The acquisition of real estate involves a series of legal and practical steps designed to ensure the successful completion of the process and, above all, the purchase of a property free of encumbrances, mortgages, liens, and legal disputes, as well as from an undisputed owner. When purchasing a newly constructed property or an off-plan property, it is essential to ensure, within the permissible legal framework, that construction is completed properly and on time and that the property is handed over.<\/p>\n\n\n\n
The preliminary contract for new construction (apartment, studio, garage, parking space) is essential and necessary, as it defines the process of developing the long-term\u2014in most cases\u2014relationship between the buyer and the seller. The contract should clearly describe and stipulate the rights and obligations of each party, deadlines for the completion of the building and the transfer of ownership to the buyer, the price and method of payment, the degree of completion of the building, penalties for delay and non-performance, and other terms.<\/p>\n\n\n\n
In preliminary contracts for the sale of properties under construction (\u201coff-plan\u201d), payment of the purchase price is spread out over two or more installments, and it is recommended that these installments be tied to the stages of construction. Thus, upon reaching a specific construction stage and the issuance of the relevant certificate (e.g., Form 14\u2014Certificate of Structural Acceptance; Form 15\u2014Certificate of Construction Readiness, and others), payment of a portion of the purchase price is required. This provides the buyer with guarantees that their payment obligation is tied to the development and progress of the construction, and would also serve as an indication of delays in construction work, which may result in penalties for the investor-seller. The preliminary contract is the document that defines these rights and obligations. <\/p>\n\n\n\n
Practice shows that in most cases, when purchasing a newly constructed home, the buyer pays a large portion of the price before becoming the owner of the property and before the building is put into use. This is because the buyer is not only a buyer but also a client. They are purchasing a new construction that is not yet fully built, and construction work must still be performed to complete the building and make it habitable. <\/p>\n\n\n\n
The parties entering into a preliminary contract should be aware that, although preliminary, this contract is legally binding and may be declared final by a court. Pursuant to Article 19 of the Obligations and Contracts Act (OCA), in the preliminary contract the parties to the transaction agree on the essential terms for the performance of the final contract; if one of the parties refuses to conclude the final contract, the other party has the right to file a lawsuit in court to compel its conclusion. In such a case, the final contract is deemed concluded at the moment the court\u2019s decision takes effect. The moment of transfer of ownership will be the date the final court decision takes effect. Ownership of the property passes from the seller to the buyer. Consequently, a court decision declaring a preliminary contract for the sale of real estate to be final has the same legal effect as a notarial deed for the sale of real estate.<\/p>\n\n\n\n
If one of the parties fails to fulfill the terms of the preliminary contract, the non-defaulting party would have the right either to terminate the contract with a penalty (deposit, down payment) or to seek a court order declaring it final, as indicated above. The termination and cancellation of contracts are the subject of another article. Please see the publications in the \u201cArticles and News\u201d section. <\/p>\n\n\n\n
The preliminary agreement must include provisions regarding the essential terms of the final agreement\u2014the parties, subject matter, price, method of payment, and deadline for concluding the final agreement. These essential provisions should be specified in detail or, if the situation requires it, be determinable based on clear criteria.<\/p>\n\n\n\n
A preliminary real estate purchase agreement is a formal transaction, given the requirement of Article 19(1) of the Obligations and Contracts Act for written form; therefore, it must be concluded in writing.<\/p>\n\n\n\n
At the request of the parties and upon the recommendation of an attorney, the contract may be notarized. For more information, please see the posts in \u201cArticles and News.\u201d <\/p>\n\n\n\n
If the buyer wishes to transfer the property they have agreed to purchase to a third party, there are two options: 1. to transfer their rights under the preliminary contract, thereby \u201cselling\u201d the property even before becoming its owner; or 2. after acquiring ownership through a notarial deed (which is the final contract), to sell the property as the full owner under whatever terms they deem appropriate.<\/p>\n\n\n\n
In the first case, the buyer under a preliminary contract may transfer their rights and obligations to a third party of their choice, who will then assume the buyer\u2019s rights and obligations under the preliminary contract prior to the notarial transfer. This substitution of a party to the transaction must be agreed upon by the parties to the contract, and a tripartite agreement for the substitution of a party must then be drafted and signed. In this way, the seller has the assurance that they are transferring ownership on a valid basis and in fulfillment of their obligations under the contract, while the buyer settles their relationship so that any future non-performance by the substituting party does not bind them. <\/p>\n\n\n\n
The Law on Obligations and Contracts distinguishes between subrogation and substitution. A third party may substitute the debtor only with the express consent of the creditor (the seller under the preliminary contract). The substituted debtor is released from liability to the creditor.<\/p>\n\n\n\n
When purchasing an apartment in a building that has already been commissioned, the standard payment schedule for preliminary contracts is 10\/90\u2014that is, the buyer pays 10% of the price upon signing the preliminary contract, and the remaining 90% (with personal funds or through financing). The risk for the buyer is lower in terms of the building being completed properly and on time; accordingly, the market regulates the price based on risks and financing.<\/p>\n\n\n\n
In such cases, if all the necessary documents required by the attorney and the notary public for the transaction are available, and if the purchase price is paid with personal funds, it is possible, at the parties\u2019 discretion, to proceed directly to the execution of the notarial deed. A preliminary contract is not a mandatory element of a real estate purchase transaction. However, if the sale price or part of it is financed by a bank, the preliminary contract is necessary, as the lending bank requires it as one of the documents for granting a mortgage loan. It is the owner\u2019s responsibility to provide the documents for the property.<\/p>\n\n\n\n
The preliminary contract should set forth in detail and comprehensively the rights and obligations of the buyer and the seller, as well as specify the deadline for concluding the final contract, the price, and the method of payment. In addition, it is advisable for the parties to agree on a number of other issues, such as: who bears the costs associated with the notarial deed for the sale of the property\u2014notary fees, registration fees, and local taxes (these may be borne by the buyer\/seller or split between the parties) ; whether there are declarations from the seller, including that they are the sole owner of the property being sold; the deadline for transferring possession and signing a handover protocol for this; in the case of bank financing\u2014the deadline for submitting the documents required by the bank for the loan to be granted, and others.<\/p>\n\n\n\n
The most important thing the seller must ensure is receiving the sale price within the agreed timeframe. For this reason, the buyer\u2019s primary obligation is always to pay the contract price in the manner agreed upon by the parties. It is recommended that the full amount be received by the day of the notarial transfer of ownership. If, however, this is not possible and\/or the parties have agreed otherwise, there are legal remedies available to protect the seller, with a view to ensuring receipt of the sale price after the property has already been transferred.<\/p>\n\n\n\n
Every buyer wants to ensure clear title and unencumbered use of their new property. The preparation phase of the transaction is extremely important for the buyer, as they need to know exactly what they are acquiring. The legal analysis of the property should include: an analysis of ownership, the property\u2019s history, building rights (superficies) on the land, encumbrances (mortgages, liens, registered claims), rights of way and easements, including pre-existing rights and previous owners; the presence or absence of public obligations on the part of the seller, and others. The analysis enables an informed decision and assessment of the terms of the transaction, including during the negotiation process, and ensures<\/p>\n\n\n\n
It is important to note that the parties should have clearly specified whether and at what point the ideal shares of the land adjacent to the dwelling will be transferred to the buyer, and whether the sale price includes their value. <\/p>\n\n\n\n
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