The Konvenju, or preliminary agreement, is standard practice in Malta but can be slightly confusing for first time buyers and foreigners. Essentially, it’s a legally binding document, usually written by the buyer’s notary, which ties the seller and buyer into the sale within a certain period of time… except for certain ‘get-out’ clauses. These might include:
- the bank failing to approve the buyer’s mortgage
- the notary finding problems with the title
- building permits not being issued
- the buyer failing to sell their own property
- any other conditions agreed by both parties in advance.
The Konvenju isn’t required by law but almost all property purchases use one.
The Konvenju will establish:
- The selling price
- The length of the konvenju, which is the term allowed before final deed must be signed. It is usually three to six months, but this can vary if agreed by all parties.
- Any work which the seller has agreed to complete.
- Any items included in the selling price, such as furniture, fixtures and fittings.
- The legal ‘get-out’ clauses.
- Whether any ground rent is payable and the type of ground rent applicable. Ground rent is due if a third party owns the land that the property is built on. Care should be taken here as some ground rents do not give permanent ownership to the buyer but stipulate that the property will revert back to the original owner after a number of years. Please do ask your notary to clarify this point and make sure that you know exactly what you are buying.
When both parties sign the konvenju, the buyer pays a deposit, usually 10% of the property price (although this is negotiable). The notary generally holds this sum. This deposit is binding and if the buyer does not complete the sale without a valid legal reason, the money will be forfeited to the seller.
What happens next?
- The notary registers the document
- The buyer must pay 1% of the selling price as stamp duty (if applicable – your notary can advise. Find out more here.
- The notary carries out searches to check on the legal title of the property and ensure that there are no outstanding debts, liens or hypothecs.
- The buyers must also organise their mortgage if they need a bank loan, and check on building permits if required.
- The seller must carry out any works outlined in the Konvenju or provide documentation as requested.
The Final Deed
You made it! Now it’s time to sign the Final Deed that will make that dream home yours…
- The Final Deed will be drawn up by the buyer’s notary and signed in the office of the bank (if a mortgage is required), or at the notary’s office.
- The notary will usually read the contract aloud and all parties will sign. You might find yourself holding your breath until the pen hits the paper!
- The remaining funds will be paid to the seller.
- The buyer will also pay the remaining stamp duty to the government, and pay the notary’s fees.
- If ground rent is due, a ‘laudemium’ or fee of one-year’s ground rent will be paid to the title holder. The buyer may also decide to redeem the ground rent, that is, buying out the third party owner of the ground rent by paying a one-time fee when this is possible. Alternatively this can be done at any time in the future by a separate deed.
- The Seller will also pay Final Withholding Tax (FWT). For more details, see here.
Note: the above applies to Maltese buyers and EU buyers purchasing a primary residence. Consult your notary.
Normally, a seller would also need to pay huge estate agent fees at this point, but with noagentfees.com, those expenses disappear, leaving the seller and / or buyer thousands of Euros better off.