Purchase contract for real estate (and its requisites)
The most fundamental document when selling real estate is, of course, the purchase contract. It is the most important step in gaining ownership of real estate.
The transfer of ownership of real estate (apartment, house, land, etc.) on the basis of a purchase contract is generally regulated by the Civil Code No. 89/2012 Coll. (CC). Other specific requirements for the content of the purchase contract are further regulated by the Cadastral Act No. 256/2013 Coll. (CA), in connection with § 1105 CC, according to which the immovable thing is acquired by registration in the real estate cadastre, within the administrative (insert) proceeding.
It is important to mention that just signing the purchase contract and paying the purchase price does not transfer ownership of the property to the new owner (buyer). This legal fact occurs only at the moment of registration of the new owner in the real estate cadastre. It is therefore appropriate to state in the purchase contract its date (it is part of the signature verification) and to add an agreement on the conditions and consequences of possible invalidity of the purchase contract and sanctions for breach of obligations under the contract.
The purchase contract for real estate must always be in writing, otherwise it is invalid.
The purchase contract according to the Civil Code must also contain the necessary essentials, which are:
1) identification of the contracting parties (seller and buyer)
2) identification of the subject of the transfer - real estate (apartment, house, land, etc.)
3) determination of the purchase price
4) signatures of the participants.
It is not necessary to specify other conditions and arrangements in the contract - the law does not impose this, but it is usually very useful, as the parties clearly determine in advance how to proceed with the sale. This will rule out possible future disputes related to this.
Other conditions and arrangements (i.e. non-essential requirements) of the purchase contract may include in particular:
conditions for payment of the purchase price (e.g. to ensure a certain quality of the transferred property) and the method of payment of the purchase price (when and how)
detailed specification of any property defects
specification of the method and date of handing over the property (especially the house or apartment)
conditions for termination or possibility of termination of the contract (expiry of time, withdrawal, termination, cancellation, etc.)
contractual penalties for breach of duty by one of the parties, severance pay, etc.
Essentials of the purchase contract
1. Identification of the contracting parties (seller and buyer) - § 14 CA
Natural person: name, surname, date of birth, or birth number, address of permanent residence, if not, then address of residence
Legal entity: name, registered office and identification number.
It can be recommended that within the specification of the participants in the contract it is stated who is the seller and who is the buyer, although the mutual position of the participants can be logically deduced from the entry in the real estate cadastre and the content of the contract.
2. Identification of the subject of the transfer - § 8 CA
In the case of an apartment unit, it is necessary to state:
unit number and its name (apartment unit)
designation of the building in which the apartment is located, a descriptive or registration number and the affiliation of the building to a part of the municipality, if the name of the part of the municipality is different from the name of the cadastral area in which the land (on which the building is built) is located.
designation of the land on which the building is built.
specification of shares and designation of any surrounding land that is associated with the ownership of the apartment unit.
cadastral territory, cadastral office.
information on whether the unit was created in accordance with the Flat Ownership Act, which is no longer effective today, or whether it was created in accordance with the new Civil Code. (If it was created under the Flat Ownership Act, it is necessary to specify the amount of the share in the common parts of the building and the share in the land. If the apartment has already been created in accordance with the new Civil Code, these shares do not have to be stated and ownership of these shares is automatically transferred with the transfer of the housing unit. In reality, however, the shares in the common parts of the house / land are stated in the contract both in the case of the transfer of a unit created under the Apartment Ownership Act and in the case of a transfer of a unit created under the new Civil Code.)
It is also possible to specify common parts of the building in the contract. These parts are listed in the owner's declaration. The future owner has such a clear idea of what is his sole property, i.e. what is part of the apartment and what is not. Repairs to common parts of the building are financed not directly by the owner of the unit, but from a common repair fund, to which the owner contributes according to the size of his unit.
In the case of transfer of other real estate (especially land, house), the designation of the relevant real estate is given in a similar way and to the extent corresponding to such real estate, as follows from the description of the scope in the case of apartment unit (designation of land, designation of building and land on which it is located, etc.).
Especially for apartments, the specification of the subject of the transfer is therefore relatively demanding. Therefore, it can only be recommended to have such a contract written by an expert. Even a relatively small error in the specification required by law may mean the rejection of a proposal for a registration in the real estate cadastre and thus the non-execution of the transfer of ownership.
3. Purchase price
The purchase price must be expressed in money by a certain amount or at least the method of its determination must be agreed.
However, there are also opinions to which I join, according to which the determination of the purchase price is not an essential / mandatory requirement of the purchase contract and does not have to be stated in the purchase contract. The amount of the purchase price and its payment can therefore be agreed, for example, in a separate agreement. However, if there are no serious reasons for excluding the purchase price from the contract and for its arrangement in a separate agreement, I recommend that you state the purchase price directly in the purchase contract.
4. Signature of contractual parties and date
In order for the purchase contract to be valid and effective, it must be signed by all participants and dated. On the contract, which is submitted to the cadastral office, the signatures of the participants must be officially verified.
Non-essential (optional) requisites of the purchase contract – i.e. they may or may not be in the contract
5. Method of payment of the purchase price
It is always recommended to arrange a detailed procedure for payment of the purchase price by the buyer, i.e. whether to pay the purchase price in cash or by transfer, from own resources or from a mortgage loan, whether to pay the purchase price directly to the seller's account or through custody (bank, law, notary etc.), in installments or at once and especially until what date.
6. Possibility of withdrawal, contractual penalty
The possibility of withdrawing from the purchase contract is generally governed by the Civil Code. The general reason for withdrawal stated there is only a material breach of contract, which is most often the non-payment of the purchase price or a material defect of the subject of the transfer (of which the buyer was not aware of). For the avoidance of doubt, the possibility of withdrawal is often explicitly agreed in case the buyer does not pay the purchase price properly and on time or if the seller encumbers the property with a right in rem, etc.
However, the contracting parties may agree on specific cases of obligations or other conditions / options under which it is possible to withdraw from the purchase contract. It is usual to agree in the contract on the possibility of withdrawal in the event of a breach of certain obligations of the parties (e.g. the provision of certain documentation, cooperation, etc.)
Furthermore, it is appropriate and usual to arrange possible contractual penalties for possible breach of the agreed obligations by the buyer or seller.
7. Declaration of possible defects
If the seller is aware of any defects in the subject of the transfer, it is appropriate to specify in the purchase contract all such defects, both legal and factual. Legal defects are, in particular, liens, encumbrances, rental rights, etc. Actual defects are technical defects, such as cracked masonry, wet plaster, leaking roof, non-functional heating, etc. The significance of these statements lies in the fact that if the owner notifies in advance buyer for all defects and especially hidden ones, the buyer can not subsequently object to these defects and demand their removal, discount from the price or withdraw from the contract.
8. Handover of real estate and related documents
The date of handover of the property to the buyer should also be agreed in the contract. When handing over the real estate itself, it is advisable to sign a handover protocol stating what the seller hands over to the buyer, i.e. in addition to the real estate, e.g. keys, internal equipment, inspection reports, construction documentation, manuals, etc. as a basis for billing and their transfer to the buyer.
In general, if both parties respect and comply with their obligations and fulfill the agreed conditions, written contracts are not required, but for the transfer of real estate the law always requires a written form. In addition, it has been proven many times that if all the conditions relevant to the parties to the contract are written down in detail and in good quality, the relationship and expectations are clear and transparent in advance and the risk of possible misunderstandings and disputes is significantly minimized.
The Civil Code (or another legal regulation) does not specify the exact wording or limit of the scope of the purchase contract. The contractual freedom of the parties gets priority. It is thus possible to negotiate a contract to almost any extent. Even if you have considerable experience with the sales process and sample wording of documents, we recommend contacting experts when creating a purchase contract, at least in order to check the wording of the prepared text of the contract. Not everyone realizes that in the extreme cases, the cost of several thousand for the services of an expert can save tens or hundreds of thousands.
Sample purchase agreement:
Attention: this is an exemplary document, so it may not correspond to the circumstances of your case. Therefore, we strongly recommend that you always use the services of a legal advisor.
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