In the process of transferring real estate properties, the preliminary contract of sale plays a fundamental role. In this contract, one party commits to selling to the other, who in turn commits to buying.
This contract allows the parties to meet various important needs (such as planning a move, examining the urban and cadastral situation of the property, and, if necessary, regularization, as well as obtaining a mortgage) that require a certain amount of time between the start of negotiations and the actual transfer of ownership, while knowing that the counterpart is obligated to sign the final contract.
Indeed, it would be very risky to proceed without the certainty of the obligation to sell or buy on the part of the counterpart.
Given the importance of this contract in real estate negotiations, this comprehensive guide aims to provide a clear and detailed overview of the contractual clauses, the deposit, and the real estate agent.
Key Points of the Preliminary Contract of Real Estate Sale
The preliminary contract of real estate sale establishes the conditions agreed upon by the parties during negotiations, which will form the basis for completing the purchase (and sale) of a property.
The clauses of the preliminary contract, especially the deposit (art. 1385 c.c.), play a fundamental role in protecting the involved parties from potential mutual non-compliance.
Although the law does not strictly require the involvement of a notary for drafting the preliminary contract as a private deed, it is advisable to seek professional assistance. The parties can proceed independently through a private document or consult a Notary and conclude the “compromise” through a public deed or authenticated private document. This latter option is essential if the preliminary contract concerns properties under construction or to be constructed (Legislative Decree no. 122/2005, art. 6).
The Preliminary Contract of Real Estate Sale
Before delving into the details of the preliminary contract of real estate sale, it’s crucial to have a clear understanding of what it is, its purpose, and the key elements that characterize it.
Moreover, it’s important to understand the distinctions between the preliminary contract and the final one, as although closely related, they have unique features.
In the following paragraphs, we will explore these aspects in-depth, providing the necessary information to fully understand the nature and implications of the preliminary contract in the real estate sales process.
Definition and Purpose
The preliminary contract of real estate sale, also known as compromise or preliminary agreement, represents a legally binding agreement between two parties – the buyer and the seller. Through this agreement, the parties commit to subsequently conclude a purchase contract, according to which the property will be transferred to the buyer upon payment of the agreed price, respecting specific terms and conditions.
The main purpose of the preliminary contract is to establish clearly and in detail the conditions and essential elements that will form the basis of the future final contract. This includes the price of the property, payment terms, delivery date, any special clauses, and the responsibilities of the involved parties.
The preliminary contract serves as a “promise” between the parties, mutually committing them to proceed with the transaction as stipulated in the preliminary agreement.
Importance and Key Elements
The preliminary contract of real estate sale plays a fundamental role for several reasons.
Firstly, it provides the involved parties with a period of time to organize and prepare the necessary documentation for the conclusion of the final contract.
Additionally, it provides a sort of “insurance” for both parties, establishing the consequences in case of non-compliance by either the buyer or the seller.
Essential Elements of the Preliminary Contract
The essential elements of the preliminary contract of real estate sale are crucial for defining the structure and legal validity of the agreement. These elements must be clearly stated in the document to ensure that the contract is effective and binding for all involved parties.
- Identification and Consent of Parties: The preliminary contract must include the complete personal details of both the buyer and the seller, and the consent of the parties must be signed within the document.
- Description of the Property: It’s crucial to provide a detailed description of the property being sold, including the address, cadastral category, floor, and any accessories.
- Price and Payment Terms: The preliminary contract must specify the agreed price and payment terms, including any deposit or down payment.
- Place and Deadline for the Conclusion of the Final Contract: The location and deadline for signing the final contract before a notary must be indicated.
- Written Form: The law requires the preliminary contract to be drafted in writing; otherwise, it may be considered void.
- Special Clauses: The preliminary contract may include special clauses, such as suspensive or resolutive conditions, which can affect the conclusion of the final contract.
- Confirmatory and/or Penalty Deposit or Price Down Payment: The amount of the deposit, if any, must be specified, along with the consequences in case of non-compliance by either party.
- Penalty Clause: The parties may agree on a penalty clause in case of non-compliance with the obligations assumed in the preliminary contract.
Including all these elements in the preliminary contract of real estate sale ensures that the agreement is solid, clear, and compliant with the law.
Differences between Preliminary and Final Contracts in Real Estate Sale
The preliminary contract and the final contract represent two distinct yet interconnected phases in the real estate sale process.
Both are legally binding agreements between the buyer and the seller, but they have fundamental differences that are essential to understand to fully appreciate their role in the real estate transaction.
Purpose: The preliminary contract is a preliminary agreement in which the parties commit to concluding a future final contract, defining the conditions and terms that will form its basis. The final contract, on the other hand, is the conclusive and final agreement that confirms the actual transfer of property from the current owner to the buyer, as stipulated in the preliminary contract.
Formality: The preliminary contract must be drafted in writing and does not necessarily require the intervention of a notary. The final contract, however, must be drafted in writing and signed before a notary, who ensures its compliance with the law and authenticity.
Transfer of Property: In the preliminary contract, there is no actual transfer of property ownership; the agreement simply defines the conditions and terms for future transfer. The transfer of property occurs only upon signing the final contract, upon payment of the agreed price.
Legal Effects: The preliminary contract binds the parties to conclude the final contract and to comply with the established conditions and terms. However, the rights and obligations deriving from property ownership do not transfer to the parties until the conclusion of the final contract.
Deposit, Down Payment, Price, and Penalty Clauses: In the preliminary contract, usually, the buyer is required to pay a confirmatory and/or penalty deposit or a down payment as a guarantee of commitment. In the final contract, the agreed price is paid, and the deposit or down payment is usually deducted from the total amount due. Any penalties or refunds in case of non-compliance or withdrawal are regulated by the preliminary contract.
Luigi Ragone
