Preliminary Contract for Real Estate

What is a preliminary contract

A preliminary contract for real estate is a written agreement by which the parties undertake to conclude a final contract (notarial deed) for the transfer of ownership under specified conditions.

This contract constitutes a promise of a future sale and contains all the essential terms of the final transaction:

• Exact property description — identifier, address, area, boundaries
• Sale price — amount, currency, method and payment schedule
• Completion deadline — final date for executing the notarial deed
• Conditions — conditions precedent or conditions subsequent, if any

Why it is necessary

The preliminary contract serves several important functions in the purchase process:

• Protects both parties — fixes the agreed terms and prevents unilateral changes
• Locks in the price — the buyer is assured that the price will not be increased
• Allows payment of a deposit — the earnest money serves as a guarantee of serious intent
• Provides time for preparation — for securing financing, documents or conducting due diligence
• Ensures legal protection — in case of breach, the non-defaulting party has the right to compensation or a claim under Art. 19 of the Obligations and Contracts Act (OCA)

What it should contain

To maximise the protection of your interests, the preliminary contract should include the following essential elements:

• Exact property description — cadastral identifier, address, area, floor, appurtenant parts
• Price and payment method — total price, deposit amount, instalment payments, bank account
• Deadline for notarial deed — specific date or period for conclusion of the final transaction
• Penalties for breach — sanctions for delay or refusal to conclude the final contract
• Termination conditions — under what circumstances either party may withdraw from the contract
• Seller's representations — regarding ownership, encumbrances, absence of disputes

What happens in case of breach

If either party refuses to perform their obligations under the preliminary contract, the law provides several protection mechanisms:

In case of breach by the seller:

• The buyer may claim double return of the deposit (Art. 93 of the OCA)
• The buyer may request the court to declare the contract final (Art. 19, para. 3 of the OCA)
• The buyer may claim compensation for damages suffered

In case of breach by the buyer:

• The seller has the right to retain the deposit as compensation
• The seller may seek judicial enforcement of the contract

Claims under Art. 19 of the OCA are heard under Art. 362-364 of the Civil Procedure Code (CPC) and are a powerful instrument for buyer protection.

Frequently asked questions