In addition to formalising the deed of sale, the notary guarantees the quality of the piece of real estate and offers impartial advice to the buyer and the seller. Read on to hear the story of Paul, who has just found the perfect home.
After months of searching, Paul has finally found the house of his dreams. Located in a quiet neighbourhood in Mersch, the property ticks all the boxes for his small family and is within his budget.
Now, the family has obtained all the necessary information about the characteristics of the property (surroundings, energy performance, etc.) and the formalities have been agreed with the seller, and the preliminary sales agreement (compromis de vente) can be drawn up. Although this document is not compulsory in Luxembourg, one is usually drawn up in order to seal the deal and offer the buyer and seller mutual protection against the other party pulling out. At this point, Paul needs to pay a visit to the notary.
Why go to a notary?
Legally, a notary must be involved in the sale of a property. The notary is responsible for drawing up and formalising the deed of sale, and one notary is sufficient for the two parties. They also perform all the necessary checks to ensure a proper sale, offer impartial advice and assist the parties.
The notary is responsible for checking that the sale price is sufficient to cover all debts.
myLife spoke to Maître Danielle Kolbach, a notary from Redange-sur-Attert, who will explain to Paul exactly what her role is in the property transaction.
The notary guarantees the quality and ownership of the asset
The notary plays the role of guarantor. They perform all the mortgage searches enabling them to verify the quality of the real estate asset (house, apartment, piece of land, etc.). This is an essential task, because they check whether the seller has full ownership of what they want to sell and whether the asset is mortgaged or has easements, lease agreements, etc. Paul wouldn’t enjoy finding out that there is a mortgage registered against his brand new house after he’d bought it!
“Clients contact me once the preliminary sales agreement has been signed,” explains Kolbach. “That’s when I begin my searches. I send them a questionnaire to fill in and then I conduct mortgage searches to find out if there are any debts registered against the asset being sold. I contact everyone on a list of creditors, such as the mortgage office, but also the senior creditors not registered with the mortgage office, i.e. taxes, VAT, social security, municipal charges, etc. The notary is responsible for checking that the sale price is sufficient to cover all debts.”
Once they have checked that Paul’s chosen house is free of any mortgage charges, the notary must ensure that the owner is indeed entitled to sell the property.
Ownership of the asset
“We have to do an ownership search,” Kolbach continues, “to verify that the seller is indeed the owner. If the seller is married, we need to check the marriage contract: are the two spouses joint owners? If not, does the other spouse still need to authorise the sale? Is the property under common ownership (are there several owners)? I also have to check the occupation rights: is there a usufructuary or a bare owner? I check that there is no pre-emptive right (certain subjects given first refusal to purchase the asset), rights of way or easements, or right of emphyteusis (where the owner of the building is different from the owner of the land),” Kolbach clarifies.
Once these checks have been carried out, and there are enough funds to cover debts and charges, the notary can draw up the deed and make the payment. They then take care of all the formalities of sale: registering the deed, paying the stamp duty, recording the sale with the mortgage office, etc.
The searches performed by the notary’s office give Paul a vital and official guarantee that he is purchasing a legally sound property with no mortgage or hidden debts. It should be noted that the required searches and authorisations are different in the case of an off-plan sale, or vente en état futur d’achèvement (VEFA).
The consequences of purchasing a real estate asset are different depending on whether the couple is married, in a civil partnership or merely co-habiting.
An objective adviser
The notary also acts an adviser to their clients: “This takes place on several levels,” Kolbach explains. Some clients come to see us in advance to know when is the best time to sell. Then there’s the raft of advice regarding the marital status of the couple: the consequences of purchasing a real estate asset are different depending on whether the couple is married, in a civil partnership or merely co-habiting. We also offer advice regarding tax law: are they entitled to a tax credit? How do real estate capital gains work? And so forth. Lastly, if there is a mortgage-related problem, we advise the buyer and seller on the various options open to them.”
As you can see, Paul should have no qualms about asking any questions he may have – he wants absolute clarity regarding his property purchase!
The involvement of a notary may be a legal requirement, but Paul is still worried about the fees he will incur. What exactly are they?
“Notary fees are generally paid by the buyer,” Kolbach explains. “The rate is set out in law. It is proportional and regressive.”
The fees encompass three separate elements:
- Taxes payable to the State
The notary collects from Paul any taxes payable to the State. They serve as an official intermediary. As part of his property purchase, Paul must pay stamp duty and registration fees to the Luxembourg Registry (7% of the value of the asset), value added tax (VAT) and transfer taxes.
- Reimbursement of expenses incurred for searches
The notary incurs fees for accessing the information they need in order to conduct their searches (land registry excerpts, mortgage guarantees, administrative documents, etc.). These expenses, which are essential to complete the transaction, are included in the notary’s fees.
- Notary’s own fees
This is the actual remuneration of the notary and their office. The amount is fixed under Luxembourg regulations. Find out more about fees on the website of the Board of Notaries (Chambre des notaires).
Is there any way of reducing the notary fees?
Since the house Paul is buying will be his primary residence, he is entitled to a tax credit on the notarial deeds – if he wanted to rent out the house, he would not be entitled to it. This tax credit, known as Bëllegen Akt, applies to the stamp duty and registration fees and represents a rebate of €20,000 per buyer on the value of the asset, with a minimum payment to the Luxembourg Registry of €100.
Paul notes that beyond being a legal requirement, the involvement of a notary is crucial to ensure that a real estate transaction goes smoothly. Paul can also turn to the notary for objective, impartial advice, safe in the knowledge he is complying with the law.
Looking for a notary? If your chosen property is in Luxembourg (regardless of where the seller and buyer are based), you can call on the services of a Luxembourg notary. For a list of notaries in Luxembourg, see the Board of Notaries website. Good luck!