There is a practice in Malta that is affecting both foreigners and locals alike. A couple will buy a house. They go through the correct legal procedures to make sure everything is above board: they instruct a notary; they pay their deposit; they commission the searches; they complete the purchase and settle the required Stamp Duty and Notary’s fees. They move into their cosy nest and live happily ever after. Right? Wrong.
A bombshell may be dropped through the letterbox onto their “Welcome” doormat within a matter of weeks. It is a letter from the Tax Department advising them that a surveyor will be calling to value their house and ensure they paid enough for it. It does not matter that they invested every last cent to pay for this home. A stranger will have the final say.
So what? If you have paid the market value, there is nothing to worry about. Wrong again. Here are two cases in point.
One couple paid approximately €180,000 for a property. The surveyor decided it was worth €230,000. They took up their right to appeal and presented all their documentation, plus letters from four local estate agents confirming that the current sale price of similar properties in that area was between €170,000 and €190,000. The appeal was rejected and they were forced to pay Stamp Duty on the additional €50,000, plus that same amount again as a penalty for non-disclosure.
Another lady bought a house for herself and her son. She paid €60,000 for what was basically a shell. She then spent the remainder of her savings, €25,000, on the installation of a shower room and W.C, steel reinforcement of the floor, floor tiles and repairs to the brickwork. This work was completed before they moved in because the house was at that point uninhabitable and obviously not a safe environment for her young son. The surveyor arrived and said she should have paid at least €80,000. She pointed out the work she had commissioned and his reply was along the lines of “prove it”. She now faces additional Stamp Duty of €750, plus the 100% penalty, so must pay a total of €1,500. The mother’s dream of buying a small house where her son could finally have his own bedroom instead of a windowless box room was shattered.
The apparent logic behind this is that the valuation is based on the “future” potential of the site in question. All well and good, except it doesn’t quite make sense in the above examples. The first couple’s premises were ground floor with overlying properties. They would be unable to develop it into anything without demolishing the entire block so what “potential” is there? The lady and son’s house consisted of three rooms, a bathroom and the roof. Yes, if the footprint was 2,000m2 she could perhaps in future level the lot and build a palazzino or incredible modern building with designer penthouse. Except the footprint of the house is 5m2. Yes, literally, three rooms, one on top of the other, each 24 square feet, including the stairwell. All she could hope to build is a designer lift shaft.
It seems that everyone in Malta is a suspected developer, ready to demolish houses full of character simply to make a quick buck building boxy little apartments and selling them on. What about the “normal” people who work hard, save their money and simply want to buy a home? So here is the question. Upping valuations on the basis of “just in case” may seem logical to the Tax Department, but is it right?