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Many new apartments are sold off plan (sale in the state of future completion). If you have such a purchase in mind, you will sign a reservation contract. When signing, the seller agrees to reserve a home and you to buy him. To avoid unpleasant surprises, be careful, know what you are going for and what are your possible recourses.

VEFA and the reservation contract

Sale off plan (off-plan sale) consists of buying housing that is not yet built or is being built. This type of purchase meets specific rules set out in the Construction and Housing Code.

The reservation contract is a preliminary contract for sale who will fix the conditions under which it will take place. By signing it, the seller (the developer of the real estate project) agrees to reserve you a home. In return you pay him a deposit.

The reservation contract can be signed before notary (It can then be handed to you personally) or made under private, directly with the seller. In this case, it must be sent to you by registered letter with acknowledgment of receipt.

If the reservation contract is not mandatory, it is strongly recommended. Never settle for mere oral promises...

What must the reservation contract contain?

To be valid, the reservation contract must contain certain mandatory information (Article L 261-15 of the Construction Code):

  • address good and its situation in the real estate complex.
  • The description detailed housing: approximate living space, number and type of rooms (main rooms, service rooms, outbuilding).
  • The description of the materials of construction (nature and quality).
  • The estimated selling price and its terms of revisions if applicable.
  • The approximate date the signing of the sales contract at the notary.

Many booking contracts also include other mentions that specify the terms of the real estate transaction such as the schedule of completion of work and payments, the delivery time of the property, etc.

The deposit in the reservation contract

In return for booking a home, the seller asks you for a deposit. Its amount depends on the delay between the signature of the reservation contract and that of the final sales contract:

  • It is a maximum of 5% of the price stipulated in the reservation contract, if the sale occurs in less than 1 year.
  • It is a maximum of 2% of the price stipulated in the reservation contract, if the sale occurs in more than 1 year but less than 2 years.
  • Beyond 2 years, the seller can not claim a deposit.

The deposit is "unavailable, untransferable and unseizable until the conclusion of the contract of sale" (Article L 261-15 of the Building Code). The money is deposited by the seller in a special account, opened in your name, in a bank or at a notary. The seller can not, in any case, dispose of it. This amount will be deducted from the price at the final sale.

In order to protect you, the law provides several cases where the deposit must be returned to you in full, within 3 months:

  • If the contract is not concluded because of the seller (construction canceled, final sales contract that is not signed in due time).
  • If the final sales contract shows an abnormal difference compared to the reservation contract (smaller surface area, lower quality of materials, unrealized utilities, final sale price exceeding the expected price by more than 5%).
  • If you do not get your loan (legal suspensive condition provided for in Article L 312-16 of the Consumer Code).

The withdrawal period of the reservation contract

After signing the reservation contract, you have 10 days to change your mind and go back on your commitment, without having to justify yourself.
This period starts the day after the delivery of the booking contract or the day following the first presentation of the registered letter notifying the contract.
Attention, your withdrawal must always be sent by registered letter with acknowledgment of receipt. The seller must then return the entire deposit.

The contract of reservation of a real estate

FAQ - 💬

❓ Are reservations a contract?

👉 A reservation is a binding contract consisting of mutual promises: the hotel agrees to provide the accommodation at the quoted rate, and the client agrees to pay.

❓ What is agreement reservation?

👉 A reservation agreement is used when a buyer wants to prevent a seller from negotiating the sale of a property with another party for a fixed period of time. The objective is to offer the buyer time to proceed with the transaction without running the risk of losing the property to a rival buyer (aka gazumping).

❓ What is a reservation contract in Spain?

👉 When buying a property in Spain, once a price has been agreed between the buyer and seller, buyers are often asked to sign a reservation contract (known as Contrato de Reserva) and pay a reservation fee to secure the property.

❓ What does sold with reservation mean?

👉 A sale with a reservation can mean that the seller is still awaiting certain matters that need to be arranged by the buyer. For example, the financing must be arranged. The mortgage must be granted and the buyer's financial details must be approved.

❓ What does Reserved mean in real estate?

👉 Reserved Property refers to property to be set aside for dedication to the City for Open Space and/or Public Improvements.

❓ Can a builder cancel a reservation?

👉 No; A Home Builder cannot cancel the Reservation agreement.

❓ Are reservation fees refundable?

👉 Often the reservation fee is stated to be non-refundable if the buyer fails to exchange contracts within the time period specified. Whether you are entitled to the return of your fee will depend on the terms of your reservation agreement.

❓ What does a reserved property mean in Spain?

👉 Signing a reservation contract with regards to a Spanish property purchase, ordinarily ensures that the property is not actively marketed for an agreed period (usually up to 30 days) which gives your Spanish lawyer time to run all the necessary background checks to ensure there are no issues regarding planning, land ...

❓ Who holds the 3% capital gains tax when you sell a property in Spain?

👉 When a non-resident sells property in Spain, they buyer is obliged to retain 3% of the price and pay it to the tax authorities to cover the vendor's Capital Gains Tax (CGT) liabilities. If the 3% retained exceeds the taxes due, the vendor can expect a refund once all taxes have been paid.

❓ What Reserve buyer means?

👉 A reserve price is a minimum price that a seller would be willing to accept from a buyer. In an auction, the seller is not typically required to disclose the reserve price to potential buyers. If the reserve price is not met, the seller is not required to sell the item, even to the highest bidder.

❓ How long does a reservation fee last?

👉 During this time (known as the 'reservation period'), the seller agrees not to sell to another party. As part of the agreement, the buyer pays a deposit (known as the 'reservation fee'). The reservation period typically lasts for a period of 28 days.

👉 In brokerage term, Reservation Agreement is called Earnest Money – a small amount of money usually few thousand pesos or 2% to 5% of the Total Contract Price to show interest to purchase on the part of the buyer and that the property can be put on hold until such time the Contract to sell or Deed of Sale is ready for signing.

👉 The builder or developer states that it will not sell the property to another during the reservation period. If the buyer decides to buy the property, any fee is deducted from the deposit paid on exchange of contracts.

👉 This agreement states: the amount of the reservation fee the purchase price the period of how long will the price remain the deadline date when the reservation agreement will end the expenses that will be deducted from the reservation fee if contracts are not exchanged

👉 Without this agreement, a buyer who can make a reservation can demand a refund when a buyer decides not to push through because there is no legal basis for the forfeiture. Besides, the Reservation Agreement is the basis in which the Contract to Sell shall be made leading to the more important contract – the Contract to Sell.


Video Instruction: The real estate reservation agreement in Spain | WTG Spain