By signing a preliminary contract for the purchase of a real estate property, the parties undertake to sign in some future moment the final contract (notary deed). In other words, the preliminary contract is not a document of real estate property but a form of a promise to finalize the bargain under the agreed conditions.
The preliminary contracts are usually signed when purchasing properties still under construction until the building is fully operational, or when purchasing already built properties without all conditions for finalizing the sale being available.
The preliminary contract has to be legally valid, providing for and describing the significant conditions of the transaction:
- the identifying traits of the property (location, number/identifier, description, area, boundaries, etc.);
- price and method of payment;
- construction stage of the property;
- terms for signing the final contract;
- agreed penalties for failure to observe the obligations of each party.
Before signing the preliminary contract, check if all documents of the seller are in order. Besides a document for property ownership, the seller company should present also a Building permit (if the building is in the process of construction), or a Practical completion certificate with rights of use (if the building is operational). It is your right to demand an encumbrance certificate, land property deed, current status of the company, etc. Legal advising on these issues can save you time and is always a good investment.