Preliminary Real Estate Sale Agreement

Q: What checks must be carried out before I sign a preliminary agreement?

Before you sign, your lawyer completes a full legal due diligence: title deeds going back at least 20 years, the property's record at the Land Registry Office or the national land registry, mortgages, pre-notations, attachments, claims and pending lawsuits. In parallel, an engineer issues the electronic property identity and checks for unauthorized construction and planning compliance. Tax clearance of the seller, ENFIA, common expenses and electricity and water bills must also be checked. If any pending matter arises, it is addressed by an express clause giving you the right to withdraw with refund of the deposit.

Q: How much time elapses between the preliminary agreement and the final deed?

Where the property is clean and the buyer has financing in place, completion can be achieved within 30-60 days. With a mortgage loan, 2-4 months are needed until disbursement. With settlement of unauthorized construction, acceptance of inheritance by the seller or release of a mortgage, the timeframe extends to 4-8 months. It is critical that the preliminary agreement sets an express long-stop date, beyond which the consequences of withdrawal are triggered.

Q: What are my chances of recovering the deposit?

It depends on the wording and the reason for non-completion. If the failure is due to the seller's fault (concealment of encumbrances, refusal to sign, transfer to a third party), the chances of twofold recovery are strong, provided there is a relevant clause or that Articles 402-404 of the Civil Code (AK) on earnest money apply. If completion fails due to non-approval of the loan or force majeure, recovery is only available where this was provided as a condition precedent. If you changed your mind, the deposit is generally lost.

What is a preliminary real estate sale agreement?

A preliminary real estate sale agreement is a document executed between two parties before a notary public, binding them to proceed with the described transfer of real property. The seller undertakes to transfer the property to the buyer, while the buyer undertakes to pay the agreed price to the seller. As to its term, the preliminary agreement may be drawn up either for a specific period of time after which the signing of the final deed is triggered, or subject to the fulfilment of specific conditions by the contracting parties.

Typically, upon the conclusion of the preliminary agreement, the buyer pays a deposit to the seller in order to secure the deal and further strengthen his position. The amount of the deposit is negotiable and usually ranges between 5-10% of the agreed sale price of the property. The assistance of a lawyer in drafting such an agreement is essential.

What does the preliminary real estate sale agreement include?

A preliminary real estate transfer agreement includes the following elements:

The full details of the buyer and the seller
The agreed purchase price
The method of payment (e.g. lump sum upon signing of the final deed, in instalments, with a deposit, by deposit into a bank account or by bank cheque, etc.)
Construction works, where the property is under construction, or unauthorized construction that must be settled
Delivery of title deeds and building permit, deed of horizontal property establishment and apartment building regulations, land registry documents for the conduct of legal due diligence by the buyer’s lawyer
An express date for the signing of the final deed, or a deadline after the lapse of which the parties may withdraw
Terms of withdrawal of the buyer and the seller from the property sale agreement

When should you sign a preliminary real estate sale agreement?

As a seller, signing a preliminary agreement will help you secure the sale of your property through the buyer’s written commitment to proceed with the purchase at a future date. When you have received an offer from a serious and willing buyer that you are happy with, it is advisable to proceed with a preliminary agreement to secure his commitment. If the buyer who has paid a deposit decides not to proceed to the final deed, the seller usually retains the deposit as compensation.

As a buyer, you have an equally compelling reason to sign a preliminary agreement. When you have found a property that genuinely interests you, have made your offer and have agreed verbally with the seller, it is advisable to sign a preliminary real estate sale agreement. This will bind the seller contractually and will protect you if he accepts an offer from another buyer, giving you the right to claim the property or to take legal action against him in the event of a breach of the terms of the agreement. If you have paid a deposit and the seller decides not to proceed with the agreement, the seller will usually return the deposit twofold as compensation to the buyer.

What are the advantages and disadvantages of the preliminary real estate sale agreement?

Advantages

The commitment of both contracting parties to proceed with the conclusion of the final deed at a future date. The seller is contractually bound, which means that if he does not appear to sign the conclusion of the final sale deed, the buyer has the right either to demand his presence at the deed or to take legal action against him in the relevant juridical act.

Disadvantages

The preliminary agreement does not constitute a title of ownership. This means that the buyer does not acquire ownership of the property through the preliminary agreement.
For precisely this reason, a bad-faith seller may theoretically sign a preliminary agreement and accept a deposit from more than one buyer. The first buyer to sign the final deed before the notary will acquire ownership of the property. A second buyer who has signed a preliminary agreement and paid a deposit will not be able to exercise his right to purchase the property, since the property now has a new owner. Therefore, the second buyer will not be able to claim his compensation.
Since no certificates are required for the conclusion of the preliminary agreement, there is a risk that the property may be encumbered with legal or technical issues that a bad-faith seller has not disclosed to the buyer. As a result, the buyer has proceeded to a notarial act for the acquisition of a property of which he does not have a complete picture. The buyer can avoid this risk by including clear withdrawal clauses.

See also article Property Purchase
See also article Property Sale
See also article Fraud Against Property Buyers by Sellers
See also article Action for Partition of Real Property
See also article SYPOTHA – Unauthorized Constructions
See also article Fines for Unauthorized Constructions
See also article Annulment of SYPOTHA Decision
See also article Acquisitive Prescription
See also article What is the KAEK?
See also article Pre-notation of Mortgage
See also article Eviction of Tenant
See also article Professional and Commercial Leases
See also article Correction of Manifest Error – Unknown Owner – Land Registry

FREQUENTLY ASKED QUESTIONS ON THE PRELIMINARY REAL ESTATE SALE AGREEMENT

1. What exactly do I commit to by signing a preliminary agreement?

By signing the preliminary agreement, you assume a contractual obligation to proceed with the signing of the final sale deed within the agreed deadline or upon fulfilment of specific conditions. As a buyer, you do not acquire ownership of the property through the preliminary agreement, but only a claim that the transfer be completed. The deposit you typically pay (5-10% of the price) operates as earnest money (arravonas). If you withdraw without justification, you risk losing it. If the seller withdraws, he is generally required to return it twofold. For this reason, the clear drafting of withdrawal terms by an experienced lawyer is critical before signing.

2. How am I protected if the seller sells to someone else?

The greatest risk is that the seller may sign a preliminary agreement with multiple buyers and ultimately transfer the property to whoever appears first at the final deed. The most effective protection is the registration of the preliminary agreement with the national land registry (Ktimatologio), so that the encumbrance on the property is made public. In addition, a substantial penalty clause may be included for the event of breach. If the seller refuses to sign the final deed, the buyer has the right to file a lawsuit seeking the seller’s judicial condemnation to a declaration of intent (Article 949 of the Code of Civil Procedure (KPolD)), so that the court ruling stands in lieu of the contract, as well as a damages action for any loss suffered.

3. What checks must be carried out before I sign a preliminary agreement?

Before you sign and, above all, before you pay any deposit, your lawyer must complete a full legal due diligence: title deeds going back at least 20 years, the property’s record at the Land Registry Office or the national land registry, the existence of mortgages, pre-notations of mortgage, attachments or claims, pending lawsuits. In parallel, an engineer issues the property’s electronic identity and checks for unauthorized construction, planning compliance and the topographical diagram. Tax clearance of the seller, ENFIA (Real Estate Property Tax), common expenses and electricity and water bills must also be checked. If any pending matter arises, it must be addressed by an express clause in the preliminary agreement, so that failure to resolve it gives you the right to withdraw with refund of the deposit.

4. How much time elapses between the preliminary agreement and the final deed?

The duration depends on the specific outstanding matters of each case. Where the property is “clean” and the buyer has financing in place, completion can be achieved within 30-60 days. Where a mortgage loan is involved, 2-4 months are typically needed for approval and disbursement. Where there is pending settlement of unauthorized construction, acceptance of inheritance by the seller, correction of a land registry entry or release of a mortgage, the timeframe extends to 4-8 months. It is critical that the preliminary agreement sets an express long-stop date for the final deed, beyond which the agreed consequences of withdrawal are triggered.

5. What are my chances of recovering the deposit?

It depends on the wording of the preliminary agreement and the reason for non-completion. If the failure is due to the seller’s fault — concealment of encumbrances, refusal to sign, transfer to a third party — the chances of recovery, indeed twofold, are strong, provided that there is a relevant clause or that Articles 402-404 of the Civil Code (AK) on earnest money apply. If completion fails due to non-approval of the loan or force majeure, recovery is only available where this was expressly provided as a condition precedent. If you simply changed your mind, the deposit is generally lost. The initial drafting of the document by a lawyer who anticipates realistic scenarios plays a decisive role.

6. What is the lawyer’s role in the preliminary agreement?

The buyer’s lawyer completes the legal due diligence on titles and encumbrances before any sum is paid, negotiates and drafts the terms of the preliminary agreement with a view to protecting the client — deadlines, conditions precedent, penalty clauses, twofold return of earnest money, clauses addressing unauthorized construction or pending matters. He arranges for attendance before the notary public, sees to the registration of the preliminary agreement with the national land registry where appropriate, and monitors the fulfilment of the terms up to the final deed. In the event of breach, he files a lawsuit for declaration of intent or for return of the deposit with damages. Our firm specialises in real estate law, with proven experience in safe property transactions and in dealing with bad-faith sellers.