration fees (approximate value)
- €233 AIP permit fee (where applicable)
These costs are the liability of the purchaser and become due upon the signing of the final deed and are to be settled at that same time.In the case where the property being purchased is to be the main residence and is the first property purchased by the buyer in their name, they can benefit from the First Time Buyers Scheme whereby a special concession is made, and the first €116,468.67 are subject to a discounted rate of 3.5%. The remaining balance remains subject to the regular 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.
The vendor has no immediate payments at this stage, but should contact their accountant to see what tax obligations are required of them upon the sale of their property.
Energy Performance Certificate - Why you need it
New legislation states that when there is a transfer of property from vendor to purchaser, an Energy Performance Certificate (EPC) is shown to the buyer at the time of entering the contract of promise of sale, or even a rent agreement.
The EPC rates the property in terms of energy and informs buyers about the energy performance of the building; the assessor also gives recommendations on how to cost-effectively improve the property to achieve a better energy efficiency class. The owner is not obliged to implement any of the recommendations set out by the assessor.
An EPC is carried out by an Energy Performance of Buildings (EPB) assessor who is registered with the Building Regulation Office (BRO) which is the office responsible for the implementation of the EPBD in Malta.
The EPB assessor inspects the property and assesses the building. The assessor then calculates the energy use rating of the building and issues a registered EPC. A list of registered assessors is available on www.epc.gov.mt. The BRO charges a €75 registration fee for each certificate registration. There is no set fee for an EPC as it is up to the assessor to set the price.
An EPC is valid for 10 years from the date it is issued. The same EPC will still be valid if the property is placed on the market within those 10 years provided there are no substantial changes to the building which could affect its energy performance.
An EPC is a requirement of the EU Directive, namely the Energy Performance of Buildings Directive (EPBD) and Maltese Law, specifically the Energy Performance of Buildings Regulations (EPBR) of 2012 (LN376/2012). An owner who fails to produce the EPC to the BRO, when requested to do so, may incur a fine ranging from €500 to €5,000.
Disclaimer: The information found in this article is for information purposes only and should not be construed as advice, legal or otherwise. All property vendors and buyers should seek legal advice from a notary public of their choice.