Preliminary agreement with a deposit: deposit terms, deadlines, refunds

Preliminary agreement with a deposit: why you need it

A preliminary agreement with a deposit is signed when the price is agreed but the main deal cannot yet go ahead: the documents need checking, a bank decision is awaited, the money is still being gathered or the seller's mortgage must be removed. The agreement fixes the price and the deadline, and the deposit shows that both sides are serious. What matters most in it is not the size of the deposit but the answer to the question of what happens to the deposit if the deal falls through. Full transaction support is described on the real estate lawyer page.

What to put in the preliminary agreement

• the apartment as shown in the extract: cadastral code, address, area;
• the price and the payment procedure at the main deal;
• the amount of the deposit and the account it goes to;
• the date by which the parties sign the main agreement;
• what the seller does before the deal: removes the mortgage, pays off debts, obtains consents;
• in which cases the deposit is refunded to the buyer;
• in which cases the deposit stays with the seller;
• what happens if one of the parties misses the deadline.

Deposit and advance payment

The word used in the agreement matters: a deposit and an advance payment work differently. We state plainly what kind of payment it is and what happens to it in each scenario, so there is no argument about terms later. If a payment is described vaguely, a dispute over it is settled by the general rules of the law, and the outcome is hard to predict.

Terms for refunding the deposit

The deposit should be refunded to the buyer if the problem is not on their side: the check found a mortgage or attachment that the seller did not remove by the deadline; the seller withdrew from the deal; the bank did not approve the mortgage, if that condition is expressly written in; the area or owner in the extract did not match what was stated. We list these cases specifically rather than with a general phrase like "for a valid reason". We also state within what period and to which account the seller refunds the deposit: usually a few banking days. How we check the apartment before the deal is on the property document check page.

The deposit amount and who to pay

The deposit is usually a small part of the price, and the parties agree the amount themselves. Pay it by bank transfer to the account of the owner named in the extract, not to an agent or representative, unless this is expressly written into the agreement and confirmed by the owner. Do not hand over cash without a receipt to anyone. If the seller insists on a large deposit before the check, that is a reason to be wary. We write the deposit amount in the same currency you transfer it in, so there is no argument about the exchange rate on a refund.

Deadlines

The deadline for the main deal must be realistic. A document check takes a few days, a bank's mortgage decision up to several weeks, a transfer from abroad several days, and arranging a power of attorney in another country sometimes more than a month. We build all of this into the deadline; otherwise you risk losing the deposit simply because you did not make it in time. If a mortgage or transfer is delayed through no fault of yours, the agreement can provide for an extension. We write the deadline as a specific date rather than "within a month", and state separately who sets the day of the deal and how it is communicated.

A preliminary agreement with a developer

Developers have their own procedure: often, instead of a preliminary agreement, an agreement for the sale of the future apartment with an instalment schedule is signed straight away, and sometimes a reservation fee is charged. A reservation is quite often non-refundable, so we read the terms in the reservation document before paying. If the reservation is paid, ask for the amount to be credited towards the price of the apartment. Before paying, check the developer; more on the developer check page.

The notary and the main deal

A preliminary agreement can be signed in simple written form; notarisation is not required. But if the parties act through representatives or want more protection, it is convenient to sign it before a notary and place the deposit in a notary deposit. The main agreement is then registered at the Public Registry, and only from that moment are you the owner. What goes into the main agreement is on the purchase agreement page.

How much a preliminary agreement costs

Drafting a preliminary agreement with deposit terms costs from 480 ₾. A main purchase agreement with translation from 660 ₾, a legal due diligence check of the apartment before the deposit from 960 ₾, a lawyer consultation of up to an hour from 155 ₾. The final cost is set after reviewing the transaction and agreeing the scope of work.