Real estate: purchase agreement or not?

Real estate: purchase agreement or not?

It is striking how often there is discussion about whether or not a purchase agreement has been concluded between parties. It all seems so simple: either you have bought a property or you have not. Nevertheless, we put that question to the (provisional) court on behalf of clients many times each year.

Purchase

A purchase is deemed to have been made if agreements have been made about the delivery of a property against payment of a cash price. It must of course be clear which property is involved. However, the purchase price does not have to be fixed at the time of the agreement. In particular, if the parties are specifically unconcerned about the purchase price. It is sufficient that the purchase price can be determined. So if you agree with your neighbour to sell your garage box to him, then there is a legally valid purchase if you both find the price of lesser importance. The purchase price can thereafter be determined by an expert.

Offer and acceptance

A purchase agreement is established through offer and acceptance. What is an offer? A statement is an offer if it contains all essential elements of the purchase. So not only must the location and size of the property be fixed, but also the purchase price (taking into account the above-mentioned exception), the state of maintenance, the date of delivery and any resolutive conditions. An offer expires if it is not accepted within the specified period, or if the offer is withdrawn before acceptance.
Note: an advertisement in which a house is offered for sale at a certain price is not an offer, but an invitation to enter into negotiations.

Acceptance only occurs if the relevant statement has reached the provider.

Buying a home

Different rules apply to the purchase of a home, at least if the buyer is a natural person who is not acting in the exercise of a profession or business. In that case, there is a so-called written requirement: there is only a purchase agreement if it is on paper and the parties have put their signatures to the relevant contract. So if the parties have reached verbal agreement on all the essentials (important elements) of the purchase of a home, a legally valid purchase agreement will only be deemed to exist if everything has been laid down in writing.

Reflection time

The buyer of a home is entitled to a three day reflection time (also called a “cooling-off period”) after signing the purchase contract. During that period the buyer can cancel the purchase agreement. A reason does not have to be given and the dissolution of the agreement is form-free. A telephone call may be sufficient, if it can be proven that the telephone call in question has taken place. The cooling-off period starts on the day that the signed agreement is made available to the buyer, and ends on the last day of the cooling-off period at midnight.

Buying a store or office

The written requirement and reflection period explicitly do not apply to professional parties or when purchasing for example a retail space or office. In the event of a conflict, it must therefore be assessed whether there is an offer and acceptance, and whether a purchase agreement has therefore been concluded. In principle, the burden of proof lies with the person who invokes the conclusion of the transaction. What parties have said to each other, what has been written and what has been mailed plays a part in this. Proof can be provided by means of documents / messages, as well as by means of testimonials from persons who have been present during the conversations or negotiations.

The role of the broker

The parties involved regularly invoke statements made by their broker or the broker of the other party. The main rule is that the instruction to a broker to mediate in the purchase or sale does not imply a power of attorney to enter into a purchase agreement. In other words, a broker cannot bind his client. So if a broker announces that his client agrees to a bid that does not mean that the bidder may assume that the client indeed agrees. This is only different if an “appearance of authority” of the broker has been created. Broadly speaking, this means that the bidder could assume that the broker was authorised to close the transaction based on the conduct of his counter-party (not that of the broker).

To the court

If the parties cannot reach an agreement between themselves, then the court may be called in. This usually happens in summary proceedings. The party relying on the conclusion of the purchase agreement can demand compliance and demand that the property be delivered to him/her. A fine may be claimed because the other party refuses to cooperate in delivery. The reverse is also possible. If the buyer refuses to accept and pay, compliance or a fine can also be demanded. In both cases, compensation for damage may also be required. The latter usually happens in a so-called substantive procedure.

For further information or in case of questions about this topic, please make contact with Raymond de Mooij.

 


Date:23 April 2019