Reservation contract for an apartment – our client’s story

Buying a property doesn’t always go smoothly. Rather, it is good to expect that something may go wrong. For example, signing the reservation contract and paying the reservation fee. Our client, Jindřich Krčmář, found this out.

6 minutes of reading

Chapters of the article

What is a booking contract

A reservation contract is used to secure the commitment of both parties in the purchase of a property. The basic purpose of this contract is to guarantee that the buyer will actually purchase the property and that the seller will not sell it to another party, even if a better offer comes along.

The contract also includes a reservation fee, which acts as a guarantee for the seller. If the buyer withdraws from the purchase, the fee is forfeited as compensation to the seller. If the transaction goes through, the fee is included in the total price of the property.

Are you planning to buy a property?

We will provide you with a complete contractual and legal service, including a booking contract. We can do it within 48 hours, flawlessly and professionally.

Components of the booking contract

A booking contract does not have a statutory content, but there are parts that it should always contain. These are:

  1. Specification of the property: this section should give details of the property to be sold. This includes the address, cadastral details, land area, description of buildings and other specific features of the property.
  2. Specification of other items to be sold: If there are additional buildings, equipment or fixtures and fittings (such as a garage, garden furniture or kitchen appliances) attached to the property, these should be specified in the reservation agreement.
  3. Thepurchase price: The contract should clearly state the price at which the buyer is purchasing the property. It should also state whether the price is final or whether there may be additional costs associated with the transfer of the property.

Tip: When buying a home or apartment, it’s not about small money. Often you have to invest a lifetime of savings or go into debt for the next 30 years with a mortgage. So read on to find out what to look out for when buying a property.

  1. Method of payment of the purchase price: This clause specifies how and by when the purchase price is to be paid. It may include details of advance payments, any instalments, a reservation deposit or the use of credit (e.g. a mortgage).
  2. The length of the reservation contract: This sets out how long the contract is valid for, i.e. by when the purchase contract must be concluded. After this period, the reservation contract can either be extended or terminated without further claims.
  3. Conditions and consequences of withdrawal or cancellation: This section should set out the conditions under which the contract can be cancelled (e.g. failure to meet the financing conditions, discovery of legal defects in the property, etc.) and the consequences of such cancellation for both parties, including any refund of the reservation fee.

Tip: A reservation contract is a type of forward contract. You can find out what other types we have, and how to do them, in our article.

A story from practice

Mr. Krčmář did not rush to sign the booking contract, but there were still problems. The real estate agency through which he purchased the apartment promised something in the reservation contract for the apartment that it could not fulfill. Anyone expecting an apology and a remedy would be sorely mistaken. Mr. Krčmář was only helped by our service. How specifically?

“I can highly recommend the legal services of Available Advocate. In my case, it was a disputed situation I got into with a real estate agent and the seller of the property. Both the estate agent and the seller breached the booking contract and refused to accept my demand for a refund of the booking fee. In fact, in the reservation agreement, the seller had stated, among other things, that he would sell the co-ownership interest in the parcel of land on which the property was located, even though it soon became apparent that neither he nor the company of owners owned the parcel in question.

On this basis, I was no longer interested in buying the property, because my plan from the beginning was that I would only buy the property with the respective plots or co-ownership shares. In their opinion, these were not sufficiently serious breaches of the reservation agreement, so I had to buy the property or they would keep the reservation fee of around 5% of the property price. Through consultation and later legal representation in the case, the dispute was concluded by agreement without subsequent lengthy litigation. In the end, the other party refunded the reservation fee and paid me at least symbolic compensation for the damage caused. Without the help of the Accessible Lawyer, I would most likely not have reached any agreement with the opposing party.”

At the first stage, we assured the client that he was in the right and that the counterparty had clearly breached the contract. At the same time, however, we recommended to settle the matter amicably, as this would avoid a lengthy trial with a possible surprising outcome. In the end, the counterparty responded positively to our pressure and, in addition to the booking fee, also compensated for the damages incurred.

Tip: Read about the principles of compensation, what you are entitled to and how to claim.

The purchase of an apartment begins with the signing of the reservation contract. In our experience, many people underestimate this document. As seen in Mr. Krčmar’s story, it certainly may not pay off. That’s why we’ve prepared a detailed guide on what to look out for when buying a property in our e-book 5 tips on how to buy or sell a property risk-free.

What else to look out for

Buying a property is an important process, as it usually involves millions of dollars, so you need to think carefully and take care. In addition to the reservation contract, make sure to look at the following points:

  1. Thelegal status of the property: check that the property is legally “clean”, i.e. that there are no foreclosures, liens or other restrictions on it. It is also important to check that the seller really owns the property and has the right to sell it.

Tip: Planning to buy a home in foreclosure? Learn how to proceed and what to watch out for.

  1. Physical condition of the property: thoroughly check the physical condition of the property. This includes the condition of the building structure, electrical wiring, plumbing, heating, windows, doors, etc. It is definitely worth investing in an inspection by a professional to uncover any hidden defects.
  2. Location. Be sure to also find out about planned changes in the area, such as new building projects or zoning changes that may affect the future value of the property.
  3. Financial considerations.
  4. Contract: It is essential that the purchase agreement is clear, complete and contains all important aspects such as the exact specifications of the property, price, terms and conditions of transfer. Don’t be afraid to seek the help of an Affordable Solicitor to ensure that the contract is correctly worded and does not contain terms that are unfavourable to you.

Are you solving a similar problem?

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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.

  • 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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