Property sale agreement: what to check before signing

A sales agreement is a binding contract between the buyer and the seller regarding the property and its price. Before signing, be sure to check the details of the property, the deadlines and the terms and conditions set out in the contract. If your purchase is subject to a mortgage, the condition precedent relating to the financing warrants particular attention.

Key points on the preliminary sale agreement

These figures are general guidelines. The terms of your preliminary agreement and your personal circumstances remain the decisive factors.

What is the purpose of a preliminary sales agreement?

The sales agreement sets out the agreement between the seller and the buyer prior to the signing of the notarised deed.

It sets out the property being sold, its price and the main terms of the transaction. Once signed by both parties, it constitutes a binding legal commitment.

In fact, we often hear the expression «a preliminary sale agreement is as good as a sale». It means that agreement on the property and the price already binds the signatories.

However, the preliminary agreement is not compulsory. In theory, the seller and the buyer can go directly to the solicitor. In practice, the preliminary agreement serves to formalise the agreement pending the final deed.

What must a preliminary sales agreement contain?

A valid preliminary agreement must clearly identify the parties, the property being sold and the agreed price.

Guichet.lu states that it must specify at least the following:

• the names and addresses of the seller and the buyer; ;
• the description of the property, including its cadastral details; ;
• the selling price; ;
• payment terms.

Further details may be included. In particular, the preliminary agreement may specify any easements, the chosen notary or the scheduled date for the deed.

The date on which the property becomes available for occupation may also be specified. This generally corresponds to the time when the keys are handed over.

Finally, the contract may include various clauses relating to the parties’ circumstances. This is particularly important where the purchase is dependent on bank financing.

What condition precedent should you include if you need a loan?

The a condition precedent to obtaining the loan protects the buyer when the purchase is dependent on bank financing.

This clause stipulates that the purchase is conditional upon the granting of the loan as set out in the preliminary agreement. The document must also specify a deadline by which the bank must provide its response.

The parties are free to determine this period. However, the time limit must allow the buyer sufficient time to submit their application.

In practice, Guichet.lu states that the processing times observed are at least 4 to 6 weeks. An extension may be considered upon receipt of an official letter from the bank.

The buyer must also act in good faith and within the specified time limits. In the event of a dispute, they may have to prove that a loan application was actually submitted. They must also be able to demonstrate that they informed the seller within the specified time limit.

What should you check in the financing clause?

Before signing, check that the terms of the financing actually match your project.

In particular, take a look at:

• the amount of the loan sought; ;
• the expected duration; ;
• the time allowed to receive a reply; ;
• the procedure for notifying the seller; ;
• the conditions under which this deadline may be extended.

The clearer the clause is, the less room there is for interpretation.

Before signing, you can also simulate your mortgage with atHomeFinance. This will give you an initial idea of your borrowing capacity.

What is a penalty clause in a preliminary sale agreement?

The penalty clause provides for compensation where a party fails to fulfil its obligations without valid reason.

The amount is set out directly in the preliminary agreement. This makes it possible to determine in advance the compensation that may be claimed.

According to Guichet.lu, this allowance amounts to 10 % of the selling price in practice. This percentage should therefore not be regarded as a figure that automatically applies to all preliminary agreements. It is necessary to check the actual clause that has been signed.

For example, a penalty clause of 10 % would represent €60,000 for a property sold for €600,000.

That is why a preliminary agreement should never be signed merely as a formality.

Can you withdraw from a sale agreement after signing it?

In principle, simply changing one’s mind is not sufficient grounds for freely withdrawing from a sales agreement already signed.

The contract takes legal effect immediately between the parties. Both the seller and the buyer must therefore honour their commitments.

The situation is different when a condition set out in the contract is not met. This is particularly the case when the sale is subject to a condition precedent relating to financing and the loan is refused under the terms set out.

Conversely, a buyer who secures financing but then simply decides not to go ahead with the purchase may face financial consequences. In particular, a penalty clause may apply.

The seller may also be held liable if they subsequently refuse to sell without a reason specified in the contract.

If you are unsure about a clause or an option to withdraw, seek advice from your solicitor before making a decision.

Do you need to register the preliminary sale agreement?

In principle, preliminary sales agreements relating to a property must be registered with the Registration, Land and VAT Authority.

For someone who is not a property professional, Guichet.lu states that the timeframe is 3 months from the date of signature.

The fact that the preliminary agreement has not been registered does not invalidate it between the seller and the buyer. However, registration does, amongst other things, make the preliminary agreement enforceable against third parties from the date of registration.

How much does registration cost?

The amount depends, in particular, on the terms of the preliminary agreement.

When he realises that a condition precedent, such as when taking out a bank loan, the registration fees are set at 12 €.

The situation is very different when no condition precedent is stipulated. In such cases, Guichet.lu states that the registration fee is 7 % of the selling price for the person presenting the preliminary agreement.

This point may therefore have significant financial implications. You should have your situation checked by a solicitor or the relevant authority before taking any action.

What should you check before signing?

Before signing a preliminary agreement, make sure you have enough information about the property and your financing.

Start by checking that the property details match what you saw during your viewing. The address, land registry details, annexes and price must be correctly listed.

If you’re looking at a flat, be sure to check the information available about the owners’ association. Service charges and any necessary renovation work could have a significant impact on your budget.

Also check the energy performance certificate. Finally, make sure that the terms you have agreed on are clearly set out in the document.

Before reaching this stage, our guide These 10 questions to ask during a property viewing can help you prepare for your checks.

If this is your first purchase, please also take a look at our guide from your first property purchase in Luxembourg.

What is the notary’s role after the preliminary agreement has been signed?

The notary ensures that the transfer of the property is legally sound and draws up the authentic deed.

In particular, he carries out searches into the seller’s title to the property. He also checks for any mortgages, easements or other encumbrances.

The notarial deed then makes the sale enforceable against third parties. It may be registered with the relevant authorities.

The parties may choose their notary regardless of the property’s address. Where no agreement has been reached, the party bearing the costs usually chooses the notary. In practice, these costs are most often borne by the purchaser.

To find out more about this step, please see our article on the role of the notary in a property sale.

What are the next steps after signing the preliminary agreement?

Once the contract has been signed, the buyer must meet the deadlines set out in the contract.

If the preliminary agreement contains a condition relating to a mortgage, start the application process with the banks as soon as possible. Above all, make sure you meet the deadline for them to give their response.

At the same time, the case is progressing towards the preparation of the notarial deed. The notary carries out the necessary checks prior to the final sale.

The process can therefore be summarised as follows:

1. Signing of the preliminary agreement
2. Funding application, if necessary
3. Fulfilment of the conditions set out in the contract
4. Checks and preparation of the file by the notary
5. Signing of the notarised deed
6. Handover of the keys, on the agreed date

However, each agreement may set out a different timetable. The dates specified in your contract therefore remain the reference.

How can atHome help you before you sign?

A compromise is prepared well before it is signed.

On atHome, you can compare properties at sell and prepare for your viewings. This makes it easier for you to check whether a property meets your criteria and fits your budget.

If your purchase requires a loan, atHomeFinance can also help you arrange your financing. You can simulate your mortgage before you commit.

The aim is simple: to reach a compromise whilst having a clear picture of the property, your budget and the conditions required for your purchase.

Frequently Asked Questions about the Preliminary Sale Agreement

Does the preliminary sale agreement have to be signed at a notary’s office?

No. The preliminary agreement is generally a private document signed directly between the parties. Indeed, it is not compulsory to sign it before the final deed. However, as the preliminary agreement is legally binding on both the seller and the buyer, it is possible to seek advice from a notary before signing. The final deed of sale must, however, be drawn up before a notary in order to be registered and enforceable against third parties.

Can you sign a preliminary agreement before you have the bank’s approval?

Yes, provided you include an appropriate clause if your purchase is subject to a loan. The a condition precedent to obtaining the loan Your commitment is therefore conditional upon securing the planned funding. Guichet.lu states that a period of at least 4 to 6 weeks is generally observed. The buyer must then proceed with due diligence and comply with the deadlines set out in the preliminary agreement.

Can the seller accept a better offer after signing?

A seller who has signed a preliminary agreement is bound by the contract. They cannot, therefore, simply walk away from the transaction simply because another buyer subsequently offers a higher price. Failure to honour the preliminary agreement may result in legal action and, where applicable, the enforcement of the penalty clause set out in the contract.

Can an estate agent sign the preliminary agreement on behalf of the owner?

Yes, provided the agent holds a power of attorney granting them the necessary authority. Guichet.lu states that a preliminary agreement signed by the parties or by their duly authorised representatives is legally binding. It is therefore essential to check the scope of the power of attorney before a professional signs on behalf of the seller or the buyer.

Is a preliminary sale agreement sufficient to become the definitive owner?

The preliminary agreement binds the parties to the sale, but the notarised deed remains essential to make the transfer of the property enforceable against third parties. In particular, the notary verifies the seller’s title to the property and any charges attached to it. The notarised deed can then be registered with the relevant authorities.