When it comes to buying property off-plan in Malta, not many people are sure what exactly it involves. This way of purchasing property has been the tried and trusted way for many savvy buyers and investors to make good money for several reasons. If you intend to buy a property off-plan and use it as your primary residence, there are a few things you should be aware of, but one thing is for certain: you will not only save substantial amounts of money, you will also stand the chance of having made money on the property even before you have moved in!
Buying off-plan in Malta means the property is unfinished or still needs to be built. All you have to do is put down a small deposit or reservation fee in order to secure the property. You will usually be asked to sign the formal contract within a period of a month. Buying off-plan is regular also referred to as on-plan.
Always find out exactly up to which point the developer is involved before they exit from their commitments. Some developers sell units with an entire “package” which means the property can be completed up to the stage where the tiling, doors, windows and even the plumbing and electrical can be in place. Always find out what is included before you buy. In most other cases you will have to install your own kitchen or even bathrooms, although many developers will also hand over a unit with the bathrooms completed. Always make sure that you know what you are going to get and see to it that it is all stipulated in the final sales agreement.
Absolutely! If you buy a property off-plan, you will be in for huge savings as most developers offer handsome discounts when selling properties off-plan. You may even be able to pay off the property’s agreed purchase price in instalments up to the point of completion.
As with everything in life, buying off-plan has its benefits and drawbacks:
You may decide to go it alone and hunt for the perfect off-plan property yourself, but this is only advised for the experienced. Successful buyers and investors ALWAYS make use of the services of a tried and trusted estate agent and there are several reasons for this. The estate agent will not only select and find you a bouquet of properties that will suit your taste and budget, they will separate the chaff from the wheat very quickly. Agents know which developers are problem-free, deliver on time and sell high quality properties. Agents also do all the legwork on your behalf and will keep a meticulous record of the entire process of buying and see to it that all legalities and permits are in hand to facilitate transferring the property into your name, as this is only when they get paid. It is therefore in the agent’s and your best interests that everything runs as smooth as possible. Agents know the entire process of buying off-plan inside out and may be able to spot any irregularities that you may not, thus saving you from running into any potential problems.
Find you who you are buying from: developers’ advertising may look great and even impressive, but that does not mean it is what they deliver! Try and find legitimate client testimonials, go and visit previous developments completed by the developers and if you can manage it, speak to some of the people living in the previously completed complex. Ask if the developer delivered on time, if the units are of high quality and if they are happy with what they bought. If you have appointed an agent, ask them about the developer, past projects and discuss any concerns you may have.
It does not matter how well-known the developers are, always make sure they have the approved permits in hand and ask for a copy. Just remember, until such time as all the legalities have been sorted out, you won’t be able to apply for electricity and water connections from the authorities and you will also be asked for a compliance and or EPC certificate. You will most likely also not be able to receive any mail at the address until such time as you have all of these and without them the property will not be transferred into your name.
Be careful with making any internal structural changes during the building period, as only the original, approved plans will be considered legal. If you asked for any structural layout changes that differ from the original plans, you will have to get approval of any of these changes and plans. Failure to do so will result in the transfer process of the property into your name to be stalled or delayed.
Having an estate agent by your side will be invaluable, as they will do a lot of the work for you and see to it that the entire process of buying off-plan is a smooth and hassle-free one. They will even go as far as in assisting you in getting your water and electricity applications submitted towards the end of the process when you are getting ready to move in.
The pen is mightier than the sword! Get written and signed agreements, contracts and print out all correspondence, including emails. Keep a log of calls between you and the developer. Having all of these filed in chronological order will also make it a lot easier to follow up on and you will always know exactly what was said, agreed to and promised. Even when you are in agreement during a verbal conversation, try and write down what exactly was said. It may be wise to consult or engage with a legal expert before you enter into any agreements, as developers are very busy people and may not always pay you the attention afterwards that you feel you deserve.
Having an experienced estate agent will help tremendously as they will have a lot of clout with the developer. As they have more than likely dealt with the developer before, they will know what to ask, what to do and how to ensure that the entire process of buying off-plan is problem-free for you. It is also the agent’s job to be on top of things daily and they will make sure of it that everything is in writing.
This does not refer to finishing and furnishing your apartment! During the legal process of buying any property, there are fees and costs such as those that are payable to notaries, the authorities, architects and more. If you are buying the property by applying for a bank loan, you will be expected to have taken out life insurance which will have to be paid annually for the duration of the loan as well. Additionally you have to fathom in deposits and connection fees for water and electricity, personal home insurance and if you are buying an apartment in a complex there may also be yearly management fees or levies that will go towards looking after the common parts, administration and bookkeeping.
Use a notary that you know you can trust. Ask for referrals from your family first. When it comes to costs, a notary will usually charge in the region of one percent of the property’s value for their services from start to finish. It is acceptable to ask the notary for a written quote upfront of what their estimated costs will be. A good notary will ensure that the contract is absolutely legal and according to what is required by the law and do not get swayed by the developer to use their notary for a discounted fee! Remember, you get what you pay for and sometimes going for cheap can work out to be very expensive. Notaries have to include in any contract at least the name, surname and address of the buyer and seller, the full purchase price, what is included in the purchase price, a full description of the property, what amounts are payable when, the delivery date, compensation for not sticking to deadlines and defects and also the date of completion or handover. Your estate agent will be eagle-eyed during the completion of the contract and see to it that all the required information is there and that you will be properly protected.
Delays in the delivery of your off-plan property is the stuff of nightmares. NEVER pay the full asking price up front: ask for incentive clauses to be included in the contract and pay a further instalment once the particular milestone has been reached. It is up to you to decide which these are, but speak to your agent who will be able to best advise you.
To further ensure that you will be taken seriously is to enclose a financial penalty clause for late delivery along the way of completing certain milestones and make sure it is in the contract. The penalty can be based upon an acceptable percentage of the total amount or the next forthcoming amount, which will be triggered consecutively with every week that goes by of late delivery or reaching a milestone. This can all add up to quite a bit of money the developer stands to lose, something they will try and avoid at all cost. That said, developers can be sticky about penalty clauses and even refuse to pay up unless you take them to court, so include in the contract the option that you will deduct the penalty amount from the next payment once the milestone is finally reached.
If your developer is only going up to shell stage according the agreement and you have bought the property with this as the accepted and agreed upon delivery or handover condition, you will have to hire tilers, plasterers, painters, electricians, carpenters and more to bring your property to completion. Just make sure you get what was agreed upon in the sales contract.
Buying a property in shell form is a lot cheaper, but the hassle of getting it finished can be complex as you have to deal with a lot of independent suppliers and contractors to get it one hundred percent finished. With each and every contractor you hire, sign an agreement and have penalty clauses doing their magic for late delivery. Again, NEVER pay in full for the work that needs to be done: pay in stages. If you do not have the energy to deal with all of this, you can appoint a turnkey property management company or a project manager for a fee and they will take care of everything for you.
You may opt to sell a property that was bought off-plan before completion, but this entirely depends on the developer allowing it. Remember, you may already have gotten a very good discount on the purchase price from the developer! The golden rule is that you will be allowed to sell once you have paid any and all outstanding amounts owed to the developer as agreed upon, but it is wise to have an emergency exit strategy in place BEFORE you buy! Circumstances may change for you in life and you may need to sell before completion, but by this time you may have made enough of a profit on your property that no-one stands to lose out should you decide to sell.
Just keep in mind that developers do not take kindly to “flippers” as they may flood the market drive prices down. When you have a real life changing emergency and have to sell the property before the time of completion, talk to your agent or the developer and see what the best solutions will be to amicably come to an agreement regarding the sale of the property. Understandably so, no-one wants to lose out financially, especially the developer.