When is a « reservation of purchase right » contract considered to be a purchase contract? If I make a deposit before signing the purchase contract, do I get my money back if the property is not built?
Surely at some point you have considered buying a first home in a new development or through a cooperative that has caught your attention for any reason. But you may have heard that these developments « keep your money » or that sometimes they end up not building the houses or even go bankrupt. In that moment, you might feel that the money you put down for your future home has now been lost.
Pre-contract or reservation contract
To start with the advance payments prior to the purchase contract, a pre-contract or a reservation agreement is usually signed in order to start paying for the future home in advance.
But when can this contract be considered as a purchase contract? In other words, does this contract have the same guarantees as a purchase contract? Below, we explain the requirements that must be met in order for this contract to be considered an effective purchase contract.
Validity of the reservation contract
First and foremost, according to the case law, the reservation agreement must show, at the time of signing, a firm and definite intention to buy in the future.
And how can this be proved? The most important thing is to check that the contract meets the following requirements:
- Determination of the thing, i.e. the future home.
- Determination of the total price of what the property will cost.
- Determination that the payment of these advance amounts is part of the final agreed price of the house.
- Regarding the form of payment. A payment plan should be established, with dates and amounts.
When drawing up and signing this contract, a common doubt arises: what happens if I pay in cash? As we have indicated, the amount, as well as the form of payment, must be determined in the contract.
- An expected date of delivery of the property must appear in the contract. Normally this date coincides with the end of the payment plan and the handover of the keys.
- A guarantee for the restitution of the amounts paid in advance must appear in the contract.
It is only if these requirements are met that the firm and definitive will to buy the property in the future is confirmed. And, therefore, the reservation contract would become, for all legal purposes, a real, perfected purchase contract. In the same way, the rights derived from these contracts would be attributable to you, together with the legal protection that these have.
Only if all of the previously mentioned requirments are fulfilled that we can establish a definite intention to purhcase the property. And thus the reservation contract would become, for all legal purposes, a real, perfected purchase contract. In the same way, the rights derived from these contracts would be attributable to you, together with the legal protection that these have.
And you, are you considering investing in a new development to acquire a property under construction? At Imont Legal Services we will help you with all the formalities and accompany you throughout the whole process of acquiring your home.