How NOT to Buy Real Estate

Have you decided to take the first step to buy your dream real estate and you do not know how to proceed?

Our clients often turn to us for advice on whether the purchase agreement is written correctly and whether it is all right to sign. However, the truth is that the whole inspection process should start when selecting the real estate and before signing the reservation contract. We can confirm this in one of our most recent cases.

Our client chose a very attractive-looking advertisement on the internet, which promised to buy land with an unfinished building in the “pre-completion” phase meaning that the client only had to complete the interior of the building and transfer the real estate to use at his own expense. The building was advertised as unfinished and the photo documentation of the building and land was taken from the construction site. The client was assured verbally by the seller as the builder that the construction phase had significantly progressed compared to the photographs and that he will be buying the building in the pre-completion phase, so he has nothing to worry about. Communication between the sides was always done verbally. Unfortunately, our client believed in the promises and concluded a reservation contract with the agent and the seller. The reservation contract included a relatively high reservation deposit, which in the event of failure to conclude a purchase contract should have been included in the contractual penalty, otherwise it should have been used as an advance payment on the purchase price for the real estate. The client doubted the process from the beginning, but because it was explained to him that there is great interest in the real estate, he must conclude a reservation contract, otherwise other interested parties will be given priority. Our client succumbed to the pressure of the agent and concluded a reservation contract. However, since he could not sleep due to the whole situation, he handed the case over to our law firm and was subsequently rather surprised.

The submitted contractual documentation showed that the subject matter of the purchase is an immovable object, but only the land where the building under construction stands without further specification. Neither the phase nor the state of building under construction or a more detailed description of the building under construction was determined in any way. The seller’s promises that he would complete the entire construction as he advertised was only by word of mouth. To make matters worse, the connection of utilities was not completed nor was there a proper access road. None of the submitted documents contained the seller’s obligation to set up and properly build an access road, utilities, or to complete the construction of the house. In addition, following the negotiations on the contractual arrangement for the completion of the construction, the client was promised the conclusion of a contract for work. The subject of the contract for work was the completion of the necessary utilities and the construction of the house. The contract did not mention that the price of the work should have already been paid or that the total amount requested by the seller would be divided between the purchase price and the price of the work, and it also did not include any other adjustment for the price of the work.

We strongly recommended that our client not conclude the transaction described above for the following reasons. At the end of the day, the client would only buy land with a building under construction without further specification for the price at which he intended to buy an almost finished house, and at the same time, he would be obliged to pay the usual price for the work agreed in a separate contract. Nowhere was he assured that his house would have an access road, while in accordance with existing case law, he would not have acquired the right to establish the necessary road neither.

Due to the fact that the reservation contract contained a similarly defined subject matter of the reservation as the purchase contract, the whole transaction will probably end up costing our client a contractual penalty in the amount of the reservation deposit. It is an expensive lesson, but without timely intervention, it could have been even more expensive.

When purchasing real estate and before concluding the reservation contract, we recommend always properly checking what its subject matter is, what are the rights and obligations of the parties, and whether everything you have agreed to verbally is included in the written contract. If you have any doubts when carrying out a million-crown transaction, it may reasonable to invest a little money to ensure that you are buying and obtaining what you have agreed to with the seller.

Do you have questions related to real estate? At Stuchlíková & Partners, we have been dealing with this issue for a long time. Contact us at info@stuchlikova.com and arrange initial consultation.