A real estate sale and purchase is usually a longer process in which conclusion of the contract, payment of the purchase price, transfer of possession and acquisition of title do not necessarily take place at the same time. It is therefore not only what the parties agree that matters, but also the order in which the individual steps follow one another and the safeguards that protect the seller and the buyer in the meantime.
Title to real estate does not pass merely upon signature of the sale and purchase agreement. Acquisition of title requires both a contract intended to transfer title, which forms the legal basis of the change, and registration in the land register. The contract creates an obligation to transfer title, but the buyer’s title itself is created by registration in the land register. From signature of the agreement until registration of title, the parties must therefore coordinate payment of the purchase price, discharge of the property and issuance of the declarations required for registration so that neither party is placed in an unreasonably vulnerable position.
The current land registration system is based on Act C of 2021 on the Land Registry (the “Land Registry Act”) and its implementing decree. The new legislation entered into force on 15 January 2025 and is progressively placing land registration procedures on an electronic footing. During the transitional period, certain forms of paper-based and electronic administration operate in parallel; as a general rule, however, legal representation is mandatory in application-based proceedings for the registration of rights and facts.
1. The Sale and Purchase Process in Brief
The precise course of a real estate sale and purchase depends on the particular features of the transaction, above all on the payment schedule for the purchase price. Under either structure, conclusion of the agreement is usually preceded by determining the available financing, examining the legal status of the property, arranging an assessment of its technical condition by a suitably qualified professional where necessary and, in the case of a condominium property, reviewing the operation and financial position of the condominium. This may be followed by submission of an offer to purchase or a declaration of intent to purchase, and then preparation of the sale and purchase agreement.
1.1. Payment of the Purchase Price in One Lump Sum
Where the purchase price is paid in one lump sum, the buyer pays the full purchase price upon conclusion of the sale and purchase agreement or at a time directly connected with it. Following preparation, signature and countersignature by a lawyer of the agreement—or its execution as a public deed—the seller issues the consent required for registration of the buyer’s title.
The sale and purchase agreement, the seller’s consent to registration of title and the application for registration of the buyer’s title may then be submitted together to the land registry authority. Possession of the property is transferred at the time and subject to the conditions specified in the agreement, typically at the same time as payment of the full purchase price or shortly thereafter. From a land registration perspective, the transaction is completed upon registration of the buyer’s title.
1.2. Deferred Payment of the Purchase Price
Where payment is deferred, the buyer pays the purchase price in several instalments in accordance with the schedule specified in the agreement. The first instalment—within which, where applicable, an earnest money deposit may be included—is usually paid upon conclusion of the agreement. The seller retains title until the purchase price has been paid in full, while the lawyer handling the transaction takes into escrow the seller’s consent required for registration of the buyer’s title.
The sale and purchase agreement is submitted to the land registry authority together with an application to register the buyer’s right associated with retention of title. Payment of further instalments may be preceded by fulfilment of contractual conditions, in particular the steps required to discharge the property, obtaining any necessary permit for acquisition of title or, where bank financing is involved, conclusion of the loan agreement.
Once the contractual conditions have been fulfilled, the buyer pays the balance of the purchase price. The lawyer then releases from escrow and submits the seller’s consent to registration of title and files the application for registration of the buyer’s title. Possession is transferred at the time specified in the agreement, usually in connection with payment of the full purchase price. The process ends with registration of the buyer’s title in the land register.
2. What Should Be Checked Before Making an Offer?
The essential checks should preferably be carried out before the buyer pays any advance payment, earnest money deposit, “offer security”—discussed in more detail below—or any other significant amount.
2.1. Preliminary Assessment of Financing
When purchasing with loan financing, it is advisable to clarify in advance:
— the amount of the buyer’s own funds available;
— the amount of financing for which the buyer is likely to qualify;
— whether the selected property is acceptable to the bank as collateral;
— what subsidies or concessions may be available;
— how long credit assessment and disbursement may take.
A preliminary credit assessment may reduce financing risk, but it does not create an unconditional obligation on the bank to disburse the loan. The bank will usually make its final decision on the basis of the specific property, the valuation, the sale and purchase agreement and the applicant’s current financial position.
2.2. The Title Sheet
The title sheet is the principal starting point for assessing the legal status of the property. It consists of three parts:
— Part I contains the basic particulars of the property, including in particular the cadastral number, address, area, cultivation category or designation of the property;
— Part II identifies the owners, their ownership shares and the legal grounds on which they acquired title;
— Part III contains rights and facts encumbering or otherwise relating to the property, such as usufruct, mortgage, a prohibition on alienation and encumbrance, enforcement rights, pre-emption rights or the fact that litigation has been commenced.
It is not sufficient, however, to review only rights and facts that have already been registered. Pending notations on the title sheet—discussed in more detail below—must also be clarified, because they indicate ongoing land registration proceedings. A pending notation may, for example, relate to an earlier sale and purchase, registration of a mortgage, an enforcement right or another application affecting the buyer’s acquisition of title.
The land registration order of rights and facts registered in respect of a property is known as the order of priority, while the position occupied by an individual registration within that order is its priority rank. The order of priority and priority rank are determined by the dates relevant to commencement of the legal effect of the registrations. As a general rule, this is the time at which the application for registration, court order or official request was recorded.
This has both substantive and procedural significance. Where competing rights arise by registration, an earlier priority rank may take precedence, and the land registry authority will, as a general rule, determine the submission standing earlier in the order of priority first. A right that arises by registration is created upon registration, but its effect generally relates back to the time at which the submission was recorded.
2.3. Consistency Between the Registered and Actual State
The title sheet alone does not necessarily show whether every building on the property, or any extension or alteration relating to it, is properly recorded in the land register or supported by the necessary building-authority documentation.
In the case of a detached house or a plot, the cadastral map should therefore also be reviewed. It should be checked, for example, whether:
— the residential building, outbuilding or garage is shown on the map;
— any extension requiring a permit or notification has been carried out;
— the actual floor area and use correspond to the registered and official data;
— the required occupancy or retention documentation is available.
A discrepancy between the registered and actual state does not invariably prevent the sale and purchase, but it may hinder bank financing, reduce the market value of the property or require regularisation under building or land registration rules.
2.4. Condominium Documents and the Financial Position of the Condominium
When purchasing a condominium apartment, it is advisable to examine not only the apartment itself but also the operation and financial position of the condominium. Particular relevance may attach to:
— the condominium deed of foundation;
— the organisational and operational rules;
— the minutes and resolutions of previous general meetings;
— the condominium’s reserves, liabilities and outstanding loans;
— planned renovations and extraordinary contributions;
— the amount of the common charges and any arrears owed by the seller;
— the legal status of any storage room, garden area or parking space associated with the apartment;
— restrictions on use of the apartment, including, for example, restrictions on short-term accommodation services.
It is particularly important to establish whether a storage room, parking space or garden area is in fact owned exclusively by the seller or whether the seller merely has an agreed right of exclusive use over part of the condominium’s common property.
2.5. Technical Condition of the Property
The review carried out by the lawyer handling the transaction primarily concerns the legal status of the property, the available documents and the legal risks of the transaction. It is not a substitute for a professional assessment of the building’s technical condition.
For higher-value, older or visibly altered properties, it may therefore be appropriate to involve an architect, structural engineer, building diagnostics specialist or another technical expert. Particular attention should be paid to:
— signs of damp and water ingress;
— the condition of the roof and structural floor or ceiling;
— the electrical installation;
— the water and wastewater systems;
— the heating and cooling systems;
— the windows and doors;
— any structural deformation;
— previous alterations and renovations.
The seller’s representations are important, but they do not replace the careful inspection that may reasonably be expected of the buyer in the circumstances.
2.6. Energy Performance Certificate and Electrical Safety Inspection
As a general rule, the seller must present the energy performance certificate, or a copy of it, to the buyer no later than the date on which the sale and purchase agreement is concluded, and must hand it over no later than transfer of possession. Certain buildings and uses may, however, be exempt from the certification requirement.
Upon a change of ownership, the electrical installation of an apartment in a residential building must undergo an electrical safety inspection unless an inspection document—namely a qualification report—confirming an inspection carried out no more than six years before the date of the change of ownership is available.
A common misconception is that the issue is exhausted by whether a report less than six years old is available. The content of the document must also be reviewed carefully. Particular attention should be paid to whether the qualification report:
— finds the inspected electrical installation compliant;
— identifies any defect presenting a risk to life or of fire;
— identifies any deficiency requiring immediate or urgent rectification;
— specifies a particular deadline for rectification;
— covers the entire electrical installation or only a specified part of it.
If the inspection identifies a defect, the sale and purchase agreement should clearly regulate who is required to rectify it, by what deadline and in what manner, how rectification must be evidenced, and whether remedying the defect is a condition of payment of any instalment or transfer of possession. In the case of deficiencies identified in older installations, the inspector may also specify a deadline for rectification in the qualification report.
3. Offer to Purchase, “Declaration of Intent to Purchase” and “Offer Security”
The title given to a document used by an estate agent or the seller does not in itself determine its legal effect. Depending on its content, a document described as a “declaration of intent to purchase” may constitute a binding offer to purchase if it clearly expresses an intention to contract and covers the essential contractual terms.
Particular care is required where the document:
— precisely identifies the property and the purchase price;
— sets a deadline for acceptance of the offer;
— requires payment of an earnest money deposit or another sum of money;
— attaches legal consequences if either party subsequently fails to conclude or perform the sale and purchase agreement;
— fails adequately to regulate the consequences of refusal of financing;
— grants the estate agent broad powers of attorney.
“Offer security” is not an independent legal institution defined by statute. The legal treatment of the amount paid is determined not by its label but by the content of the parties’ agreement, in particular whether the amount qualifies as an earnest money deposit or an advance payment.
Before the buyer signs such a document or pays any money, the following should be clarified:
— who will receive the amount;
— the legal basis on which the payment is made;
— whether the amount is credited towards the purchase price;
— when and subject to what conditions it is refundable;
— in what circumstances it may be retained;
— what happens if the seller does not accept the offer;
— what happens if the buyer does not obtain the intended financing;
— whether the estate agent is entitled to receive, hold or transfer the amount to the seller.
The safest course for the buyer is therefore to involve their own legal representative before making an offer. You can read more in this article about unauthorised money handling and escrow practices by estate agents.
4. The Sale and Purchase Agreement and the Lawyer’s Role
A real estate sale and purchase agreement must be made in writing. In addition, an instrument suitable for registration of the buyer’s title must comply with the formal and substantive requirements of the Land Registry Act and—unless executed as a public deed—must be countersigned by a lawyer or an in-house legal counsel admitted to the bar.
Lawyer’s countersignature is not merely a formal requirement. By countersigning the instrument, the lawyer certifies, among other matters, that:
— the instrument complies with the law;
— its content reflects the parties’ declared intentions;
— the parties have been identified;
— the parties signed the instrument in the lawyer’s presence or acknowledged the signatures appearing on it as their own.
The tasks of the lawyer handling the transaction usually include:
— reviewing the title sheet and related documents;
— identifying the parties and carrying out client due diligence;
— preparing the sale and purchase agreement;
— coordinating payment and discharge of encumbrances;
— holding the seller’s consent to registration of title in legal escrow;
— filing land registration applications;
— assisting with notification of the acquisition to the tax authority.
A properly drafted agreement should clearly regulate, in particular:
— the precise particulars of the parties and the property;
— the ownership share transferred;
— the purchase price and payment schedule;
— the legal nature of individual payments, in particular the earnest money deposit and advance payment;
— the method of financing;
— discharge of encumbrances from the property;
— the seller’s retention of title;
— establishment, registration and duration of the buyer’s right associated with retention of title;
— issuance and use of the seller’s consent required for registration of the buyer’s title;
— the conditions for transfer of possession;
— fixtures, fittings and other items remaining in the property;
— allocation of costs;
— the consequences of delay and other breaches of contract;
— the procedure relating to rights of pre-emption;
— the seller’s warranty statements and other representations.
5. Earnest Money Deposit or Advance Payment?
The distinction between an earnest money deposit and an advance payment is one of the most important issues in a real estate sale and purchase.
5.1. Advance Payment
An advance payment is an amount paid by the buyer towards the purchase price to which the parties do not attach the statutory security consequences applicable to an earnest money deposit.
If the agreement is performed, the advance payment is credited towards the purchase price. If the transaction fails, the advance payment is refundable unless there is another legal basis for retaining it. This does not prevent either party from asserting a separate claim for damages, a contractual penalty or an accounting claim arising from breach of contract.
5.2. Earnest Money Deposit
An earnest money deposit serves to reinforce performance of the agreement. A sum of money qualifies as an earnest money deposit only if its security function is clearly apparent from the agreement.
If the agreement is performed, the earnest money deposit is credited towards the purchase price. If performance:
— fails for a reason for which neither party is responsible, or for which both parties are responsible, the earnest money deposit is refundable;
— fails for a reason for which the party who paid the earnest money deposit is responsible, that party forfeits it;
— fails for a reason for which the party who received the earnest money deposit is responsible, that party must repay twice the amount received.
Forfeiture or repayment of twice the earnest money deposit does not necessarily exclude other consequences of breach of contract, but the amount of the earnest money deposit is credited against any contractual penalty and damages.
The law does not prescribe a mandatory amount—such as ten per cent—for an earnest money deposit. The parties are free to agree its amount, although a court may reduce an excessive earnest money deposit.
5.3. What Happens if the Bank Refuses the Loan?
Refusal of financing does not automatically mean that the agreement has failed for a reason outside the buyer’s sphere of responsibility. Unless the agreement provides otherwise, securing the full purchase price is generally the buyer’s obligation.
Where the purchase is financed by a loan, it is therefore particularly important to regulate:
— the deadline by which the buyer must submit the loan application;
— the parties’ duties of cooperation and information;
— the documents by which the buyer must evidence that the financing process was properly commenced and pursued;
— whether the buyer must cover any shortfall from other sources if the bank refuses the application or disburses less than expected;
— whether the buyer has a contractual right of withdrawal in such circumstances;
— where a right of withdrawal may be exercised, the conditions for doing so and the treatment of any earnest money deposit already paid.
6. Pending Notation, Priority Rank and Consent to Registration
6.1. What Happens After the Agreement Is Filed?
Following conclusion of the agreement, the lawyer submits the necessary application and documents to the land registry authority. Commencement of the procedure relating to a properly filed submission is indicated by a pending notation on the title sheet.
A pending notation does not yet constitute registered title or another registered right. It certifies that land registration proceedings concerning the property have commenced and records the time at which the submission was entered. This time is of central importance in determining the order of priority and priority rank.
6.2. The Seller’s Consent to Registration of Title
Registration of the buyer’s title requires the seller’s consent to registration. This is a declaration in the prescribed form by which the seller unconditionally and irrevocably consents to registration of the buyer’s title in the land register and deletion of the seller’s own title.
The consent may be included in the sale and purchase agreement or executed as a separate instrument. If the purchase price is not paid in full upon signature of the agreement, the consent is usually held in escrow by the lawyer and used only after the contractual conditions—typically payment of the full purchase price—have been fulfilled.
This protects both:
— the seller against losing title before the purchase price has been paid in full;
— the buyer against the seller arbitrarily refusing, after payment of the purchase price, to issue the declaration required for registration.
The buyer’s declaration that the purchase price has been paid does not in itself replace the seller’s consent to registration of title.
7. The Buyer’s Right Associated with Retention of Title
If the buyer does not pay the full purchase price upon conclusion of the agreement, the seller will usually retain title until the purchase price has been paid in full. In that case, a buyer’s right associated with retention of title may be registered in favour of the buyer.
This institution replaced the former mechanisms of holding the application for registration of title in abeyance and recording the fact of a sale subject to retention of title.
The significance of the buyer’s right is that:
— it may be registered over the entire property, the seller’s entire ownership interest or an undivided share of either;
— the buyer’s subsequently acquired title must be registered at the priority rank of the buyer’s right;
— for a specified period, it provides enhanced protection against submissions filed later.
If the buyer’s right has been registered, the land registry authority suspends determination of submissions ranking later—including, in particular, an application to register a right encumbering the property or another person’s title—until the buyer’s application for registration of title has been determined, but for no longer than six months from submission of the application to register the buyer’s right.
The six-month period therefore begins not on the date on which the buyer’s right is actually registered, but when the application for its registration is submitted to the land registry authority.
If the buyer’s application for registration of title is duly received, the buyer’s title must be registered at the earlier priority rank of the buyer’s right. As a result, as a general rule, the buyer’s acquisition of title cannot be preceded by a later-ranking application to register a right encumbering the property or another person’s title.
The buyer’s right does not automatically cease upon expiry of six months. From that point, its effect is equivalent to that of a contractual prohibition on alienation and encumbrance, but the special six-month suspension of later submissions no longer applies.
A buyer’s right established for a fixed term is deleted by the authority ex officio upon expiry of that term, while one established for an indefinite term is deleted after five years. A deleted buyer’s right may be registered again on the basis of a new agreement between the parties.
8. Purchase with Loan Financing and Discharge of Encumbrances
In a transaction financed by a loan, the sale and purchase agreement must take account not only of the parties’ agreement but also of the financing bank’s conditions for disbursement.
The bank will usually specify, among other matters:
— the conditions precedent to disbursement;
— evidence that the buyer’s own contribution has been paid;
— requirements concerning the priority rank of the buyer’s right and the bank’s mortgage;
— the method of payment to the seller;
— the conditions under which the sale and purchase agreement may be amended or terminated.
Property Encumbered by a Mortgage
If the seller’s property is encumbered by a loan and mortgage, the agreement must precisely regulate:
— evidence of the outstanding debt and the conditions for discharging the property;
— the bank account and payment reference required for full or partial early repayment;
— whether the appropriate part of the purchase price is to be paid directly to the seller’s bank;
— the conditions for issuance of the declarations required to delete the mortgage and the prohibition on alienation and encumbrance;
— the deadline for issuance and filing with the land registry authority of the consent to deletion.
The sequence of discharge and payment must be structured so that the seller’s bank receives the amount required to satisfy its claim, while the buyer receives adequate assurance that the existing encumbrances can in fact be deleted.
9. Pre-emption Rights, Usufruct and Co-ownership
9.1. Right of Pre-emption
A right of pre-emption may arise by law or contract. In the case of undivided co-ownership, for example, the co-owners generally have a right of pre-emption if one co-owner intends to sell their ownership share to a third party.
If the seller receives from a third party an offer that the seller intends to accept, the seller must communicate the offer in full to the holder of the right of pre-emption before accepting it. This duty does not apply where communication would involve exceptional difficulty or substantial delay because of the holder’s whereabouts or another circumstance; however, this exception is interpreted narrowly and applies only where the relevant conditions are met.
Communication of the offer constitutes an offer to sell made by the seller. If the holder of the right of pre-emption accepts the offer in full and within the applicable period, the sale and purchase agreement is concluded between the seller and that holder on the terms set out in the offer.
A contract concluded in breach of a right of pre-emption is not void, but is ineffective against the holder of that right. This is relative ineffectiveness: the contract remains in force between the original parties, but the holder may ask the court to declare that it is ineffective against them and that an agreement of identical content was concluded between the holder and the seller.
Claims arising from such ineffectiveness may be asserted within thirty days after the holder becomes aware that the agreement was concluded. This requires the holder, simultaneously with asserting the claim, to make a declaration accepting the offer and to prove their ability to perform. No claim may be asserted after three years from conclusion of the agreement.
Accordingly, the following must be clarified when preparing the sale and purchase agreement:
— who holds a right of pre-emption;
— precisely which offer must be communicated to that person;
— how and to which address communication must be made;
— how much time the holder has to make a declaration;
— which documents can evidence communication, waiver or that communication would involve exceptional difficulty.
9.2. Usufruct
A usufructuary is entitled to possess and use the property and take its fruits. The owner may exercise these rights only to the extent that the usufructuary does not exercise them.
A property encumbered by usufruct may be sold, but the sale and purchase does not by itself terminate the usufruct. If the buyer wishes to acquire unencumbered title, deletion of the usufruct must be arranged, which as a general rule requires the usufructuary’s consent to deletion in the prescribed form.
It is therefore not sufficient merely to reach agreement with the seller. The usufructuary’s participation, any consideration payable and the conditions for issuance of the consent to deletion must also be regulated.
9.3. Undivided Co-ownership
In the case of undivided co-ownership, the buyer does not acquire title to a physically separate residential unit, but to a specified undivided ownership share in the property as a whole.
The arrangement for actual use is usually regulated by a use-allocation agreement. It is advisable for that agreement to include a cadastral map or floor plan, and it should be signed by all affected co-owners.
Before conclusion of the agreement, it should be examined:
— which rooms and areas are allocated to the exclusive use of the ownership share to be acquired;
— how common areas are used;
— whether utilities are separately metered;
— whether responsibility for maintenance and renovation costs is regulated;
— whether the agreed use arrangement corresponds to the actual state;
— whether the agreement satisfies the financing bank’s requirements.
The new land registration legislation also permits registration of a right governing the use of co-owned property where the statutory conditions are met. The right governing the use of co-owned property is included among the rights capable of registration in the land register.
Summary
The security of a real estate sale and purchase does not depend solely on signature of the agreement. Before making an offer, the buyer should understand the legal and technical condition of the property, the financial position of the condominium, the financing conditions and any encumbrances, pre-emption rights or rights of use affecting the property.
The agreement must then regulate more than the purchase price and payment deadlines. It must coordinate:
— payment of the purchase price;
— discharge of the property;
— the seller’s retention of title;
— registration of the buyer’s right;
— the holding in escrow of the seller’s consent to registration of title;
— the conditions of bank financing;
— the procedure concerning holders of rights of pre-emption;
— the consequences of delay and failure of the transaction.
Most subsequent disputes do not arise because either party acted in bad faith from the outset, but because a material issue was not clarified in advance or cash flows and legal safeguards were not arranged in the correct sequence. The legal representative’s role therefore extends beyond preparing and countersigning the instrument: the entire transaction must be structured so that the parties’ obligations, rights and risks are all transparent.
What Will Be Covered in Part II?
Part II of this series will examine the practical and financial issues arising after payment of the purchase price, including in particular:
— transfer of possession and the handover protocol;
— recording meter readings and transferring utility accounts;
— completion of the title registration procedure;
— defects in the property and statutory warranty claims;
— the transfer tax payable by the buyer;
— any personal income tax liability of the seller;
— further administrative, legal, banking and expert costs of the transaction;
— and the principal checks to be completed before handover and completion of the transaction.
