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ITThe preliminary property sale agreement, often referred to simply as the ‘preliminary’ or ‘compromesso’, is the agreement whereby the seller and buyer undertake to conclude the final sale contract (or final notarial deed) at a later date.
The preliminary agreement does not yet result in the transfer of ownership of the property. However, the parties have already agreed, in a legally binding manner, on the key terms of the future sale: the property being sold, the price, the payment terms and the deadline by which the final contract must be signed.
In other words, the preliminary agreement serves to set out in writing all the terms and conditions of the future sale of the property, binding the parties to enter into the final contract.
The law also sets out a number of important provisions relating to this contract. The preliminary agreement must be registered within 30 days; it may be entered in the land registry if it is drawn up before a notary; and it may include safeguards such as a deposit.
Understanding when it is advisable to register the preliminary agreement and what legal effects this has is essential for avoiding risks in property transactions. In the following sections, we will therefore look at how the preliminary agreement works, what checks should be carried out before signing, and in which situations registration can offer the buyer greater protection.
How the preliminary property sale agreement works
The preliminary agreement is an intermediate stage between the parties’ initial agreement and the signing of the final contract of sale.
The preliminary contract sets out the key terms of the future sale. The document precisely identifies the property being sold, sets the agreed price and sets out the terms of payment.
In addition to these key elements, the preliminary agreement also sets the deadline by which the final deed must be signed. There is often a gap of several months between the preliminary agreement and the final deed, a period needed to carry out checks on the property, secure a mortgage or complete other formalities related to the sale.
For this reason, the contract may also contain clauses governing the conduct of the transaction. Among the most common are, for example:
- the condition precedent relating to the granting of the mortgage
- the seller’s undertaking to rectify any planning irregularities
- the requirement for a deposit
- a statement of the timeframe within which the deed of sale must be signed
From a legal point of view, the preliminary agreement is binding. This means that it does not immediately transfer ownership of the property, but creates an obligation for both parties to enter into the final contract on the agreed terms.
If one of the parties fails to comply with the agreement, the other party may seek termination of the contract, compensation for damages, or obtain a court order having the same effect as the final contract.
For this reason, the preliminary agreement should not be regarded as a mere formality, but as a legally significant step in the process leading up to the sale of the property.
What to check before signing the preliminary agreement
Before signing the preliminary property sale agreement, it is advisable to carry out certain checks on the property and the legal status of the parties.
The preliminary agreement, in fact, already creates a binding commitment, which is why it is important for the buyer to have a clear understanding of the situation before signing the contract.
Among the aspects that should be checked are, first and foremost, the seller’s title to the property and whether there are any mortgages or charges against it. It is equally important to verify compliance with planning and land registry regulations, to ensure that the property’s condition matches the official documentation.
Another factor to consider concerns the origin of the property, particularly when it has been acquired through inheritance or a gift. In such cases, it is advisable to carefully trace the property’s legal history.
Finally, it may also be necessary to examine the parties’ personal circumstances, such as the matrimonial property regime, as the choice between community of property or separation of property may affect who is entitled to carry out the sale.
Carrying out these checks before signing the preliminary agreement helps to minimise risks in the next stage of the sale.
What are the effects of the preliminary agreement?
The preliminary contract creates a legally binding agreement between the seller and the buyer.
Once the contract has been signed, both parties are obliged to enter into the final contract on the agreed terms.
If one of the parties fails to comply with the terms of the agreement, the other party may invoke various legal remedies. In particular, they may seek termination of the contract, compensation for damages or, in certain circumstances, obtain a court order having the same effect as the final contract.
This shows that the preliminary agreement is not merely a preparatory stage, but a legally significant step in the sale of a property.
The deposit and the protection of the parties
It is very common for a deposit to be paid at the preliminary stage.
A deposit is a sum of money that the buyer pays to the seller upon signing the contract, and serves to reinforce the commitment made by both parties.
If the sale goes ahead as agreed, the deposit is usually deducted from the purchase price. If not, the deposit serves as a safeguard.
If the buyer fails to honour the agreement, the seller may withdraw from the contract and retain the deposit. If, on the other hand, it is the seller who fails to fulfil their obligations, the buyer may also withdraw from the contract and claim the return of double the deposit paid.
For this reason, it is important that the contract clearly specifies the nature of the sum paid.
Why must the preliminary agreement be registered?
The registration of the preliminary contract is a legal requirement.
The contract must be registered with the Revenue Agency within 30 days of being signed, even in the case of a preliminary agreement between private individuals.
The registration serves primarily a tax-related purpose: it is required for the payment of stamp duty and to provide a certified date for the contract.
It is important to understand, however, that registration does not provide full protection against subsequent events that may affect the property.
For this reason, in certain situations, it may be advisable to consider registering the preliminary agreement in the land registry.
Registration of the preliminary agreement and its binding effect
The registration of the preliminary contract in the land registry protects the buyer against mortgages, seizures or sales to third parties that may occur after the contract has been signed.
Where the preliminary agreement is drawn up as a public deed or a private document authenticated by a notary, it must be registered in the land registry.
Registration has what is known as a ‘reservation effect’, which protects the purchaser against any subsequent acts that might prejudice their rights.
The events that transcription helps to mitigate include:
- mortgage registrations
- repossessions
- sale of the property to third parties
- insolvency proceedings involving the seller
If the preliminary agreement has been registered, the subsequent registration of the final contract takes precedence over any subsequent documents.
How long does the legal protection of the preliminary agreement last?
The protection afforded by registration is not unlimited in time.
The effects cease if the final contract is not registered:
- within one year of the date set for the signing of the deed
- and in any event within three years of the registration of the preliminary agreement
If the deed of sale is signed within these time limits, the buyer retains the protection afforded by the reservation.
The notary’s dedicated account
Another safeguard in property transactions is the notary’s escrow account.
Under this system, the purchase price can be deposited into an escrow account held in the notary’s name. The seller will only receive payment once the notary has verified that the deed has been duly registered and that there are no outstanding formalities.
This mechanism helps to enhance the security of the transaction and minimise risks during the final stage of the sale.
The preliminary agreement for properties under construction
Where the preliminary agreement relates to a property under construction, the contract must contain even more detailed provisions and registration is mandatory, as the regulations governing the protection of purchasers of properties under construction apply.
It is necessary to clearly identify the subject of the future sale, specifying, amongst other things:
- the floor area of the property
- the location within the building
- the shareholdings
These documents are also required to ensure that the preliminary sale agreement is drawn up correctly.
The preliminary contract is therefore a crucial stage in the sale of a property: it clearly sets out the agreement between the parties and, if properly registered or recorded, can provide important safeguards for both the seller and the buyer.
FAQ – Preliminary property purchase agreement
What is a preliminary property sale agreement?
This is the agreement whereby the seller and buyer undertake to enter into the final contract of sale at a later date. It does not immediately transfer ownership of the property but creates an obligation to complete the sale.
Does the preliminary agreement need to be registered?
Yes. The preliminary contract must be registered with the tax office within 30 days.
Are the registration and transcription of the preliminary agreement the same thing?
No. Registration serves a tax purpose. Entry in the land registry, on the other hand, serves to protect the buyer against mortgages, seizures or sales to third parties that have taken place since the contract was signed.
How long is there between the preliminary agreement and the final deed?
The timeframe is agreed by the parties in the contract. It often takes a few months, particularly when the buyer needs to secure a mortgage.
What happens if one party fails to honour the preliminary agreement?
The party that has complied with the contract may seek termination of the contract, compensation for damages, or a court order having the same effect as a final contract.
What is the difference between a preliminary agreement and a provisional sale agreement?
From a legal point of view, there is no difference. The term ‘compromesso’ is simply the name commonly used to refer to a preliminary contract.
What should the amount of the deposit cheque be in the preliminary agreement?
The law does not specify a minimum or maximum amount. In practice, the deposit is often a percentage of the property’s price.
What happens if the buyer dies after signing the preliminary agreement?
The rights and obligations arising from the contract pass to the heirs, who take the place of the prospective buyer.
Is it compulsory to sign the preliminary agreement at a solicitor’s office?
No. It can also be drawn up as a private agreement. However, only a preliminary agreement that has been received or authenticated by a notary can be entered in the land registry.
How much does it cost to register a preliminary contract?
Registration entails the payment of:
- €200 in registration tax
- 0.5% of the deposit and any advance payments made towards the purchase price.
Can a signed preliminary agreement be cancelled?
The preliminary agreement may be terminated by mutual consent or in the circumstances provided for by law, for example in the event of termination due to breach of contract.