In recent years, Malta has successfully launched citizenship programs that involve the acquisition of real estate. These programs come with specific requirements, such as predefined price ranges for properties, making thorough due diligence an essential part of the buying process. Whether for commercial or private use, it is crucial to rigorously inspect the property before signing the sale contract. There are several procedures that allow one to verify a Maltese property about to be purchased. The first real estate due diligence procedure involves verification with the Maltese Land Registry, and the second entails an architectural inspection of the property. To benefit from a simplified and fast process, foreign citizens or investors can also seek the services of a law firm in Malta, which will also explain the legal aspects of buying a property in this country.
Main Types of Real Estate Due Diligence Procedures in Malta
Over the last few years, the number of procedures that can be completed before buying a property has increased, as has the number of people purchasing real estate for residential or vacation purposes. Malta has also enabled several residence by investment programs that allow foreign citizens to buy real estate properties.
Based on these programs, it is even more important to request real estate verifications in Malta. Here are the most important types of real estate due diligence that can be performed before purchasing a property in Malta:
- Land Register Verification, which can also be defined as legal real estate due diligence;
- Technical or Architectural Due Diligence, which involves having the property inspected by a construction specialist or an architect;
- Financial Due Diligence, which entails checking a property for financial encumbrances, such as mortgages or unpaid bills;
- Zoning and Survey Due Diligence, generally required for commercial real estate purchases.
There are various types of verifications that can be completed on a property in Malta before acquisition; however, those mentioned above respect all aspects that need to be checked before completing a significant transaction.
Real Estate Verification with the Malta Land Registry
The first step towards purchasing real estate in Malta is to sign a promise of sale contract. After signing the agreement, it is the best time to start the real estate due diligence process. Whether one decides to use the services of a Maltese public notary or a law firm, this verification should be done with the Land Registry. The information to be obtained from the Maltese Land Registry includes:
- The legitimacy of the property title,
- Whether the property is subject to any mortgage payments,
- If any third party has rights over the property,
- If the property is rented.
If a company is being opened in Malta and the property will be purchased for commercial purposes, it is also advisable to verify the activities that could be undertaken in such a building and whether all permits and licenses are in place.
Technical Verification of a Property in Malta
Once the real estate due diligence procedure has started, it is advisable to have its structure verified. To do this, the future owner could engage the services of an architect who will clarify all the structural aspects of the building. This way, the buyer can make an informed decision. This aspect is particularly important in the case of commercial purchases to ensure the safety of employees.
Financial Real Estate Due Diligence in Malta
As mentioned above, financial real estate due diligence involves verifying a property for encumbrances and other issues related to the payment of bills, mortgages, and even rent. For many people, financial real estate due diligence is not important because the Land Register verification offers sufficient information on the respective property. However, our attorneys in Malta would like to draw attention to the fact that in some cases a property can be used as collateral when contracting a loan. Usually, such loans involve large amounts of money, so a verification with the local tax office in the Maltese city where the property is located can prove very useful.
Another unpleasant situation is for the owner to be subject to a debt collection procedure completed in a Maltese court of law. Such a case can lead to a judge ruling for the property of the defendant to be used for paying the debt.
These are the main reasons and common situations a buyer might face when acquiring property in Malta. The case can become even more serious when commercial purposes are involved due to the significantly higher price of such real estate. Moreover, in commercial real estate purchases where more than one building and land plots are involved, financial verification is necessary.
Why is Real Estate Due Diligence Important?
As presented above, real estate due diligence can have a huge impact on the decision of the buyer. No matter the type of property to be purchased or who the seller is, due diligence can even impact the price of the property.
We also recommend people buying newly built houses or apartments to have the respective property verified at least technically.
Another important aspect strictly related to real estate due diligence in Malta is the purchase of a property under the Residence by Investment Scheme. It is good to know that under this program, the properties rented or purchased must be evaluated, and the rent or the acquisition values are specified by the regulations in the program.
The Maltese Real Estate Market
If you plan on buying a property in Malta, you should know that:
- In 2018, property prices increased by 16.9% (the report was completed between the second quarter of 2017 and the second quarter of 2018);
- Maltese banks usually ask for an advance of 10% to 30% to those seeking to obtain a loan for buying a property;
- 80% of Maltese citizens own at least one property;
- An 8% transfer tax is levied upon the purchase of a real estate property in Malta.
Exploring Investment Opportunities in Real Estate in Malta
Investing in real estate in Malta presents a unique opportunity, particularly for those interested in the citizenship programs that the island offers. Understanding the detailed processes of real estate due diligence is crucial to safeguard your investment and ensure a smooth transaction. By engaging in comprehensive checks—from legal verifications at the Land Registry to detailed architectural and financial reviews—you ensure that your investment is sound and your legal interests are protected.
Moreover, Malta’s appealing real estate market growth, along with its legal frameworks designed to protect both local and international investors, makes it an attractive destination for property investments. Working with knowledgeable local attorneys can help navigate the complexities of Maltese real estate, ensuring that all documentation is correct and all regulatory requirements are met before making a commitment.
Whether you are drawn by the lifestyle, the potential investment returns, or the benefits of the citizenship programs, real estate in Malta offers substantial value. With the right guidance and thorough due diligence, you can make informed decisions that align with both your financial and personal aspirations.
