Promise of Sale
Although not required by law it is customary for buyers and sellers to enter into a binding preliminary agreement before publication of the final deed of sale by the Notary Public.
In the preliminary agreement the prospective sellers will promise to sell, whilst the prospective buyers will promise to buy, at a particular price and under a number of specific conditions, which must be met before the date of the final deed of sale. A promise of sale or konvenju, as it is known in Malta, will be made valid for a number of months. Konvenji are usually made valid for a period of 3 months.
A konvenju can be, and usually is, made subject to a number of conditions. By far the most common condition for a preliminary agreement to be subject to, apart from the fact that searches into liabilities and title are in order, is the granting of a home loan by a bank.
However, a preliminary agreement can be made subject to a number of varied conditions. For example, it is not unusual to have a konvenju subject to building permits being issued; to an architect’s visit; or even to a sale of another property going through.
On the preliminary agreement a buyer will generally pay a deposit. This deposit usually amounts to ten percent of the selling price, but there is nothing in the law which prohibits the buyer and the seller reaching a different agreement, either for a smaller or larger deposit to be paid on the promise of sale.
When buying a property a buyer must pay Stamp Duty, which in most cases is calculated at 5% of the selling price. But, there are many exceptions for this general rule. For example, buyers purchasing a property with the intention of establishing therein their sole ordinary residence will pay a reduced rate of Stamp Duty of 3.5% in respect of the first €150,000 of the selling price, and those buying their first residence will be completely exempt from paying tax up to the amount of €150,000, On the konvenju a part of this Stamp Duty is paid, although it typically represents 1% of the selling price, in many cases it is less, and it is advised to contact their Notary Public before signing a konvenju so that the exact provisional stamp duty due is calculated for you.
During the time after the preliminary agreement has been signed, but before the signing of the final deed of sale the Notary Public will conduct the searches.
Searches involve compiling a number of documents which a Maltese Notary Public will order to allow him to ascertain that the seller owns the of the property being transferred, that is, that he has proper title to the property, since no one can sell that which they do not own.
The Notary Public will also check if there are any liabilities on the property or if it is subject to any ground-rent. A Title Report can be drawn up by the Notary Public and passed on to the prospective buyers before the date of the final deed of sale.
Disclaimer: This article is for general information only and does not constitute advice, legal or otherwise. Always obtain professional advice for your particular situation.