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Promise of sale on property in Malta (Konvenju)

KONVENJU

 

The Konvenju (sometimes referred to as preliminary agreement or promise of sale agreement) is usually the first step towards becoming the owner of a property in Malta.

It is the instrument or document signed before a Lawyer or a Notary Public that legally binds both the prospective buyer and the prospective seller.

Once a sum of money is paid on a promise of sale, and recorded in the document, it is the way in which the money paid is described in the said document that determines its status.

If it is described as an on account payment, it is considered to be a part payment of the purchase price, and therefore both parties have the right to sue for specific performance meaning the right to sue for the promise of sale to be finalized in a contract of sale.

If on the other hand it is described as earnest/kapparra it creates a different relationship which means that both parties have the right to opt out of the agreement however paying compensation to the other party. This compensation is usually the amount of deposit paid, so if the buyer opts out he loses the deposit, if the vendor opts out he gives back the deposit given to him by the buyer on the promise of sale plus the same amount as compensation.

Therefore if the deposit paid on the promise of sale is described as an on account payment, unless there are provisions that exempt any one of the parties in specific circumstances, such as having a clause putting the obligation of the buyer subject to the approval of a bank loan or other conditions, the agreement formalised in the promise of sale is enforceable by law.

The law places an obligation upon the parties to register the promise of sale together with a payment of 20% of the duty to be due on the final deed; if this is not done within 21 days of its signing, the konvenju expires.

Very often, the Notary having been empowered by the parties to register the konvenju on their behalf, collects the 20% of the total tax due (often working out as 1% of the purchase/selling price) and carries out the procedure for them.

 

What is paid on the promise of sale is therefore a deposit and duty part payment.

 

Information compiled by

DSLR Notaries

Debono & Smith la Rosa

Triq il-Ftieh

Birkirkara Bypass

Birkirkara.

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