Requirements of a property purchase agreement
When buying or selling a property, the purchase agreement is one of the most important legal documents, governing the terms of the transaction and the rights and obligations of both parties. Whether you are the seller or the buyer, it is in your interest for it to contain everything it should.
Legal framework for a property purchase agreement
The transfer of property ownership under a purchase agreement is governed by the Civil Code, while the specific requirements for its content are set out in the Cadastral Act. The purchase agreement must be made in writing. Any other form is invalid. Like any contract, it has its required elements, which can be divided into essential and non-essential elements.
Essential elements of a property purchase agreement
The essential elements of a purchase agreement include the identification of the contracting parties, identification of the subject of the transfer, determination of the purchase price and the signatures of the parties.
Although non-essential elements are not required by law, we recommend including them in the purchase agreement.
Non-essential elements of a property purchase agreement
Non-essential elements include, for example:
- how the property will be paid for,
- any defects affecting the property,
- the manner and timing of the property transfer,
- options for withdrawing from the agreement or contractual penalties should either party breach its obligations.
As mentioned above, when drafting a purchase agreement, it is necessary to take into account the Civil Code and the requirements of the Cadastral Act in order to avoid unnecessary issues at the Land Registry when registering the transfer of ownership.
Pay particular attention to specifying the subject of the ownership transfer.
When transferring a property, it is essential to identify the property sufficiently. In the case of a flat, you must state the unit number and its designation, the designation of the building and land plot, the cadastral area and the cadastral office. Nor should you forget to identify any adjoining land plots, especially access roads or a share in common areas.
Property defects
Although they are not essential elements required by law, we recommend specifying the rights and obligations of the contracting parties in the purchase agreement, in particular the seller’s obligation to identify specifically and in detail all factual and legal defects affecting the property. We do not recommend signing a purchase agreement without these provisions.
This part of the agreement does not serve solely to describe physical defects, but above all to set out all encumbrances, any mortgage, enforcement proceedings or other legal disputes and debts. Specifying defects in the purchase agreement is particularly in the seller’s interest. The law sets the seller’s liability period for hidden defects at five years. If serious defects are discovered that restrict the use of the property, the purchase agreement may be withdrawn from, and in such a case, the seller is obliged to refund the buyer the purchase price of the property and pay compensation.
Even where all defects are mentioned in the purchase agreement, it cannot automatically be assumed that the buyer is protected and that no problems will arise. It is common for buyers not to read the agreement carefully. Even if someone already has experience of property transactions and understands the terms used and all the requirements, we would recommend having the purchase agreement prepared by a lawyer familiar with the matter. Any reputable real estate agency offers this service. At Bohemian Estates, we prepare purchase agreements ourselves or, if one has been prepared by the other party, it is reviewed by our legal department.