What is the importance of signing the sales contract?
While a notary public may not be present during the signing of the preliminary sales agreement, the commitment between the parties is nonetheless legally binding. Specifically, the parties have reached an agreement on the asking price at this time. The owner has the obligation to sell at this price to the buyer who signs the contract. It is strongly suggested that certain clauses be added to protect the signatories and ensure a smooth proceeding.
What exactly does a compromise sale mean and how much do they cost?
Before scheduling an appointment with the notary, it is recommended, though not required, to have both parties sign the preliminary sales agreement. This will allow for the establishment of a formal agreement between the parties and the precise definition of the conditions of the sale.
This agreement has the force of law and binds the parties to its terms and conditions, including the agreed upon price. Compromise sale is a common French expression meaning that a sales promise is as good as a sale, so it's crucial to understand all the terms of the agreement before committing to them.
What elements should a provisional sale agreement have?
Preliminary sales agreements can be rendered legally ineffective if they omit any of the required information. We list the names and addresses of all parties involved, a detailed description of the item being sold, the agreed-upon price, and the payment schedule and terms.
Securing a loan, the almost inevitable cliffhanger
“In addition, many different clauses are typically added that stipulate various conditions prior to the sale becoming binding”.
The buyer is safeguarded from an otherwise precarious financial situation by the contingent condition of granting a mortgage loan; if he is unable to secure financing, he is under no obligation to complete the purchase. The seller may insert a delay into the process for his own protection in the event that the transaction takes too long to complete. If the duration is left entirely up to the discretion of the individual, a delay of four to six weeks is common.
"The suspensive condition of granting a mortgage loan safeguards the purchaser from a precarious financial situation; if he is unable to obtain a loan, he is under no further obligation to purchase”.
Please note that unless the parties mutually agree otherwise, the sales contract is binding and cannot be terminated due to the absence of a suspensive clause (obtaining a loan).
Abandonment of the sale is subject to the penalty clause, which provides compensation
As a precaution against a buyer changing his mind at the last minute after securing financing, it is common practice for sellers to include a penalty clause that requires the buyer to pay an indemnity if the purchase is canceled. This fee is typically equal to ten percent of the sale price plus the commission owed to the selling agent.
Last but not least, the compromise should specify the date on which the keys will be handed over and include a list of all the factors that went into the buyer's decision to buy, including the existence of any easements, the date of entry into possession, and the person who will be responsible for paying the notary's fees and the registration and transcription taxes (typically the buyer). The study also supposedly includes the name of the notary who will oversee the sale and the anticipated date for the signing of the deed.
Consequences for noncompliance, including the possibility of legal action
The preliminary sales agreement is a valid contract with full legal force. This means that if one party breaches its obligations, the other can seek redress and demand that the breached area be fixed.
The party at fault may be required to pay the amount of the penalty clause when it has been specified in the compromise if the seller no longer wishes to sell his property or if the buyer abandons the purchase. Otherwise, a claim for indemnification will be made, the amount of which will depend on the nature of the damage.
In case you forgot, the withdrawal period does not exist in Luxembourg. When you sign a contract, it shows that you agree to all of the terms and conditions.