Once a property is chosen and the price is negotiated, the owners and prospective buyers must appear on a promise of sale agreement or konvenju. This preliminary agreement is signed by the prospective vendors and purchasers before a Notary Public.
The parties will agree on a length of time for which the konvenju will be valid, usually three months. The parties to the promise of sale must also agree on any conditions to which the preliminary agreement will be subject.
On the konvenju the purchasers must pay a portion of the stamp duty due on the final deed of sale. This portion of stamp duty, which is also known as provisional stamp duty, usually amounts to 1% of the selling price.
On the final deed of sale the amount of stamp duty to be paid is usually that of 5% of the selling price, but it can vary. For example, if the prospective buyers are buying the property with the intention of making it their sole ordinary residence, they will pay at the reduced rate of 3.5% on the first €150,000, and 5% on any amount over and above that.
For the year 2014 the Government of Malta has issued a one-time exemption on stamp duty for first time buyers. Through this one-time exemption first-time buyers purchasing their residence will be totally exempt from stamp duty when purchasing property up to the value of €150,000. Over this amount first time buyers will pay tax at the rate of 5%. First time buyers are defined as anyone who has not received or acquired property through an inter vivos act, such as sale or donation. Persons who received immovable property through inheritance, that is, causa mortis, are still eligible under this exemption.
On the konvenju it is also a common practice for the prospective buyers to pay a deposit to the prospective vendors. The deposit is usually 10% of the selling price, and is normally kept by the Notary, either until a condition in the konvenju is fulfilled or until the date of the final deed of sale.
Unless expressly exempted from doing so by the prospective buyers, during the period of validity of the konvenju the Notary Public will carry out the necessary searches, according to Law, into the property being transferred.
The Notary Public performs the searches in order to confirm that the vendors possess good and sufficient title for the transfer of the property, as well as to confirm that there are no outstanding debts or hypothecs on the property.
If necessary for the purchase of the property, it is important that right after signing the konvenju the prospective buyers seek the services of a local commercial bank and request to be granted the required loan.
During the period of validity of the promise of sale agreement the parties, along with the Notary, will ensure that all the conditions set out in it for the transfer of the property are met. Such conditions may include the granting of a loan, ascertaining that the property is built according to building permits, and any pending works to the property are completed.
Finally, the deed of sale is read out by the Notary in front of the parties, the remaining balance of the selling price and final stamp duty are paid by the buyers. Whilst, if applicable, any capital gains tax is paid by the vendors.
Subsequent to the signing of the final deed of sale the buyers are advised to make a will.
Subscribe to our news letter to receive weekly updates of latest properties available on the market!