Preliminary agreement — what to watch out for

What a preliminary agreement is

A preliminary agreement is a commitment by the parties to conclude in the future the promised agreement, that is the final sale contract in the form of a notarial deed. It is governed by the Civil Code. Its purpose is to secure the transaction during the period between agreeing the terms and the actual transfer of ownership, which usually lasts from a few weeks to several months, for example while a mortgage is being arranged.

In the agreement the parties settle the most essential elements of the future transaction. Thanks to this neither party can unilaterally change the price or back out without financial consequences.

The form of the agreement and its significance

A preliminary agreement can be concluded in ordinary written form or in the form of a notarial deed. The difference is fundamental. In written form, if the other party evades concluding the promised agreement, the injured party is entitled only to compensation. In notarial form the buyer can demand before a court the so-called conclusion of the promised agreement, that is compel the seller to sell.

The notarial form is more expensive, but in high-value transactions it offers real protection. It is worth considering especially when the property is exceptional and the risk of the seller backing out is high.

Key clauses protecting the buyer

A solid preliminary agreement should precisely describe the property, the price, the deadline for concluding the promised agreement, and the amount and nature of the deposit or advance paid. It is worth including a mortgage-approval condition, which allows the buyer to recover the funds paid if the bank refuses financing for reasons beyond the buyer's control.

It is also good practice to include a clause on handing over the property free of encumbrances and third parties, and on contractual penalties for delay. Before signing, verify the land and mortgage register, check that there is no mortgage, easement or debt.

The most common pitfalls

Typical mistakes include an overly general description of the property, no deadline for concluding the promised agreement, and omitting the mortgage condition. It also happens that the seller conceals encumbrances or ongoing proceedings. Paying a high deposit without checking the legal status of the flat can be risky.

You should also watch out for unfavourable clauses, for example grossly high contractual penalties on the buyer's side or a short, unrealistic deadline for obtaining a credit decision. Every such clause is worth negotiating before signing.

Summary: a safe preliminary agreement

A preliminary agreement is not a formality but a real safeguard of the buyer's interests. Choosing the notarial form, a precise description of the property, a mortgage condition and verification of the legal status are the four pillars of a safe transaction. Devoting time to this stage protects you from losing money and nerves in the months that follow.