Real Estate Reservation Agreement

The purpose of the Real Estate Reservation Agreement is to agree that the owner of a real estate does not sell the real estate to anyone else during a certain period. The parties to the non-notarised agreement cannot be forced to conclude the sale agreement, but it can be used in case:

  • you wish to get exclusivity to a real estate before its purchase
  • the sale agreement is not concluded yet, but the parties have agreed on the sale
  • you wish to set a penalty if the owner sells the real estate to someone else
  • the potential buyer agrees to pay a reservation fee

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Frequently asked questions

Why cannot the reservation agreement provide the seller with the obligation to sell the real estate?

In order to agree on the seller's obligation to sell the real estate to the buyer a notarised preliminary or sale agreement should be concluded, which entails notary fees. So, if the parties are certain that they wish to conclude the sale agreement of the real estate it is advisable to conclude a notarised preliminary agreement or already the notarised sale agreement. The reservation agreement can be concluded in case a certain time period is needed before the conclusion of the sale agreement, but the parties have reached agreement on the sale of the real estate.

What guarantees the fulfilment of the reservation agreement?

The fulfilment of the agreement by the seller is ensured by contractual penalty, which the seller is obliged to pay to the buyer in case the seller transfers the real estate to a third party during the validity of the agreement. The buyer's intent to buy the real estate is demonstrated by the fact that the buyer pays a reservation fee at the conclusion of the reservation agreement and in case the buyer refuses to conclude the sale agreement, the seller can keep the reservation fee.

How much should the reservation fee be?

The amount of the reservation fee depends on the specific transaction. In practice the usual amount is 2-5% from the final sale price of the real estate.

However, it must be kept in mind that if the amount of the reservation fee exceeds the reasonable price for just the act of the reservation and the parties have agreed that the fee will remain with the seller in case of failure to conclude sale agreement, then this might indicate that the agreement is, in fact, a preliminary agreement to sell the real estate, which must be notarised by law. It is important to note that the title of the agreement does not change the content of the agreement, meaning that even if the agreement is labelled as a reservation agreement, it does not mean that the agreement might not actually be a preliminary sale agreement by its content.

What happens to the reservation fee when the real estate is sold?

The parties can agree in the agreement whether the reservation fee is deducted from the final sale price of the real estate. In case the seller transfers the real estate to a third party during the validity of the agreement, then the reservation fee is refunded to the buyer. The buyer is also refunded the reservation fee in case the sale agreement in not concluded by mutual consent of the parties. The buyer will not be refunded in case the sale agreement is not concluded due to reasons dependent on the buyer.

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