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Real estate purchase contract: contractual guarantees

The preparation of a purchase contract for the sale of an apartment or house entails several pitfalls that can jeopardize or at least slow down the entire transfer. In this series on the purchase contract, we try to unmask these pitfalls and give guidance on how to avoid them.

3 minutes of reading

We have already addressed the issue of the definition of the property, the purchase price or the terms of the purchase agreement.

Today we are looking at the issue of contractual guarantees.

What are seller’s warranties? These are express assurances by the seller about the condition of the apartment or house, both from a legal and factual (technical) point of view. For example, the seller assures the buyer that the house is equipped with modern insulation or that there are no debts on the house.

The seller’s interest

The seller naturally wants to sell the property without any extra guarantees and, on the contrary, often tries to exclude or at least limit his liability. The seller naturally wants to achieve a situation where the transfer of the property does not involve any risk for him.

Thus, from the seller’s position, it is often advisable to sell the property “as is” and thus eliminate the risks from most defects. In practice, however, this is more complicated and the phrase “as is” may not have any effect at all in the case of a clearly defined property. It is more likely to apply to things that are not clearly defined (e.g. furnishings in an old house).

The issue of drafting contractual warranties is probably the most challenging task for a lawyer in drafting a purchase agreement and can involve lengthy negotiations between the prospective buyer and the seller.

Real Estate Purchase or Sale

We provide a complete package of legal services related to real estate sales and purchases, including reservation contracts and escrow services. We will also help you with all tax and land registry issues. Our work is fast and accurate, ensuring a worry-free transaction. You’re also welcome to pay after services are provided.

Buyer’s interest

The buyer has an interest in ensuring that the apartment or house is free of both factual defects (e.g. rotten floors) and legal defects (the apartment has been sold twice, there is an easement or lease agreement with a problem tenant or there is a mortgage on it).

The buyer should therefore insist on express warranties. The seller’s warranties can and often do cover a wide area of concern:

  • ownership of the property,
  • other persons’ rights in rem or other encumbrances on the property,
  • hidden defects,
  • taxes and other public charges, etc.

In practice, we have come across a case where the seller has concealed a problem tenant in the flat and, as the contract was unfortunately worded, the new owner has had to deal with the situation at his own expense (and nerves). Here again, it is advisable to consult a solicitor beforehand. The costs are then minimal in relation to what awaits the buyer with a poorly drafted contract.

Care should also be taken with the actual pages of the purchase contract. If the apartment is owned by a married couple, both should sign the contract. The parties should also declare that there are no foreclosure or insolvency proceedings against them. This could also complicate the transfer. It should also be added that of course the above also applies to the transfer of a cooperative flat (membership share).

Download the free e-book 5 tips on how to buy or sell property without risk and go through the process of selling or buying a house, flat and land smoothly.

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Author of the article

JUDr. Ondřej Preuss, Ph.D.

Ondřej is the attorney who came up with the idea of providing legal services online. He's been earning his living through legal services for more than 10 years. He especially likes to help clients who may have given up hope in solving their legal issues at work, for example with real estate transfers or copyright licenses.

Education
  • Law, Ph.D, Pf UK in Prague
  • Law, L’université Nancy-II, Nancy
  • Law, Master’s degree (Mgr.), Pf UK in Prague
  • International Territorial Studies (Bc.), FSV UK in Prague

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