In cases where the buyer and the seller of the property are either not ready or simply do not wish to immediately enter into the property purchase contract, they have the option to enter into a preliminary agreement. By signing the preliminary agreement, the buyer does not become the owner of the property, and the seller does not receive the price; they simply confirm their intention to conclude the final purchase agreement in the future, with the terms and conditions provided in the preliminary agreement.
It is important to know that the preliminary agreement and the main property purchase contract are two different contracts. The preliminary agreement is an independent and self-sufficient contract, which determines the essential elements of the property purchase contract to be drawn up, such as the property, the price, the time of conclusion, etc. However, there are certain issues that you should pay attention to when signing a preliminary agreement:
Property Title and Encumbrances: Before signing a preliminary agreement, it is essential to verify that the seller indeed has the right to sell the specific property and that there are no encumbrances or disputes regarding the property title. If the property is owned by more than one person, all of them or their legal representatives must participate in the signing of the preliminary agreement.
Type of Preliminary Agreement: According to the Civil Code, the preliminary property purchase agreement is subject to the same type as the main contract, meaning that compliance with the type of notarial deed is required. This type is constitutive, and if not complied with, the preliminary agreement is entirely void and considered as if it did not occur, while any monetary amounts paid as earnest money are refunded according to the provisions for unjust enrichment.
Engagement: The preliminary agreement may specify the amount of the earnest money. It is important to know that the role of earnest money is to secure the obligation of the parties to conclude the main contract and not the transfer of the property or payment of the price for it. The seller is obligated to transfer the property only after the signing of the main contract. It is also very important to agree on all terms for the return of the earnest money, in case the transaction does not take place for any reason.
Obligations of the parties: By signing the preliminary agreement, the parties may undertake certain obligations. For example, the seller may undertake the obligation not to exhibit or sell the property to other buyers for a specified period of time.
Terms and conditions of the final contract: The preliminary agreement may specify the terms and conditions under which the final contract must be completed and the terms under which it may be terminated.
Housing loan: If the purchase of the property is financed by a housing loan, it is worth discussing the terms and conditions of the financing, as well as the possible complications with the bank, before signing the preliminary agreement.
Dispute resolution: The preliminary agreement may include terms for resolving disputes in case of disagreements. If you are a prospective buyer of a property, it is important to take into consideration all of the above and proceed with the signing of the preliminary agreement carefully, as you risk losing the deposit amount. For this reason, before signing the preliminary agreement, we recommend consulting with a lawyer specializing in real estate matters to ensure that all terms of the preliminary agreement are clear, agreed upon, and protect your interests!