Recommendations on purchasing virtual dwelling
In recent years new residential projects have been actively offered in the real estate market. Often, however, the construction is begun only after signing the preliminary agreements with the potential buyer. Usually a payment of 10 's 30 percent of the value of the real estate is made in order to reserve such virtual houses or apartments. Thus to avoid misunderstandings, financial losses and issues on the questionable quality of the property, special attention should be paid to legal nuances during the conclusion of the deal.
By signing an agreement on real estate that is under construction, the buyer runs the risk that he will ultimately not get what he had originally wanted. If, as a rule, the buyer is able to carefully inspect and examine the dwelling prior to purchasing it, then by seeing only a virtual project he relies to a great extent on the promises of the seller and the constructor. So it would be advisable to stipulate the procedure and terms for delivery of the dwelling and elimination of shortcomings. Usually, both parties sign a deposit agreement or preliminary agreement stipulating the relevant contractual provisions.
The difference between those agreements lies in the obligations undertaken by the parties:
1) the deposit agreement ensures a certain interest of the parties to sign the purchase agreement, as the Civil Law provides that if the purchase agreement has not been signed in the set term through the fault of the seller, he must return twice the sum of the deposit to the buyer; but if the buyer is at fault, the deposit paid remains with the seller;
2) the same payment in the preliminary agreement may be called an advance payment, and the parties may mutually agree on what happens with the advance payment in case the agreement is not signed in the set term. In such cases, usually the seller returns the amount he has received, and an additional penalty can be determined for failure to timely perform obligations. In such case, notwithstanding the payment of the penalty, the buyer may still request the seller to meet his commitments.
It is important to stipulate the payment of the remaining amount for the real estate. It is advisable to draw up a payment schedule dividing the payments into stages.
For example, the first instalment after signing the agreement, the second instalment after the deed of conveyance of the building (apartment), but the third instalment after the registration of the buyer's ownership title in the Land Registry. That would be another tool in the buyer's hands to influence the seller in case the latter does not meet his commitments.
It would be advisable to open an escrow account in a bank for the remaining payment. Thus the seller can be sure that the buyer possesses a certain amount of money, while the buyer can be sure that the bank where the escrow account has been opened will pay the remaining amount to the seller only after the seller produces the Land Registry deed certifying the buyer's ownership title to the respective dwelling.