Preliminary sale agreement for a flat – what to watch out for

The preliminary agreement is the moment a transaction stops being a conversation and becomes a binding commitment. And that is exactly why it is the stage where mistakes happen most often – on both the buyer's and the seller's side. Here is what to remember so the agreement protects everyone.

Notarial or ordinary form?

A preliminary agreement can take the form of a notarial deed or an ordinary written civil-law contract. The difference is fundamental. A notarial deed allows a party to go to court and force the other side to conclude the final sale – in other words, to compel the purchase or the sale. An ordinary written form only gives the right to claim damages, not to force the transaction.

In practice, most preliminary agreements for flats in Warsaw are notarial deeds. The cost is a few hundred złoty in notary fees (far less than for the transfer deed) and the security is incomparable. We recommend this form to all our clients – buyers and sellers alike.

Deposit (zadatek) vs advance (zaliczka) – they are not the same

A deposit is regulated by the Civil Code and works as security. If the buyer withdraws, the seller keeps the deposit. If the seller withdraws, the buyer can demand double the deposit back. It is symmetrical and fair – both sides have an incentive to keep their word.

An advance is simply part of the price paid upfront. If the transaction falls through – for whatever reason – it is returned in full. It disciplines neither side.

For most transactions we recommend a deposit. The standard amount is 5–10% of the price. On a flat at one million złoty that is 50,000–100,000 złoty. The buyer should factor this into their own funds, because at the final deed it is credited against the price.

Deadline for the final deed

The preliminary agreement must state the date by which the parties commit to sign the transfer deed. It should be realistic – if the buyer is financing the purchase with a mortgage, the bank needs four to eight weeks for a decision and disbursement. Too short a deadline risks the buyer losing the deposit through no fault of their own.

On the other hand, too long a deadline paralyses the seller, who cannot freely dispose of the property in the meantime. We usually suggest six to twelve weeks for our clients, depending on the complexity of the transaction and the financing method.

What else the agreement should include

Besides the price, deadline and security mechanism (deposit or advance), a good preliminary agreement describes:

• a precise description of the property – address, land-register number, area, appurtenances (storage unit, parking space),
• the seller's representations – that the property is free from encumbrances, not subject to enforcement proceedings, not in dispute, and that the seller has the right to dispose of it,
• termination conditions – what happens if the bank refuses the mortgage (does the buyer lose the deposit, or is the agreement dissolved without consequences),
• condition of the flat at handover – whether the seller undertakes to deliver it in unchanged condition, cleared of belongings, with former occupants deregistered,
• handover date – which does not always coincide with the day of the notarial deed.

The most common mistakes

First: no clause covering what happens when the bank refuses the mortgage. The buyer loses the deposit because formally it is the buyer who failed to meet the condition – even though the buyer is not at fault. The fix is a clause that allows the agreement to be dissolved with a full deposit refund in the event of a final mortgage rejection.

Second: an imprecise description of the property's legal status. If an easement or a third-party claim comes to light after the preliminary agreement is signed, the situation gets complicated. Better to check beforehand.

Third: signing without the other spouse present when the property is part of the marital estate. Such an agreement may turn out to be ineffective.

Do you need an agent for the preliminary agreement?

The preliminary agreement can be drafted by the notary – and it is the notary who is responsible for its content. But the terms it contains are the result of negotiation between the parties. An agent's role is to make sure neither side agrees to a condition that is disadvantageous, and that everything agreed orally ends up in the document. This is one of those stages where experience really makes a difference.

If you are planning a sale or purchase and want to make sure the preliminary agreement protects your interests, get in touch. We will review the document before you sign or help negotiate it from the start.