Preliminary agreement — what to watch out for
The preliminary agreement is the most important document at the early stage of buying property. It settles the price, the deadline and the conditions under which the final transaction will take place. Mistakes made at this stage can cost the buyer the loss of a deposit or of their dream flat.
In this article we explain which elements must appear in the agreement, which form offers the strongest protection, and what to look out for before you sign. A well-prepared preliminary agreement gives both parties peace of mind until the day the deed transferring ownership is signed.
- A preliminary agreement obliges the parties to conclude the promised agreement on the previously agreed terms.
- The notarial deed form gives the buyer the right to compel the seller to sell through the courts.
- The key clauses are the price, the deadline, the description of the property and the mortgage-approval condition.
- Before signing it is worth checking the land and mortgage register and the legal status of the flat.
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.
Frequently asked questions
Does a preliminary agreement have to be made before a notary?
What happens if the bank refuses the mortgage?
How long is a preliminary agreement valid?
Can the terms be changed after signing?
The RealtyTM editorial team prepares guides based on Polish market data and current regulations. Content is reviewed by our subject editors.
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