Preliminary Purchase Agreement & Agreement to sell: Differences

When it comes to real estate, it is essential to have a clear understanding of legal terms, especially when it comes to property transactions. In the case of a property acquisition, before a final act of sale is signed by the notary, the buyer and seller may choose between a Preliminary Purchase Agreement and a Sales Agreement, while waiting for the buyer’s loan to be finalized.

What is a Preliminary Purchase Agreement?

The Preliminary Purchase Agreement, also known as a synallagmatic promise to sell, is a preliminary agreement between buyer and seller. It seals the agreement between the two parties on the main terms of the real estate transaction. The sale agreement is generally drawn up by a notary and can be considered as a preliminary contract committing the parties to conclude the sale. The seller undertakes to sell the property to the buyer, who in turn undertakes to buy it. The Preliminary Purchase Agreement does not require the payment of any indemnity, and it is possible to add suspensive clauses. The seller cannot retract if he accepts a specific sum or an “at price” offer from the buyer.

In a Preliminary Purchase Agreement, the main information includes the identification of the parties, a description of the property, the agreed sale price, any conditions precedent (such as obtaining a loan), details of the date on which the final deed of sale will be signed, and the terms of the security deposit.

What is an Agreement to sell?

The Agreement to sell is unilateral. It is issued by the seller to guarantee the buyer that he will not sell the property to another person during a specific period. The Agreement to sell is generally used when the buyer wants more time to make a final decision to buy.

The Agreement to sell is valid for a specified period, during which the buyer can exercise his right to purchase by exercising the option. In this case, the seller is obliged to sell the property to the buyer under the conditions previously agreed. However, if the buyer decides not to exercise his right to purchase during the specified period, the promise to sell expires and the seller is free to offer the property to other buyers.

Can the seller withdraw from an Agreement to sell?

Under an Agreement to sell, the seller can cancel the transaction as long as the buyer does not exercise the option. But this comes at a price: he risks losing the immobilization indemnity, also known as escrow, and paying damages of up to 20% of the price of the property. If the seller decides to retract after the option to purchase has been exercised, the buyer has the choice between being compensated or proceeding with the forced sale of the property through the courts.

What if the buyer cancels and no longer wants to buy?

If the buyer desists and does not ultimately exercise his option on the property, he loses his immobilization indemnity to the seller. However, if the buyer cancels because of one of the suspensive clauses in the promise to sell (e.g. inability to obtain a mortgage), the buyer can cancel the sale and be reimbursed for the immobilization indemnity.

What content should be included in a Preliminary Purchase Agreement or Agreement to sell?

Whether it is a Preliminary Purchase Agreement or an Agreement to sell, the document must contain certain legal information to be legally valid. It must contain the following:

A detailed description of the property (geographical location, type of property, number of rooms and bedrooms, surface area, outbuildings, annexes, etc.).

• The identity of the buyer
• The identity of the seller
• The sale price of the property
• Mandatory property diagnostics
• The real estate agent’s fees
• The legal 10-day cooling-off period applying solely to the buyer
• Conditions precedent to protect the parties

What is the difference between a sale agreement and a promise to sell?

Although they may seem similar, the sale agreement and the promise to sell are two distinct contracts in a real estate transaction. Understanding these differences is essential to avoid confusion and to ensure a safe and informed real estate transaction.