Expert: Only a Notarial Agreement Applies to Real Estate
A booking agreement commonly used in the real estate market may give buyers and sellers a false sense of security, but if the document is not notarially certified, it is actually invalid in the eyes of the law and either party can back out of the agreement, warns Laima Moora, a real estate broker at 1Partner Real Estate.
A booking agreement is usually concluded when a prospective buyer has found a suitable home, but more time is needed to finalize the purchase – for example, due to a bank loan decision or freeing up investments. The agreement ensures that the property is held for the interested party for a certain period of time. "A booking agreement may seem like a fair and quick solution, but if it is not notarially executed, then it is essentially a worthless piece of paper. In essence, it is about fixing a mutual interest, but at the same time neither party has a truly binding obligation and both the buyer and seller can change their minds at any moment," explains Moora.
The booking fee that comes with the agreement can amount to thousands of euros and is often treated like a down payment: if the buyer backs out, the fee goes to the seller and if the seller backs out, the money must be returned. "However, the law stipulates that all contracts related to the sale of real property, including booking agreements, must be concluded in notarial form. If a booking agreement contains references to concluding a sales contract in the future, a simple written document is not sufficient and the seller also lacks a legal basis for retaining the money," emphasizes Moora, according to whom many sellers are surprised when they have to return the booking fee to the client because the law treats it as unjust enrichment.
According to an experienced broker, disputes over booking agreements often arise when the buyer decides to back out of the transaction after an expert appraisal or bank decision. This is where the dual nature of booking becomes apparent: on one hand, it is a useful tool that gives the buyer time and the seller certainty, on the other hand, it can lead to misunderstandings and financial losses if the formal requirements are not correctly fulfilled. "The lesson to take from such situations is simple. Before signing a booking agreement, a buyer should always investigate what kind of obligations the document contains and make sure that it is actually valid. A seller should consider whether the short-term wait justifies the risk of losing both a potential buyer and the sales period," explains Moora and adds that it is in the best interests of both parties to go to a notary and conclude a properly executed preliminary agreement or sales contract.
