Notary Public & Commissioner for Oaths

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The Deposit on the ‘Konvenju’ - Aid for First-Time Buyers (I)

Created on Monday, 19 November 2012 16:22

Is the deposit given to the seller on the day of the promise of sale (konvenju)?

There is no fixed procedure at Maltese law concerning the deposit. In fact, the law in Malta does not oblige the purchasers to pay a deposit to the seller. However, it is a standard practice for the purchasers to pay a 10% deposit to the seller on the ‘konvenju’. A different amount may be agreed upon between the parties. Nevertheless, first-time buyers should be advised that banks in Malta will not normally give more than a 90% loan of the selling price.

What happens to the deposit is also a matter which is to be agreed upon between the parties. The parties may agree that the deposit be given to the seller straight-away. Alternatively, they may agree that the deposit be kept by an independent third party (usually the notary) who will be obliged to release it to the seller either on the day of the final contract of sale or upon the occurrence of a future event/s, such as the issuance of the bank sanction letter or upon confirmation that the seller’s legal title is in order.

From the purchasers’ point of view, it is advisable to go for the latter option so as to ensure that the deposit only goes to the seller when there is certainty on issues which at the time of ‘konvenju’ are still uncertain.

When is the deposit lost?

The deposit is lost when the purchasers capriciously decide not to go through with the final purchase. It is imperative that the ‘konvenju’ clearly stipulates that the purchasers shall not be bound to purchase the property and shall not lose the deposit in the occurrence of certain events, which typically include the following:

  • If the purchasers are not given a bank loan from a bank of their choice;
  • If the searches conducted by the notary show that there is no valid legal title, or that there is some issue which is of serious prejudice to the purchasers;
  • If the relative building permits are not in order;
  • Any other issue agreed upon between the parties.

With such clauses, the purchasers will have their mind at rest that should any of these events occur, their deposit will be safe. Even if the deposit had already been given to the seller, s/he is obliged to return this amount in full.

Can the seller change his mind and not sell the property?

No. Once the seller enters into a ‘konvenju’, then s/he is obliged to sell, no matter what. If the seller refuses to appear on the final contract of sale, the purchasers have the right to institute a court action to force the seller to sell at the agreed price.

Next Article: ‘Important Things to be Included in a ‘Konvenju’.

This is the first in a series of articles written by Notary James Grech which are intended to provide basic and clearly understandable information on the process of buying a property in Malta, with a special focus on first-time buyers. The aim is to facilitate life for first-time buyers and to put them more at ease when they come to purchase their first property.

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