Buying property in Belgium is a two-step process.
When the buyer and the vendor agree on the price, they sign a "compromis" a couple of months later, they meet again with the notary to sign the official deed.
It is a common mistake to think that the compromis is just a temporary agreement that has no legal effect.
Between buyer and vendor, the deal could be done with a simple handshake. An oral agreement is perfectly valid, but it may be difficult to prove what you have agreed exactly. And that is why the estate agent will insist you fill out and sign a written agreement, the compromis de vente.
The compromis has a set of standard conditions. E.g. it is standard practice for the buyer to pay an advance of ten percent of the sales price. The compromis will state that he loses the advance if he gets out of the deal. And if the vendor does not sell, he has to pay back the advance with a penalty of ten percent. The vendor and the agent may not like it but you should never pay the advance to the vendor. Instead, pay it into the bank account of his notary.
Before signing, read the compromis. You may want to make some changes or additions.
As a buyer, you may want to put in a provision that you can drop the deal if the bank does not give you a loan within, say, four weeks. That is perfectly acceptable.
On the other hand, you may want to agree that you will be going to the notary within two months instead of four months. That could convince the vendor to sell to you rather than to someone else.
As a buyer, you are not obliged to sign the deed with the vendor’s notary; you can appoint your own notary. There is no extra cost; the notaries split the fee. It can never do any harm to have your own notary read the compromis before you sign it. He may want to put in a clear explanation of the position of a sitting tenant, a reference to the zoning and environmental rules and make the vendor promise that there are no problems in that respect. It is always better to anticipate hitches that could be lead to lengthy court battles.
While he prepares the deed, the notary has to check the legal status of the property. That is done in the mortgage register, who is registered there is the legal owner. In Belgium, we do not keep all the title deeds. If you can prove who owned the property in the last thirty years ownership is sufficiently proven. That is why each sales deed lists the successive owners thirty years back. The original deed stays with the notary; you just get a copy.
The notary also checks that there are no environmental or zoning restrictions. He also asks the tax man and the manager (syndic) of the apartment building whether and whether the vendor owns them any money. The notary can deduct these from the sales price. All this work explains why he needs a minimum of about six to eight weeks.
If you need a loan, the bank manager will normally come to the notary’s office to take out a mortgage on the property before you even sign the purchase deed. He will then hand over to the notary a cheque for the amount borrowed.
The notarised deed must be signed within four months because that is when the notary must register the deed with the Ministry of Finance, and pay the registration tax. It is only after that is done that he can get the sale, and the mortgage, transcribed in the mortgage register. That makes you the legal owner.
In Belgium, stamp duty or ### purchase tax is a registration tax; it is due when the deed is registered. The rate is 12.5 % (10 % in Flanders) of the purchase price. If that price is less than the market value, the tax is nevertheless due on the market value. In Brussels, registration tax is not due on the first €60,000 if you are planning to live in the property; in urban renovation zones, that exemption is €75,000.
If you buy off plan from a property developer, it is not registration tax that you pay but VAT at 21 %. You may be asked to buy the land from another company; that may save tax, because on the land you pay the registration tax and at 12.5 % or 10 % that is much less than VAT at 21%. If you buy the land from the developer, 21 % VAT is due on the total value.
The notary will remind you that you are not to pay part of the price in the black. Everyone will smile knowingly, but what he does not tell you is that the penalty is high: both parties incur a penalty equal to the evaded registration tax. The notary’s fees come on top of that ; they are calculated at degressive rates between 4.56 and 0.057 per cent The total cost is usually about 115 to 117 per cent of the purchase price.