From Oi Realtor, as real estate experts, we want to help you make the procedures less difficult. On this occasion, we at nphp.com.pk offer you a step-by-step guide to make the change of ownership of a property. If you need to carry out this management, we recommend that you continue reading.
Changes of ownership of a property are made before the Property Registry where the property is registered. In order to achieve this, you must present the relevant documentation, according to your particular case.
The cost of this procedure will depend on the value of the property. It should be noted that, although the procedure is similar throughout Pakistan, the price you must pay may vary from one autonomous community to another.
If you wish, you can get a quote from the registrar. In general, this operation has four types of costs associated with it:
- Notarial:the cost of doing the deed.
- Fiscal:the payment of the corresponding taxes.
- Registry:the value for making the registration.
- Management:it is not mandatory, you will only have to pay it, in case you want to pay for the processing of the tax and for the registration.
Reasons for making a change of ownership of a property
Buy and sell:
After having acquired a home, the new owners of the property will have to pay for the registration in their name.
The seller is obliged to go to the notary to obtain the deed and request a simple copy of it. With this, the payment of the municipal capital gain is processed.
The person who bought the property will need this simple copy of the deed to make the change of ownership in the Cadastre and in the Property Registry.
Donation:
The beneficiaries and those who donate must go to the notary to obtain the new deeds with the donation transmission.
It is convenient to clarify that donations from parents to children, from children to parents, marriage, grandparents to grandchildren and from grandchildren to grandparents may be exempt from capital gains tax, depending on the autonomous community.
Inheritance:
The heirs have to apply to the notary for the deed of “acceptance of inheritance allowance“. With it, they can go to the Land Registry Office and then to the Property Registry to make the change of ownership.
Expenses that you will have to face when making the change of ownership
In Pakistan, it is not mandatory to make a public deed of the housing transfer operations, however, it is highly recommended. The deed of a home is the document where what has already been agreed in its negotiation is established and has legal and economic scope, and the team of Capital Smart City has made sure that all your deeds are in the correct order so that there may not be any issues in the future.
Due to the importance of this contract between two parties, the intervention of a third party is required to act as a witness. This third party must have impartiality, solvency and legitimacy. You must ensure that the agreement complies with the laws in force and that it respects the rights of both parties. The third party in public deeds, who is jointly liable, is the notary. The notary is a public official.
The notary charges a fee that is set by the Government by Royal Decree, he does not decide how much the cost of his work will be. For this reason, it is the same for all notaries in Pakistan.
The notary fee or fee varies according to three factors:
-The amount of the property in the document.
-The extension of the document.
-The complementary acts carried out.
Notary fees cover the fees, but also constitute a provision to face taxes, registrar fees, and other expenses that are generated and that the notary pays on behalf of the client.
These expenses are included in what is called complementary actions or directed extra-documentary notarial actions. Based on such complementary actions carried out, the Notarial Associations set the criteria to determine the exact amounts to be charged.
When everything is correctly established, the notary must send the agreement to register the property in the Property Registry.
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The change of ownership in the Cadastre is free, as long as it is carried out by the owner of the property. In the event that this change is processed by the notary, it will be an additional expense to be added to the notarial expenses.
Likewise, it is necessary to bear in mind that you will not be able to register the apartment in your name until you have settled the taxes that may apply, as the case may be.
Like the notarial expenses, those of the registries are also governed by law, through the Royal Decree approving the fees of the Property Registrars. The amount that you must pay is calculated on the value declared in the deed. The higher the amount, the lower the percentage.
There are exemptions in the payment of registration expenses, as is the case of officially protected housing.
Documents that you must present in the Property Registry
The registration of a property in the Property Registry requires the presentation of three regulated documents. These are:
-The public deed.
-The Self-assessment Form: document that justifies that the payment of the Property Transfer Tax (ITP) has been carried out.
-The proof of payment of the municipal capital gain.
Registration is done at the Registry office of the town where the property is located, where you must present the documents just mentioned.
Taxes that you must pay before registering the property
In the cases of sale, the taxes that you will have to pay will depend, fundamentally, on whether the apartment is new or second-hand.
If it is a first transfer, that is, of new homes purchased directly from a developer, VAT must be paid. In the case of official protection, public promotion or special regime housing, VAT corresponds to 4% of the notarized price. In the other cases, the VAT reaches 10%.
If it is a second-hand apartment, you must pay the Property Transfer Tax (ITP). This tax varies between 5% and 10% on the deeded value, depending on the autonomous community. Tax deductions may apply for reasons of age, large family or disability.
The tribute of documented legal acts (AJD) taxes all legal documents issued on stamped paper, which are necessary to formalize the sale. Its cost ranges between 0.5% and 1.5%.
In inheritance cases, the Inheritance and Donations Tax (ISD) is paid, which is a tribute assigned to the autonomous communities. In many communities, the amount you will have to pay for a donation is minimal.
The payment of the municipal capital gain also falls on the heirs. In addition, the Tax on Patrimonial Transmissions, and Documented Legal Acts must be paid.
In cases of donation, the Tax on Inheritance and Donations is also paid, but in the Donations mode. Some autonomous communities apply bonuses of up to 99% on this tax.
For the beneficiary, the capital gain that is generated by receiving the donation of the goods is exempt from being taxed in the personal income tax (Personal Income Tax).
Change the name of a property with a mortgage
There is a figure that is unknown to many mortgage holders, it is about subrogation. This mechanism allows you to change the owner of the mortgage, as well as some of the parts of the mortgage contract.
In cases where the sale of a property already mortgaged is carried out, the buyer can subrogate to that loan contract. In this way, a change of debtor is made while maintaining the same bank. It is understood that the buyer accepts the conditions of the mortgage loan that the promoter or the previous owner had. Therefore, the buyer assumes the existing debt.
Surrogacy expenses
Among the expenses involved in a surrogacy are:
-The subrogation commission.
-The expenses of notary, agency and registration in the Property Registry.
Currently, the mortgage law establishes the distribution of payments between the client, who will pay the appraisal of the property, if required, and the bank. The latter will be responsible for the tax of documented legal acts, the first copy of the notary, the expenses of the registry and the agency.
For a property to have legal validity, it is essential that it be registered in the Property Registry just like Blue World City is. For this purpose, you must have the deed signed before a notary public. Carrying out the registration of your property is very beneficial, since in addition to protecting the owner, it also facilitates the transfer of the property and the search for financing.