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A Promise to Sell – An Overview – Part I

by Dr Laura Calleja – Junior Associate

This article is the first part of a collection of articles dealing with the legal issues surrounding the Promise of Sale.

In today’s day and age, the purchase of an immovable property is more often than not preceeded by the signing of a promise of sale, more commonly referred to as the konvenju, between the involved parties. Through this promise of sale one party, the vendor, promises that on the final deed of sale s/he will sell and transfer the property in question onto the other party, the purchaser, who equally promises to accept said transfer and purchase the property at a pre-determined price. Essentially, and as the name implies, a promise of sale is an agreement that outlines in utmost clarity the promises that one undertakes to fulfil.

It follows that once said promise of sale is signed the vendor is legally obliged to sell the property at the pre-determined price to the purchaser who is equally bound to purchase the property, also at the price agreed upon and within the time-frame stipulated in the same contract.

For the promise of sale to be binding and effective, it is imperative that said agreement is registered with the Promise of Sale Notifaction – Inland Revenue Department.

It is common practice that the validity of said promise to sell and to purchase is subjected to a number of guarantees (such as that the root of title of the property in question is good and unequivocal), terms (such as that a bank loan facility can be obtained) and/or conditions (such as that the property in question is covered by all relative building and planning permits). In the event that one of the above-mentioned guarantees, terms and/or conditions comes into fruition, or not, depending on the nature and wording of same, the party in whose interest that clause was drawn up reserves the right to rescind from his or her promise, effectively terminating the agreement.

Every promise of sale, whether it contains an ‘expiry date’ in writing or not, is subject to a time-limit. In the case that said promise of sale is not subjected to a specific expiry date, then the time-limit established by the law, that is, three months from the day on which the sale could be carried out (1), shall apply. On the lapse of these three months the promise of sale agreement shall cease to be effective and thus neither the vendor nor the purchaser would be able to enforce their rights at law. On the other hand, in those cases where the promise of sale contains a specific expiry date, for the promise of sale agreement to be enforceable the final deed of sale and purchase needs to be signed by said date. Naturally, should both parties agree, said expiry date can be extended. For this extension to be effective, it needs to be registered with the Inland Revenue Department in the same manner that the promise of sale agreement is.

What happens however, if a promise of sale is not extended prior to its expiry date or if a party fails to appear for the final deed of sale by the expiry date? The promise of sale shall lapse and it will be rendered ineffective. That said, the law does provide ways and means in which said promise of sale can be extended and the final sale enforced.

Article 1357 (2) of Chapter 16 of the Laws of Malta outlines the procedure that one has to adhere to in order to ensure that the promise of sale is not rendered ineffective. Prior to the lapse of the agreement, the party seeking to enforce the sale must file a judicial letter calling upon the other party to appear for the final deed of sale and thus fulfil the promise undertaken. Should the defaulting party fail to adhere to the intimation presented to him or her, the party interested in enforcing the sale must demand, this time by a sworn application filed in Court within thirty days from the expiration of the promise of sale, that the defaulting party fulfils his or her side of the bargain.

It is only through the application of the procedure outlined in article 1357 (2) of Chapter 16 of the Laws of Malta that one can successfully ensure that the promise of sale remains enforceable and the parties’ rights are protected.

(1) Article 1357 (2) of Chapter 16 of the Laws of Malta

Disclaimer: This article is not to be considered as legal advice, and is not to be acted on as such. Should you require further information or legal assistance, please do not hesitate to contact Dr Laura Calleja on laura@abalegal.eu.