The need to know guide for buying property in Gibraltar

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By Sarah Bray, Partner and Katrina Isola, Associate, ISOLAS LLP

Anyone can buy a property in Gibraltar which is on the open market. However, there are certain properties that belong to a restricted market known as the 3-year residency rule.

1. What is the 3-year residency rule in Gibraltar?

Certain properties in Gibraltar are only available for purchase by those who have been living in Gibraltar for a continuous period of 3 years. These properties may only be occupied by the owner and family and cannot be rented out. They are not suitable for buy-to-let investors.

2. Can I buy my property in the name of a company?

Yes, you can buy property in the name of a company, whether the company is incorporated in Gibraltar or outside of Gibraltar. Property owned in a company name is still subject to tax and you should obtain tax advice at the point of purchase, which we can assist with.

3. What should we consider before starting our property search?

There are many things that one should consider before starting their property search. We consider the following to be some of the most important:

  • budget and financing plans;
  • type of purchase: off-plan / re-sale / buyto-let;
  • whether the intention is to live in the property, rent out or sell on;
  • mortgage plan;
  • location of property;
  • parking access;
  • residency requirements;
    future construction around the property;
  • planning restrictions; and
  • housing rules (such as pets).

4. What is the purchasing process?

This is a very broad question and can have a number of different answers depending on the type of property, for instance, whether one is interested in an off plan, government and/or the open market and whether a property is being purchased with the assistance of a mortgage or not. Therefore, a brief summary of the standard process with regards to a standard purchase and sale is more suitable:

The standard purchase process in Gibraltar begins with the agents issuing a memorandum of sale to the respective lawyers whereby usually a 2% refundable deposit is payable to reserve the property on a ‘subject to contract’ basis. Thereafter the Purchaser’s lawyer submits pre-contract enquiries to the vendor’s lawyer which will contain various questions about the property such as: the items to be sold with the property (if any), exchange and completion dates, service charges, rates, information with respect of a management company, whether the property has suffered any water ingress and whether there have been any alterations made to the property etc.. The Purchaser’s lawyer will review copies of the original title deeds forwarded by the Vendor’s lawyer to ensure good root of title and the lawyers will draft, review and approve all relevant documentation necessary for the purposes of exchanging contracts and thereafter completion.

Exchange of Contracts can either occur prior to completion or on the same date as completion. Usually, a percentage of the purchase price is paid at the time of exchange of contracts by the Purchaser to the Vendor. Once exchange of contracts has taken place the parties are under a legal obligation to complete the transaction on the agreed completion date in accordance with the terms of the agreement.

Should the Purchaser be buying with a mortgage, the Purchaser’s lawyer or bank’s lawyer (as the case may be) will prepare the deed of mortgage, liaise with the bank and prepare a report on title and request for funds in order to ensure that the mortgage funds are transferred on the date of completion.

The vendor’s lawyer will also prepare a completion statement which will apportion rates and service charges to the date of completion depending on whether these have been paid up to date or not. Once the completion statement has been approved by the respective lawyers, the Purchaser’s lawyer will request the funds for the purposes of completion. This will include (but will not be limited to) registration costs, stamp duty costs and management company/lessor approval fees.

On the date of completion, the relevant deeds are to be executed by all parties and monies transferred from the Purchaser’s law firm’s client account to the Vendor’s law firm’s client account to be held in escrow pending completion. Once the Vendor’s lawyer confirms safe receipt of monies and receives the fully executed deed, they would release the title deeds and any related documents to the property to the purchaser’s lawyer, completion is said to have taken place and keys are released to the Purchaser as new owner.

5. What is Conveyancing Property law?

Conveyancing Property Law is the legal transfer of property from one person to another.

6. What is a Memorandum of Sale?

A memorandum of sale is a form which records the details of the sale. These details include, but are not limited to: purchase price;

  • property address;
  • deposit paid by purchaser to the agent;
  • vendor’s name, address, phone number, lawyer details;
  • purchaser’s name, address, phone number, lawyer detail; and
  • any other agreed terms.

7. Will my bank outside of Gibraltar give me a mortgage on a Gibraltar property?

It is possible for a non-Gibraltar lender to take security over a Gibraltar property. However, it is rare. The majority of mortgages on Gibraltar properties are from banks/ branches situate in Gibraltar.

8. Can you help me obtain a mortgage for a Gibraltar property?

In order to start the process of obtaining a mortgage, the initial application would need to be made yourself, there are a number of reputable banks here in Gibraltar, all of whom we work with and would be happy to introduce you to. We would then handle the legal work once you have a facility letter in place from the bank you have chosen.

If you are purchasing a property with a mortgage here in Gibraltar, we can assist by drafting the Deed of Mortgage and liaise accordingly with the bank and the Land Registry. Should you wish to sell a property of which you have a mortgage over that property, we can assist by drafting the Deed of Release of Mortgage and liaise accordingly with the lawyer for the Purchaser, representatives of the bank and the Land Registry, where necessary. We can also assist should you wish to up-stamp/obtain a further advance in respect of your existing mortgage.

Stamp Duty payable on mortgages or further advances secured in Gibraltar are at the following rates:

  • Mortgage amount of £200,000 or less at 0.13%;
  • £200,001 or over at 0.20%; and
  • Releases of Mortgage are calculated at 0.03% of the original amount borrowed.

9. What is Stamp Duty payable on?

Stamp Duty Land Tax is the tax that the government charges when an individual or company purchases a property. It is payable at the following rates:

(i) 0% where the value of the property does not exceed £200,000;

(ii) 2% on the first £250,000 and 5.5% on the balance, where the value of the property exceeds £200,000 but does not exceed £350,000; and

(iii) 3% on the first £350,000 and 3.5% on the balance where the value of the property exceeds £350,000

Effective from the date of the Gibraltar Government’s Budget speech, on the 11th of July 2023, first or second time buyers in Gibraltar are exempt from paying Stamp Duty where the value of the purchase price does not exceed £300,000 (this excludes companies). Therefore, for first or secondtime buyers in Gibraltar, the following rates would apply:

(i) 0% on properties up to £300,000;

(ii) 5.5% on properties valued between £300,001 and £350,000; and

(iii) 3.5% on properties valued over £350,000

The 2023 Gibraltar Budget Speech also confirmed that the stamp duty payable on property purchases over £800,000.00 would increase from 3.5% to 4.5%. This change has not yet been implemented but is expected to do so in 2024.

Stamp duty on releases of existing mortgages are calculated at 0.03% of the amount borrowed.

10. Any extra costs to be aware of (in addition to stamp duty)?

Some of the costs that clients will be required to meet and should therefore keep in mind are:

  • registration costs in registering property deeds at the land registry;
  • property searches;
  • sealing fees; and/or
  • management company and/or lessor approval fees.