Down payment agreement

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Down payment agreement is necessary in cases when one of the parties to the transaction needs time to perform some other activities (drawing up a loan, registering real estate in the land register, etc.) and both parties want to ensure that the other party does not consider concluding a purchase agreement.

The law does not specify a model or form for a Down payment agreement, but does specify certain essential components, which must be specified in the contract:

  • Parties of the transaction.
  • Real estate information from the State Land Register.
  • The amount of the down payment (usually in practice it is determined by 10-15% of the purchase price) and the way it is paid (it can be paid in cash at the conclusion of the contract or within a certain period to the current account).
  • Purchase price for real estate.
  • Term until which the purchase agreement must be signed.

 

It is important to understand that if the purchase agreement is not signed by the buyer – the down payment remains with the seller, but if the purchase agreement is not signed by the seller, then the seller must return the down payment in double amount.

It is also important to indicate what happens to the down payment – it is included in the purchase price or returned to the depositor.

In practice, this agreement is one of the most frequent objects of dispute if the Down payment agreement is not drawn up correctly or is missing some essential components that could be as a reason for the dispute to go to court.

DSSLegal will provide you with legal support for the preparation of the Down payment agreement, so that your transaction will take place without unnecessary complications.

 

Type of contractDown payment agreement
Blank sample of Down payment agreement40,00 EUR
Completed Down payment agreement for the specific client's transaction 80,00 EUR

FAQ

1. When a down payment agreement must be signed?

Down payment agreement is an option contract. It is not mandatory for the transaction. It must be signed if one of the parties wants to guarantee the transaction, but it is not possible to conclude the transaction immediately. For example, in cases where some of parties must wait for the bank’s approval of the loan.

2. What should be included in the down payment agreement?

It is important to include both parties to the transaction, information from the land register, the amount of the down payment, the purchase price, as well as the term.

3. What is amount of down payment?

There are no rules for a specific amount of down payment. It can usually be 10-15% of the purchase amount. It can also be more or less. The method of payment of the down payment can also be freely chosen – in cash when signing this agreement or wire transfer to the account within a certain term.

4. Why the full purchase price must be written in the down payment?

Down payment agreement is signed to guarantee that the transaction will take place and also guarantee that the transaction will take place as agreed, even if circumstances have changed later. If the parties have agreed on a purchase price, then the down payment contract is a guarantee that this price will be valid and will not be changed.

5. Can the down payment agreement be terminated?

Yes, the agreement can be terminated, but only on agreement conditions. Usually, it means if the buyer refuses the transaction, the buyer loses all the deposit paid to the seller, while if the seller cancels the transaction, the seller refunds twice the deposit paid to the buyer.

6. What happens to the down payment when the transaction is completed?

This must be provided for in the down payment agreement. Usually, the down payment is included in the purchase price. However, if the parties so agree, the down payment may also be refunded to the buyer upon completion of the transaction.