The laws governing the purchase and sale of property in Gibraltar follow the Law of Property in the United Kingdom (pre-1925) for unregistered land. Transactions are carried out by way of the production of original title deeds to the property.
Once a purchaser has an idea of how much can be spent on a property, it is a question of finding a suitable property. Purchasers should make enquiries with estate agents, as well as perusing private advertisements in local publications. A reservation deposit of 2% is usually paid over to the agent or stakeholder, once a purchaser finds a property they would like to purchase.
If a purchaser needs financing in order to assist with the property purchase, it is wise to arrange a consultation with a mortgage lender to enquire as to how much can be borrowed and what options or products are on offer.
At this point, the purchaser should instruct a lawyer to deal with the legal side of the transaction. The lending institution will usually also instruct the same lawyer to prepare all the documentation in respect of the lending. Both lawyers to the transaction will receive a memorandum from the agents, giving details such as names, prices, and confirming legal representatives. The purchaser’s lawyer will then contact the vendor’s lawyer in order to obtain copies of title deeds for the property. These have to be checked in order to ensure that the purchaser will be getting good title to the property. Getting good title to a property means that nobody else has any claim whatsoever in respect of the property. It is advisable at this time for the purchaser’s lawyer to carry out a property search with the land registry in order to confirm that the title deeds provided tally with the documents which have been registered, and to make sure that there are no further charges which might not have been disclosed.
The purchaser’s lawyer will then send Preliminary Enquiries Before Contract to the vendor. These cover a number of aspects in relation to the property, and the vendor is under a duty to disclose any information which might affect the property adversely. The vendor will have a duty to provide information that is correct; should any of the information provided not be accurate, there will be room for a claim to be made of the vendor by the purchaser.
Once the purchaser’s lawyer is satisfied that the purchaser’s interests are fully protected, the vendor’s lawyer can proceed to draft a Purchase Contract to be signed by both the purchaser and the vendor. Once the contract is signed and exchange has taken place, both the purchaser and the vendor will be bound to proceed with the transaction on the terms and conditions of the contract. This will specify the price, the completion date, and what items are to be included in the sale (fixtures and fittings, etc). The contract will also specify what penalties there are for the purchaser and the vendor should either one of them not proceed to complete the transaction as per the contract. It is also standard practice for a total of 10% of the purchase price to be paid by the purchaser into the vendor’s lawyer’s bank account upon exchange of contracts (this sum normally includes any reservation deposit which might have been paid by the purchaser to an estate agent).
The purchaser’s lawyer will then, depending on whether the property is freehold or leasehold, draft a Conveyance or a Deed of Assignment for approval by the vendor’s lawyer. This is the document which passes legal title of the property from the vendor to the purchaser. It is important that this document is carefully and correctly drafted, otherwise the purchaser might not obtain good title to the property, meaning that their ownership of all or part of the property or the rights appertaining thereto might be defective.
Once this document is approved and lending facilities are in place, the purchaser and the vendor can then agree on a completion date. On completion, the relevant Deeds will be signed by both the vendor and the purchaser. The vendor will then hand over all keys and original title deeds to the purchaser, and the purchaser will pay the balance of the purchase price now due.
Legal fees are normally charged on a sliding scale, although these may be reviewed depending on the complexity of the transaction or the amount of work involved should this be more than normally required. Further costs which will have to be met are stamp duty and registration costs for the Deed of Assignment or Conveyance, and the mortgage should the purchaser be obtaining financing to assist with the purchase. The rates payable as stamp duty have recently been amended, and can be found in the Stamp Duties Ordinance. The new rates are as follows:
a. On Assignments or Conveyances:
i. Where the value of the property is less than £160,000 – 0% of the purchase price;
ii. Where the value of the property exceeds £160,000 but does not exceed £250,000 – 1.26% of the purchase price;
iii. Where the value of the property exceeds £250,000 but does not exceed £350,000 – 1.6% of the purchase price;
iv. Where the value of the property exceeds £350,000 – 2.5% of the purchase price.
b. On mortgages:
i. Where the sum borrowed does not exceed £200,000 – 0.13% of the sum borrowed;
ii. Where the sum borrowed exceeds £200,000 – 0.2% of the sum borrowed.
Stamp duty also has to be paid on counterparts of each document (£5.00 per document), and payment must also be made to obtain the Commissioner of Stamp Duties’ certificate to confirm that the correct duty has been paid (£1.00 per document to be stamped).
The documents must also be sent for registration with the land registry (£52.00) and with the Supreme Court (£20.00 - £40.00).
Each transaction obviously has its own merits, so it is difficult to say how long any transaction is likely to take. An average timescale can be around 6 – 8 weeks, although transactions can sometimes be completed in as little as 2 weeks. Conversely, some complicated transactions can take much longer.