Buying and selling real estate: how to safely conclude a contract

The legal purity of a real estate object is the basis for a safe transaction. Before concluding a real estate purchase and sale agreement, it is important to determine in advance the key points that will be spelled out in it. This allows the parties to avoid misunderstandings and legal disputes in the future, and also clearly fixes their rights and obligations. Lawyers of the company “DE-JURE” provide comprehensive support to clients at all stages of real estate purchase and sale agreements. They check the title documents for the object, investigate the presence of encumbrances, litigation and other risks that may complicate the transaction.

Buying and selling real estate is much more than exchanging money for square meters. Behind each transaction is the legal status of the object, the origin of ownership, possible encumbrances and tax obligations, which directly affect the security of the transaction. In this material, lawyers from the company “DE-JURE” tell you how to competently and risk-free purchase of real estate on the secondary market.

Checking real estate before a purchase and sale agreement

The legal purity of a real estate object is the basis for a safe transaction. Before buying, it is important to carefully check three important points:

• the owner (seller). The owner of the real estate must provide copies of their passport, RNOKPP (for individuals) or statutory documents – an extract from the Unified State Register of Legal Entities (for legal entities). In the event that a representative participates in the transaction, documents confirming his authority should be checked, such as a power of attorney and/or a decision of the general meeting. Particular attention should be paid to the marital status of the seller: if the property was acquired during marriage and is considered joint joint property, the consent of the other spouse is required. It should also be taken into account whether there are minors or incapacitated persons among the co-owners, for whom appropriate decisions of the guardianship authorities regarding the transaction are required;
• the real estate object. Checking the object itself begins with studying the title documents: purchase and sale agreements, donations, certificates of ownership or inheritance. It is necessary to verify the data with the State Register of Property Rights and familiarize yourself with the technical passport of the object. It is important to check whether there have been any changes to the planning that are not included in the technical passport, for example, dismantling or installing partitions, superstructures, extensions, changing entrances or windows. It is useful to obtain confirmation from the condominium association, the building manager or utility providers that the previous owner has no debts;
• the presence of encumbrances and disputes regarding the real estate object. Checking risks and encumbrances includes finding out about the presence of mortgages, arrests, prohibitions, tax liens, easements, leases and trust management through the State Register of Rights. It is necessary to check active enforcement proceedings and data on litigation regarding the object or owner through the Unified State Register of Court Decisions. You should also obtain information about the persons registered in the real estate.

For complete confidence and minimizing legal risks, it is better to contact a qualified lawyer who will conduct a comprehensive check and give recommendations on the safe execution of the transaction.

Preliminary contract: agreement on the terms

Before concluding a preliminary real estate purchase and sale agreement, it is important to determine in advance the key points that will be spelled out in it. This allows the parties to avoid misunderstandings and legal disputes in the future, and also clearly fixes their rights and obligations. The main points of a real estate purchase and sale agreement include:

• the subject of the agreement, namely the exact address, registration number and area of ​​the real estate object in order to uniquely identify the property;
• price. The real cost paid by the buyer and the estimated value of the property must be spelled out;
• terms of payment for the object. How exactly it is sold – in installments, with an advance payment, how the funds will be credited or returned if necessary, etc. Securing payments through a mortgage or deferred registration of rights, if any;
• condition of the property. The absence of claims regarding the condition of the property must be agreed upon;
• transfer of ownership of the object. Acceptance and transfer certificates are drawn up, deadlines for vacating the apartment and handing over the keys;
• eligibility, which includes guarantees of the legality of alienation, the absence of hidden rights of third parties, illegal redevelopment;
• dispute resolution. The procedure for pre-trial settlement, fines, compensation and the mechanism for refunding funds in the event of invalidity of the contract or refusal of state registration.

Coordination of all these points in the contract allows you to avoid disputes and creates a reliable basis for protecting your rights in the event of complications.

Verification and signing of the contract by a notary

Real estate alienation contracts must be notarized with simultaneous state registration of the transfer of ownership. The notary plays a central role in this process. He checks the legal capacity of the parties, the availability of all necessary documents, current registry data, encumbrances and other circumstances that may interfere with the transaction. The notary also monitors the legality of settlements and makes appropriate entries in the state registry.

On the day of the conclusion of the contract, the notary identifies the parties and checks their legal capacity. Then he checks the data in the registers of property rights, encumbrances, powers of attorney, and also checks the marital status according to the available documents. The next step is the preparation of the contract: checking the subject, price, terms of performance and conditions of liability of the parties. After that, the notary certifies the contract and conducts state registration of the transfer of ownership, making the appropriate entry and giving an extract to the buyer. To ensure that the procedure goes smoothly, you should prepare a package of documents in advance:

• passport and RNOKPP;
• title documents;
• technical passport;
• certificates of absence of debts and registered persons;
• documents confirming the marriage and the consent of the other spouse, if necessary;
• consent of co-owners in the event of alienation of a share;
• decision of the guardianship authority, if necessary;
• assessment of the value of the real estate object.

Despite the experience and qualifications of the notary, you should not rely solely on him. He does not represent the interests of any of the parties, but only carries out the procedure in accordance with the law. To determine the risks and identify the weaknesses of the transaction, you should independently or with the help of a qualified lawyer check all the nuances before signing the contract.

Taxes and additional costs when buying and selling real estate

The purchase and sale of real estate involves not only paying the cost of the property, but also a number of taxes and additional costs. They significantly affect the “net” price of the transaction, and some of them are established by law, while others can be distributed by agreement between the parties. The main mandatory payments include:

• personal income tax (PIT). It depends on the status of the seller (resident or non-resident), the type of property (residential or non-residential property), the number of sales during the year and the period of ownership. For the first sale of a residential property during the year and in case of ownership for 3 or more years, PIT is not paid. If the specified benefit cannot be applied, then the PIT rate, depending on the number of transactions during the year, is 5% or 18% of the assessed or contractual value, whichever is higher. This tax is always paid by the seller;
• Military duty is charged on the seller’s taxable income together with personal income tax and, as a general rule, is 5% in the absence of grounds for exemption from paying the tax. Payment of military duty is also the responsibility of the seller;
• Pension Fund fee. It is paid by the buyer in the amount of 1% of the value of the object, determined in the contract or appraisal. There are exceptions for certain categories of buyers;
• administrative and registration fees. Additional costs include state duty for registration of rights (most often 1% of the value) and notary fees. Their payment is most often determined by agreement of the parties.

In addition to the above, it is necessary to agree on additional costs, in particular the costs of appraiser services and the tax base, the procedure for determining the price (contractual or appraisal), as well as fixing the real value in the contract. Underestimating the price increases the risks of appeal, additional tax assessments and liability.

We advise you to prepare a cost calculation table before signing the contract, which takes into account personal income tax and military duty for the seller, pension fee for the buyer, state duty, notary fees, appraisal, bank commissions, etc., according to the agreements of the parties. For non-residential properties, you should check special norms and benefits that differ from residential properties.

Risks for purchase and sale transactions

When buying or selling real estate, you should always consider the specific risks for each type of property. They are as follows:

• for apartments and private houses, the main risks are associated with unauthorized redevelopment, which can complicate the registration of ownership or lead to claims from regulatory authorities. You should also check the presence of registered residents and determine the terms for their removal from registration, providing for the retention of part of the price until this obligation is fulfilled;
• non-residential premises carry functional risks. Compliance with the actual use for its intended purpose, technical conditions and restrictions on reconstruction. Particular attention should be paid to current lease agreements, guarantee payments and tenants’ rights;
• for mortgaged or pledged property, the key ones are the procedure for removing the encumbrance and coordinating settlements with the bank, as well as the risks of extrajudicial collection due to the terms of the mortgage agreement or the presence of an executive inscription.

Careful consideration of these risks can reduce the likelihood of post-deal conflicts and ensure a safe transfer of ownership.

Useful advice from lawyers for concluding a real estate purchase and sale agreement

Buying or selling real estate is a responsible and multi-stage process. The success of the transaction depends not only on the price, but also on the correct execution of documents, inspection of the object and clear regulation of risks in the agreement.

It is important for the buyer not to skip the preparatory audit: check extracts from the registers of rights and encumbrances, the court register, enforcement proceedings and utility certificates. Make payments through a bank or other controlled channels. If payment is made in cash, involve a specialist for documentary confirmation of the transfer of funds. It is recommended to issue a receipt for receiving money and record the technical condition of the object – photos, videos and a certificate of defects. The agreement should provide for the consequences for the parties in the event of the discovery of hidden rights or arrests.

It is important for the seller to prepare a “seller’s folder”, which includes title documents, consents, certificates of debts and registered persons, a technical passport and an appraiser’s report. Provide the buyer with a transparent history of the property, which will speed up the transaction and reduce disputes over risks. Anticipate tax consequences by calculating net income before signing the contract, and record the distribution of expenses. Stick to the timeline: deadlines for removing encumbrances, evicting residents, and preparing documents are part of your responsibility.

Carefully following these recommendations reduces the likelihood of conflicts, ensures transparency of the transaction, and creates a solid foundation for a safe transfer of ownership.

How a lawyer can help with a real estate purchase and sale agreement

Lawyers of the company “DE-JURE” provide comprehensive support to clients at all stages of real estate purchase and sale agreements. They check the title documents for the object, investigate the presence of encumbrances, litigation and other risks that may complicate the transaction. Specialists prepare contracts taking into account legislative requirements and the client’s interests, monitor the correctness of financial calculations and provide recommendations on tax and registration aspects.

On the day of the transaction, lawyers accompany the client during notarization, check the package of documents and the agreed version of the contract, monitor compliance with all procedures and deadlines. Thanks to this, the client gains confidence in the legality of the transaction, minimizes the risks of financial and legal problems, and also saves time on checking and processing documents.