The Acquisition Process
Where property is purchased, the acquisition process typically involves a preliminary agreement or “promise of sale” agreement (convenium) which is signed by the respective parties, and in terms of which the parties mutually undertake to enter the final deed of sale, subject to the satisfaction of certain specific conditions which must be clearly stated in the preliminary agreement. The preliminary agreement must be registered with the Inland Revenue Department within 21 days of its execution, together with a payment equivalent to 20% of the duty on documents due on the purchase price on the final deed of sale, in order to remain valid after such 21-day period.
Where applicable, the purchaser’s obligation to purchase should be made conditional upon the issuance of an AIP permit and the obtaining of any finance necessary for the payment of the purchase price. A sum of 10% is usually paid on this preliminary deed, either by way of deposit on account of the price or by way of earnest, although the parties may negotiate other arrangements in this regard, The deposit is typically retained by the Notary Public responsible for the publication of the final deed of sale, by the vendor or by any other person/s nominated for this purpose by the parties in the preliminary agreement.
The preliminary agreement may be valid for any period of time agreed upon by, and between the parties, but would usually be for a period of between 3 to 6 months. During this time period, legal title in the property concerned is established through the necessary notarial searches and any financing or AIP formalities are duly followed-up in anticipation of the publication of the final deed of sale. AIP applications are usually processed within 35 days from the date of submission.
Once these formalities are finalised, the final deed of sale is duly published by the notary public in the presence of the parties (or their respective legal representatives) and also signed by the said parties in the notary’s presence. All relevant duties and taxes must be paid to the notary public (who collects such funds on behalf of the Inland Revenue Department) at the same time as the publication of the final deed.
By way of general guidance, the costs and expenses related to the contract of acquisition and sale of immovable property typically consist of the following:
- 5% stamp duty of the immovable property contract price (usually paid by the buyer). The said rate of 5% may be reduced to 3.5% on the first €116,000 in cases where the property being acquired is the purchaser’s sole ordinary residence in Malta;
- approx. 2-2.5% of the immovable property contract price for the notary's fees (usually paid by the buyer);
- Legal fees, where applicable (paid by the party/ies engaging such services);
- brokerage fees due to the estate agency (usually borne by the vendor). If you find your property through the services of a Real Estate Agency, then brokerage fees are only due by the seller. If, on the other hand, the property has been found through the services of a private agent (broker), then the purchaser and vendor must each pay 1% as a brokerage fee to the private agent in terms of law, unless any alternative arrangements are made with the said broker.
Read more about:
- Restrictions to the Acquisition of Real Estate in Malta
- The Acquisition Process
- Advantages of Purchasing a Property in Malta
- Renting Property in Malta
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