REALWorld Law

Sale and purchase

Form of contract

Are there formal requirements regarding the content and structure of a sale and purchase contract relating to real estate (SPA)?



The parties are completely free to structure the sale and purchase agreement to suit their own particular needs and the deal in question. The agreement will, however, always contain clauses identifying the property, specifying the purchase price and payment terms, rules on the transfer of title (including the grant of a priority notice of transfer and then registration of the notice in the land register). This ensures that the title will pass to the buyer rather than anyone else who claims to have an interest. In most agreements, the seller will permit the buyer to grant a charge over the property in order to secure funding. Note that the purchase of real estate as part of a share deal may also require notarization, for example if shares in a GmbH (a limited liability company) are acquired. Asset deals always require notarization.

What is a typical contract or SPA in this country like?

The most important aspects of the document relate to payment of the purchase price and the transfer of an unencumbered title. For this reason the contract specifies certain conditions which must be fulfilled before the purchase price is payable, for example, the notary receiving confirmation that any existing charges relating to the property have been cancelled or will be cancelled against payment of (part of) the purchase price, that all necessary approvals (eg by the relevant public authorities) have been granted and that a priority notice of conveyance in favour of the buyer has been registered.

The seller provides a warranty that the property sold is free of certain legal or physical defects. However, the seller's statutory liability for property and construction defects is usually excluded, except in sales of newly constructed property. The seller has a statutory liability to provide valid title (which cannot be excluded).

Usually, possession of the property is transferred on payment of the purchase price, though ownership passes only after registration of the change of ownership in the land register.

Confidentiality provisions are unusual, but can be included at the parties' request.

An agreement to sell real estate (as an asset deal) is only binding once the agreement has been notarised.