A promise of sale agreement (konvenju) should not be a headache, but it can be if you are not aware of certain pitfalls.

What is a promise of sale?

In a nutshell, a promise of sale is a private agreement that commits the vendor to sell and the buyer to purchase an immovable property at a mutually agreed price.

For the promise of sale to be finalised, and binding, the parties must come to an agreement on several key aspects: the price, the amount of the deposit, the validity period of the promise of sale, and any additional terms and conditions that may apply.

It is common for buyers to feel nervous until the promise of sale is signed. This anxiety is understandable, as the vendor is free to enter into a promise of sale with another buyer until the document is officially signed. Once the promise of sale is executed, it effectively seals the sale, and the property should be removed from the market.

Who chooses the notary?

To formalise the promise of sale, an appointment is typically set with a notary chosen by the buyer. The notary plays a crucial role in drafting an agreement that accurately reflects the terms and conditions agreed upon by both parties.

Although the notary is appointed by the buyer and their fees are covered by the buyer, it is important to note that the notary remains impartial and cannot provide legal advice. Instead, they can explain the legal implications of the promise of sale. If any disputes arise during negotiations or before the signing, the notary does not take sides, and the parties are directed to appoint their own separate lawyers.

Understanding ground rent to avoid nasty surprises

To ensure a smooth process, vendors should always bring a copy of their contract of acquisition when meeting the notary. This allows the notary to review the contract before signing the promise of sale, helping to avoid any unpleasant surprises.

What do I mean by unpleasant surprises? A contract of sale typically includes a detailed description of the property, including its official door number and, if applicable, the boundaries of the property. Furthermore, it should specify whether the property is subject to ground rent.

It is vital to understand what you are signing

Unfortunately, when a notary asks a vendor if the property is subject to a ground rent, many fail to make a distinction between a temporary or perpetual ground rent.

Perpetual ground rents burden the property indefinitely but can usually be redeemed by capitalising the amount by five per cent.

On the other hand, temporary ground rents are not redeemed easily or cannot be redeemed at all. So it is always better and fairer on the purchaser to know, before signing the promise of sale, whether the property is subject to a ground rent that cannot be redeemed.

Key elements of a promise of sale

Apart from the description of the property and whether the property is subject to a ground rent or not, the notary will include several important elements in the promise of sale:

◾ The price of the property established by the parties.

◾ Whether a deposit is being given on the promise of sale, and if so, whether it is going to be handed over to the vendor or be held by the notary with conditions for release upon the final contract.

◾ The validity period of the promise of sale.

◾ Whether the promise of sale is subject to any other terms and conditions, such as conditions related to securing a bank loan for the purchase.

Final considerations

It is important to keep in mind that all the terms and conditions included in a promise of sale bind both parties on the final contract of sale. Any changes to these terms can only be made with the consent of both the purchaser and the vendor.

It is vital to understand what you are signing, as the implications of signing an unclear or poorly explained document can lead to future complications; and that is when the headache begins. However, if the process is handled smoothly, the promise of sale can bring relief and assurance to both parties.

The information presented in this article is provided by the Notarial Council for general information purposes only – for legal or professional advice contact your notary. If you have any questions you wish to ask the Notarial Council of Malta, send any e-mail to notariesofmalta@gmail.com.