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How to conduct proper due diligence for your property in Malta

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Everything you need to know is included in our Malta Property Pack

Embarking on the journey of buying a property in Malta is a substantial and potentially life-altering decision.

Whether you are on the hunt for a new home, an investment opportunity, or a serene vacation retreat, delving into the world of Maltese real estate can be an exhilarating experience.

However, it is imperative to approach this process with caution and meticulous consideration. Conducting thorough due diligence is a pivotal step in the property acquisition journey that should never be underestimated.

In this article, we will delve into the significance of due diligence when it comes to purchasing a property in Malta. We will highlight the key factors and considerations that every prospective buyer should be well-versed in. From navigating legal regulations to conducting comprehensive property inspections, our aim is to provide you with invaluable insights to ensure that your real estate investment in Malta is not only exciting but also secure.

Finally, please know that the full due diligence cheklist is included in our property pack for Malta.

What is a due diligence when you buy a property in Malta?

Due diligence in a residential real estate transaction in Malta, particularly from the buyer's perspective, is a crucial step.

It's essentially a thorough investigation or audit of a property before you buy it. This process helps you understand exactly what you're getting into and ensures that there are no surprises after the purchase.

In Malta, due diligence isn't mandatory by law, but it's highly recommended.

Why? Because real estate is a significant investment, and you want to be sure that your investment is sound.

Without due diligence, you risk encountering legal issues, structural problems, or other unforeseen complications with the property after the purchase, which can be costly and stressful.

Typically, this process is a combined effort.

You, as the buyer, would initiate it, but you'll likely need the help of professionals. This includes a notary, who plays a crucial role in Maltese real estate transactions. They're responsible for conducting searches on the property, ensuring there are no legal encumbrances or outstanding debts.

Also, you might engage a surveyor or an architect to check the physical condition of the property.

The due diligence process should start as soon as you're seriously considering a property.

It's part of the pre-contractual phase, meaning you do it before signing any binding agreement or paying a deposit.

The time it takes can vary. It largely depends on the complexity of the property and how quickly you can gather all the necessary information.

Generally, it could take anywhere from a few weeks to a couple of months.

Yes, it does cost money.

The fees for the professionals involved, like the notary, surveyor, and any other specialist you might need, will add to the cost of buying the property. However, this expense is often seen as a wise investment to avoid future problems.

Get the full checklist for your due diligence in Malta

Don't repeat the same mistakes others have made before you. Make sure everything is in order before signing your sales contract.

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What to check during a due diligence in Malta?

We'll give here a very brief overview of the elements you have to check when you conduct a due diligence in Malta ; if you want a full checklist, please check the "Due Diligence" document in our property pack for Malta.

In Malta, the due diligence process for residential real estate transactions, from a buyer's perspective, involves several key steps to ensure a secure and informed purchase.

Starting with property titles, they are verified primarily through the Public Registry and the Land Registry in Malta.

Your notary will conduct a search to ensure the title is clear, meaning the seller has the legal right to sell, and there are no undisclosed liens or encumbrances. This is crucial in Malta due to its complex history of property ownership.

Regarding local regulations, Malta has specific zoning laws and development restrictions.

You should check if the property complies with local planning and zoning laws. This can be done through the Planning Authority in Malta. They provide information on whether the property adheres to local zoning plans and whether any extensions or modifications to the property are legally compliant.

Financial due diligence involves scrutinizing all costs associated with the property, including taxes, utility bills, and any outstanding dues.

In Malta, you should be aware of the 'Ground Rent' (ċens) system, a unique aspect where some properties are subject to annual rents to the original landowners.

Environmental assessments aren't typically mandatory for residential properties in Malta, but they can be insightful, especially if the property is near industrial areas or in older buildings where there might be concerns like asbestos.

Building inspections, while not mandatory, are highly recommended. Hiring a qualified architect or surveyor to inspect the property can reveal structural issues, the quality of construction, and any potential repairs needed. This is especially important in Malta due to the age of many buildings and the prevalence of unique architectural features.

Verifying access to utilities involves checking connections to the national grid for electricity, water, and sewage. In Malta, this can be done by consulting with the local utility companies or through the seller's utility bills to ensure that the services are regular and there are no outstanding debts.

Researching and evaluating the neighborhood is about understanding the area's lifestyle, amenities, and future developments. This involves visiting the area at different times, talking to locals, and observing factors like traffic, noise levels, and general upkeep.

This can give you a good sense of the community's atmosphere and whether it fits your lifestyle.

Identifying easements or rights of way is critical.

In Malta, such rights are common due to the traditional nature of property development. Your notary can help investigate this by checking the property deeds and any historical agreements that might affect your use of the property.

To obtain information about future development plans in the area, you can contact the local council or the Planning Authority. They can provide insights into any proposed developments, changes in zoning laws, or infrastructure projects that could impact the property's value or your enjoyment of it.

Lastly, checking for historical listings or disputes is done through the Superintendence of Cultural Heritage for any heritage or conservation issues, and through your notary or legal advisor for any past legal disputes. This is particularly relevant in Malta due to its rich history and the presence of many historic properties.

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Everything you need to know is included in our Malta Property Pack

What's the process and who are the professionals involved in a property due diligence in Malta?

In Malta, when you're buying residential real estate, the due diligence process usually involves several key professionals.

A notary is one of the most important figures. They are responsible for conducting title searches to ensure there are no legal encumbrances on the property, checking for any outstanding mortgages or liens, and verifying that the seller has the legal right to sell the property.

Notaries in Malta are regulated by the Notarial Council and must adhere to strict professional standards.

Surveyors or architects are also commonly involved, particularly to assess the physical condition of the property. They will check for structural soundness, any potential repairs, and compliance with local building codes. These professionals are regulated by the Kamra tal-Periti, the professional body for architects and civil engineers in Malta.

If you're a foreigner dealing with the Maltese real estate market, language barriers can be a concern.

While English is widely spoken in Malta, legal documents might be in Maltese. It's advisable to work with professionals who can communicate effectively in your preferred language. This ensures clarity in understanding legal documents and negotiations.

Regarding the real estate contract, in Malta, it's possible to make amendments after the contract has been signed, but both the buyer and seller must agree to these changes.

Any amendments should be made in writing and duly signed. This is where having a good lawyer can be beneficial, as they can guide you through the process of contract negotiation and amendment.

The timeframe for completing all necessary paperwork and approvals after signing the contract can vary.

Typically, it can take several weeks to a few months, depending on various factors like the complexity of the transaction, the efficiency of the professionals involved, and the speed at which the relevant authorities process the required documents. During this period, the notary will finalize the searches and checks, and you'll need to secure any necessary financing and fulfill other contractual obligations.

A mistake in your due diligence could cost you thousands of dollars

Make sure you don't overlook critical checks when assessing the condition of your prospective property purchase. Avoid legal complications. Stay prepared, get our comprehensive guide.

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What are the common pitfalls happening during a property due diligence in Malta?

After our research and the feedback collected from our local real estate partners, we have written an article about the risks and pitfalls when buying a property in Malta.

In Malta, the due diligence process for residential real estate transactions has its unique risks and pitfalls, especially from a buyer's perspective.

One unique pitfall in Malta is the 'Ground Rent' (ċens) system. Some properties are subject to an annual rent paid to the original landowners. This system is not common in other countries and can be confusing for foreigners.

Buyers must check if the property is freehold (without ground rent) or leasehold (with ground rent) and understand the terms involved.

Foreigners often face risks related to understanding the local property laws and regulations. For instance, there are specific areas in Malta where foreigners can't buy property without a permit.

Additionally, language barriers can lead to misunderstandings in contract terms or legal obligations.

A real-life example could be the purchase of a property within a Special Designated Area (SDA). These are high-end developments where the restrictions on foreign buyers are less stringent.

However, the properties in SDAs are often more expensive, and foreigners might not be aware of cheaper options outside these areas.

Cultural and historical considerations also play a role.

Malta has many ancient buildings and heritage sites. Buying a property that is a part of or close to these sites can bring restrictions in terms of development and renovations. Understanding local heritage laws is crucial.

Regarding the law, Malta's property laws have some peculiarities.

For example, the 'promise of sale' agreement (konvenju) is a legally binding contract that commits both buyer and seller to the transaction, which is not the case in many other jurisdictions. This can be a pitfall if the buyer does not fully understand the commitment being made.

Common pitfalls in contracts include unclear terms about property defects, the transfer of ownership, and penalties for late payments or backing out of the deal.

It's crucial to have all terms clearly laid out and understood before signing.

To mitigate these risks, buyers should engage a reputable notary and possibly a lawyer. These professionals can help navigate the complexities of Maltese property law, translate and explain contract terms, and ensure that all legal requirements are met.

In terms of insurance, building insurance is recommended, especially given Malta's history of earthquakes. Additionally, considering contents insurance is wise, particularly for high-value properties or those with valuable contents.

In case of a dispute, the first step is usually negotiation or mediation. If these fail, legal avenues include going to court.

The Maltese courts handle property disputes, with the 'Court of Magistrates' (Qorti tal-Maġistrati) being the first instance for civil cases. The 'Civil Court' (Qorti Ċivili) handles more complex cases and appeals.

Get the full checklist for your due diligence in Malta

Don't repeat the same mistakes others have made before you. Make sure everything is in order before signing your sales contract.

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This article is for informational purposes only and should not be considered financial advice. Readers are advised to consult with a qualified professional before making any investment decisions. We do not assume any liability for actions taken based on the information provided.