Notary Public & Commissioner for Oaths


Buying property on plan – issues to consider

Created on Monday, 19 January 2015 17:44

Buying property on plan is fairly common with so many new building developments mushrooming in the Maltese Islands. Besides the usual considerations that one needs to take care of when buying any immovable property, it is also important to keep in mind a number of other issues when buying a property on plan. The list below is just a number of pointers that one should be aware of before entering into a promise of sale (konvenju) to buy such a property.

1.  Precise plans

Since the property has not yet been built, precise, “to scale” plans showing the exact dimensions of the property are crucial. The size of the property shall also be indicated in the promise of sale. The prospective seller binds himself/herself to build the property in accordance with the plans which are signed and attached as an integral part of the promise of sale. One should bear in mind however that the law allows a 5% variation when the words “approximately”, “circa” or equivalent are used.

2.  Planning Permits

At times, property is sold on plan whilst the developer is still waiting for the relative planning permits to be issued in order for such property to be built. It is thus imperative for the prospective purchaser to confirm whether the relative permits are already issued or whether they’re still pending. In the latter scenario, the promise of sale must obviously be made subject to the issuance of these permits. It would also be wise for the purchaser to enquire as to the expected time-frame within which the decision will be taken. From a commercial point of view, one should be wary about releasing a full deposit to the prospective seller until the permits have been issued.

3.  Time-frame for conclusion of building

It is advisable for the purchaser and the seller to agree on time-frame within which the building is to be concluded. As a prospective purchaser, one cannot be expected to wait indefinitely for the conclusion of a building. Thus, the promise of sale should indicate such a time-period. The parties are also to agree what will happen in the eventuality that such time-frames are not met. Sometimes, the parties agree that if the seller delays in concluding the building, s/he will incur penalties which are agreed upon between the parties on the same agreement. The parties must also agree whether the promise of sale is to be extended in such eventuality, and if so, whether such obligation binds both parties or whether it’s only binding on the seller at the purchaser’s discretion. 

4. Common Parts 

If the property being bought forms part of a block of buildings, it’s also important for the parties to agree on a time-frame within which the common parts of the block have to be complete since failure to do this could of course be prejudicial to the purchaser. Once again, the parties could agree on pre-liquidated penalties in the case of delays.

5. Finishing 

If the property is to be sold in a finished state, the promise of sale must stipulate clearly and in detail what level of finishes the parties have agreed upon. Once again, the seller will be bound to finish the property to the level and in the manner set out in such agreement. 

6.  Bank financing

If the prospective purchaser is financing the acquisition by means of a bank loan, it is ideal for the purchaser to inform the Bank about the fact the property is still on plan, especially if the target date for completion is not so close. Banks will usually process the application straight-away but the actual loan is given once the property has been built up. Of course, different banks might have different policies and therefore it’s advisable to enquire on these matters from an early stage.

7. After the promise of sale 

Between the promise of sale and the final deed of sale, the purchaser should periodically monitor the progress being made on the building site to ensure that the development is taking place in a timely and proper manner according to the target dates agreed upon. 

Article written by Notary Dr James Grech.

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