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Buying Property

Malta - Buying Property

In 2016 the Maltese government introduced a white paper called “Malta’s Property Code And Regulations”. It aims to introduce regulations to the estate agency industry in Malta. Estate agents would be required to pass a relevant diploma level qualification before applying for an operating license. A new regulatory body, the Real Estate Agents Authority, would be responsible for regulating licensed individuals, who would have to comply with licensing regulations and a code of practice. The Real Estate Agents Authority would be responsible for keeping a register of the licensees, developing rules of practice and professional standards, issuing consumer information, prescribing training courses and setting fees. They would also investigate complaints and, where necessary, prosecute individuals where offences have been committed. Controversially, prison sentences could be sought for offenders, although fines are expected to be the usual penalty.

For the consumer, the new regulations mean that their licensed estate agent should give them written terms of business. This would set out all fees and charges, including VAT, and the payment terms including when the fee is due. It should be clear to the consumer whether they are being charged a fixed amount or a percentage of the property receipt. A clause should explain clearly what will happen if the client withdraws their instructions.

Although this white paper has yet to be implemented, consumers in the meantime would be advised to ask their estate agent for the written terms of business.

Once you have found the property you wish to buy, you must make an offer to the seller. If they accept it, perhaps after further negotiation, then you will both sign a preliminary agreement. The agreement will be legally binding for three months, committing each party to the sale, while the relevant searches and checks are made by the notary. You must pay a 10% deposit to the seller at this stage, with the money held in a client account. You must also pay 1% stamp duty to the Inland Revenue at this stage.

Once the final deed is issued, you will need to make a second stamp duty payment of 4% to the Inland revenue, bringing the total stamp duty paid to 5%.

If you are a first time buyer purchasing your sole residence, and meet a number of criteria, you can qualify for a reduction in stamp duty for the first €150,000 of the property’s value. This applies to those who have moved to Malta as well as native residents. First time buyers who are intending to restore their new home may be able to qualify for up to €100,000 of property related expenses from a scheme funded by the Maltese government.

Property rights are well defined and protected under Maltese law, but it is important to employ the services of an independent notary to ensure the law is correctly applied. Notaries file the purchase and sale deeds of the property with the Maltese authorities. They check that the deeds are full and accurate, that there are no outstanding loans on the property, and that there are no other claims on the property. You should avoid appointing a notary recommended by the seller or estate agent, and find someone independent. The Maltese Notariat have a website which lists registered members.

Notary costs usually start at about 1.5% of the property value but can be as high as 2.5%. You will have to pay the first third of these costs at the time the preliminary agreement is signed, with the remainder due on the day the final deed of transfer is signed.

If your personal and business situation is not straightforward, such as purchasing your Maltese property whilst being a foreign or overseas resident, then you will find the services of an independent lawyer helpful. For example, you must obtain an acquisition of immovable property certificate from the Ministry of Finance if you are an EU citizen purchasing a Maltese residence which is not your main residence. The permit requires you to pay in excess of €107,670 for an apartment and €179,400 (£140,346) for a house or villa.

It is a good idea to have the property checked by a surveyor, especially if you are buying a historic home. The traditional limestone houses can be hundreds of years old with structural problems that are not obvious on the surface.

If you are notified by the notary or by the surveyor that there is a problem, the matter should be urgently discussed with the seller. If the matter can be rectified within an agreed period, then the sale must still go ahead. If the problem cannot be rectified in the short term you can investigate pulling out of the sale. If you have good evidence that you cannot proceed because of an issue with the property, then you will be due a refund of both your deposit and the stamp duty paid to date.

Once all the checks have been completed, you can agree a transfer date with the seller. On that day, both you and the seller will sign the final deed of transfer. You can give power of attorney to your lawyer, allowing them to sign the final deed of transfer on your behalf. You will pay the remainder of the agreed sale price to the seller and the remaining stamp duty to the Inland Revenue. You will also have to pay your notary the remaining two thirds of the fee due, and a lawyer if you used one, at this point.

If the property you are purchasing has an annual ground rent due, you will also have to pay a recognition fee when you purchase the property. This is equivalent to a year’s ground rent. In practice, this means you will pay two years’ ground rent on the day you take ownership of the property.

Be sure to discuss the tax implications of your property ownership with your lawyer. When a property owner dies, 5% of the value of that property must be paid to the Inland Revenue. If the property is owned jointly and equally, then 5% of the deceased person’s half will be sold.

If you bought your property in Malta as your main residence and sell it before you have lived in it for three years, then you must pay capital gains tax. If you live in the property longer than three years, then you will not be liable for the capital gains tax as long as the sale is completed before you reach the one year anniversary of moving out.

If your property in Malta is a holiday home or held for investment purposes, then you will have to pay capital gains tax. This is 10% of the value of the property if you purchased it before 2004, and 8% if it was purchased after 1st January 2015. A rate of 5% applies to people who are not property traders who sell their holiday home within five years of purchase.

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