Despite the fact that we are not lawyers, we wanted to give some basics to our clients concerning the purchase of a property. Indeed, some of our clients faced some problems and deceptions are quite common.
I. Definition of the sales agreement:
The sales agreement is the document by which one binds himself to deliver one thing, the other to deliver it (art. 1582 Civil Code). In this case, it is a real estate property.
II. Importance of the sales agreement:
In Luxembourg, you first sign a sales agreement which is the real sale and then a notarial deed.
The sales agreement is the real sale. The sales agreement therefore fully engages the buyer and seller to the extent that its failure usually results in the payment of a penalty clause by the offending party.
The terms and conditions of the sale will be clearly defined in the agreement as subsequently any changes will require the agreement of both the seller and the buyer. The deed is often only the formatting of the will of the parties expressed in the sales agreement.
Negotiating terms and conditions of the sale is often as important as the negotiation of the sale price.
Moreover, a clear sales agreement avoids potential conflicts by clarifying the obligations of each one.
III. Important elements of the sales agreement
1 The identity of the parties:
The identity of the parties should be checked. For this purpose a copy of the identity card is a minimum. Moreover one should also check that the property do belong to the seller wether by requesting a copy of the notary deed or by asking the cadastral record from the administration.
2 The designation of the purchased items:
The purchased items must be clearly designated. The location, the cadastral number with the surface and the pertcentage of co-ownership of the communal areas should be indicated. If the seller does not have all the information, it is possible to verify them at the administration of the cadastre (54, avenue Gaston Diderich, L-1420 Luxembourg).
You should check that each part is specified in the agreement. So if you buy an apartment with a garage and a garden, the descriptions of the apartment, garage and garden should be specified (the sales agreement will in this case specify three different items).
Additionaly if the property is sold with furniture (such as kitchen furniture, kitchen appliances, or bathroom furniture), it will be essential to specify it in an appendix. A standard kitchen is not considered as part of a flat, ie a kitchen is not an immovable by destination (art. 525 of the Civil Code) . If the kitchen cabinets are not indicated in the agreement, the seller will be entitled to take them back.
3 The sale price:
The price must be quoted in words and figures. NEVER pay an advance directly to the seller. It’s taking the risk of loosing money if the sale does not happen. If an advance has to be paid, you can pay it to the notary who will put in an escrow account until the deed is signed.
4 Suspension clauses:
The most common suspension clause is that a loan has to be granted to the buyer. It will set a deadline for the submission of the credit agreement. In general, the period shall be one month.
It may well include other suspensive clauses, such as the granting of a building permit or that the apartment must be free of any occupant by a certain date.
In the interest of all parties, it will be necessary to set a deadline for the fulfillment of the clauses. This is so that the parties are not committed indefinitely.
5 The penalty clause:
In order to guarantee the obligations of each party, a penalty clause should be specified in the sales agreement. In general, it provides for the payment of a penalty of 10% of the sale price if one of the parties was rescinding the sales agreement, but it can be a lower or a higher percentage.
6 The entry in possesion:
In general, the entry in possession is the date of signature of the deed. If at the signature of the sales agreement, the apartment is occupied but it is agreed that it should be free at the signature of the deed, you must write it in the sales agreement. It would be useful to provide for the payment of a daily allowance if the apartment is still occupied after a certain date or after the signature of the deed.
7 Additional clauses:
It would be useful to make an inventory of fixtures on the day of signing the sales agreement. This inventory will be added as an appendix. You should do a tour of the apartment the day before the signature of the deed to ensure that there was no damage.
It is generally expected that the costs and fees of the deed shall be borne by the purchaser.
9 The date of the deed and the name of the notary:
In order to avoid to be indefinitly bound by the sale agreement, you should indicate a deadline to sign the deed.
The sales agreement can specify the notary who will prepare the deed. It is recommended to take two notaries, one representing the buyer and the other the seller. The notaries will share the fees and there will be no extra cost.
This post is of course not exhaustive since each sale is a special case. In addition, the sales agreement is a contract, the law gives a lot of flexibility in its writing.
Notice: These tips are provided for information and for free. They are not exhaustive. Galux declines any responsibility for the consequences of the use of this document.