What should I know about the deposit contracts?
If you have already found your ideal apartment and are just a few steps away from obtaining financing, you are surely close to signing a deposit contract.
In this article, from Sky Marketing we explain everything you need to know about the deposit contract, so that you can take this step with the certainty and tranquility of knowing the scope of this commitment.
What is a deposit contract?
The deposit contract is a private contract, that is, it is signed between individuals and / or companies. In it, the two parties (seller and buyer) agree on a reservation right for the sale of movable or immovable property. It is a legal agreement that is established prior to the sale contract. As indicated, in exchange for the reservation, the buyer pays an amount of money as a down payment.
What are the types of earnest money?
When part of the total price is paid. In the event that one of the parties does not comply with its obligations, the other may demand the compulsory fulfillment of the contract, or take action for the resolution with compensation for damages.
In this type, the buyer will lose the amount advanced if he does not carry out the sale. But in addition, if it is the seller who fails to comply with his obligations, he must compensate the buyer by returning double the amount of money advanced.
It comes from the inclusion of a penal clause. In these cases, any of the parties that breach the agreement must pay the amount set as a penalty clause. This without detriment to the fact that the interested party can also claim the fulfillment of the contract.
What are the consequences of signing a deposit contract?
The most common type of earnest money is penitential. That, as mentioned, implies that the buyer agrees to finalize the purchase of the property within the agreed term and conditions. However, the buyer has the right to lawfully waive the sale, with the consequence that he will lose the amount of money advanced.
For the buyer to be able to withdraw from the operation, it will be essential that the deposit contract specify that they are penitential. For this purpose, the contract must detail:
- The amount to be delivered as an advance as a deposit.
- That specifies the possibility -for both parties- to withdraw from the sale.
How to write a deposit contract?
It is important that at the time of the reservation commitment, most of the steps that will be taken later in the sale are well tied. If you are selling or buying the apartment through a real estate agency, they will provide you with a model deposit contract. The wording of the deposit contract must be such that it safeguards your interests and guarantees your rights. Thus, the specifications that the deposit contract must contain include:
Identification of the parties
The name and surname, marital status, address and ID of each of the interested persons must be specified. If the property belongs to a couple and the apartment for sale is joint, they must both sign. If there are co-owners, they must all sign by virtue of being the owners. If the sale is executed by a proxy, the power of attorney must be mentioned and verified.
In the case of the buyer, even if he buys a marriage, the signature of one of the spouses will suffice. If it is bought by two or more jointly-owned persons, all those who will be co-owners must do so.
Identification of the property
All sufficient data to perfectly identify the specific home. If the apartment will be acquired in conjunction with a garage space or a storage room, it must expressly mention them and describe them in the same way. It must also contain the declaration of the property registry and the status of the charges of the property. If there are charges, the deposit contract must explicitly include the agreement reached by the parties. The same treatment must receive the declaration that the dwelling is free of tenants and other occupants.
Price and method of payment
The contract must establish the total price of the sale. Regarding the form of payment, you must specify the amounts that are delivered as a deposit, specifying whether this advance is made on account of the total price. The economic aspect must be expressed with extreme clarity. It is time to clarify that the total fixed price includes, if applicable, both the fees of the real estate agent, or the promoter company and the VAT if it is not properly broken down.
It cannot be overemphasized that this deposit contract must state that the advance is paid on account of the total price and, therefore, it must be deducted from the total amount at the time of formalizing the deed of sale.
Term for granting the deed
It is convenient to set a specific date to deliver the rest of the price of the property. The term can be indicated in months, business days or calendar days. It is customary for the delivery time of the rest of the price to coincide with the signing of the public deed and for it to be between 20 and 40 days.
Distribution of purchase and sale expenses
In the event that the buyer is going to subrogate on a mortgage or other property charge, it must be indicated which part of the price will be delivered to the seller and which part will be retained by the subrogation.
Of course there is contractual freedom. The Law recommends that the buyer be responsible for everything except the municipal capital gains and the real estate agent’s fees.
Are there earnest money contracts for the purchase of a new home?
In the event that you are acquiring a new home, the signing of the deposit contract does not proceed, although the developer will ask you for advance amounts on account of the total price.
It is important to know that in this case, the plan of the property, the quality of the construction that has been announced, even though they are advertisements made by the promoter company, tacitly commit the company and constitute binding contractual terms.
What documents do you need to prepare the deposit contract?
Although it is not a requirement, it is highly recommended to add the following attached documents to the contract:
- The Inventory of movable property that is included in the sale.
- The internal regulations of the community of owners.
- The certificate of being up to date with the IBI .
- The certificate of habitability.
- The simple note of the land registry.
- The energy certificate.
- The certificate of the community of owners of being up to date with the expenses of the community.
- The location plan of the property.
- The copy of the bank check, in case the earnest money is delivered by check.
Why not use a free contract template that you get online?
Although it is true that the model deposit contracts that are obtained online are free, you must bear in mind that for something they are. Such contract models were used for a particular operation, in particular circumstances and may not be adapted to the specific legal situation that is your case. Keep in mind that regulations change and you may run the risk of using repealed legislation. At Deplace we guarantee that the deposit contract is fully adapted to the particular needs of your case. This procedure is not as trivial as signing a simple piece of paper. Considering that it involves a disbursement, it is always better that you receive advice. In DeplaceWe offer you professional advice so that you can take this step with the security of knowing all the details. Contact us!