What Should a Proper Purchase Agreement Include?

A purchase agreement is a key document that confirms the transfer of property ownership between the seller and buyer. It should be written clearly, unambiguously, and in compliance with applicable laws to ensure it is legally binding and protects the interests of both parties. Before signing, it is important to review the agreement thoroughly and make sure it includes all necessary elements. So, what must a proper purchase agreement contain?

1. Details of the Contracting Parties

The purchase agreement should include complete and accurate details of both parties – the seller and the buyer. This includes:

• Full name (or company name for legal entities),
• Permanent address or registered office,
• Identification number (e.g., date of birth for individuals or company registration number for businesses),
• Confirmation of the legal capacity of the contracting parties.

This section ensures that both parties are legally capable of entering into the agreement.

2. Description of the Property

The agreement must provide a detailed description of the property being sold. It should include all specifications that uniquely identify the property, such as:

• Property address,
• Size (area) of the property,
• Cadastral district, cadastral number, and parcel identification,
• Description of the property's legal status (e.g., whether it is subject to easements or liens).

A precise description helps prevent misunderstandings and legal issues in the future.

3. Purchase Price and Payment Terms

One of the most important sections of the agreement is the purchase price of the property. The purchase agreement should specify:

• The total purchase price,
• Method and schedule of payment (e.g., deposit, balance upon signing, or payment through a mortgage),
• Information on any additional costs (e.g., transfer fees or notary fees).

If the price is stated in a foreign currency, it should also be mentioned in the local currency (CZK) along with the applicable exchange rate.

4. Property Handover Timeline

The purchase agreement should specify when the buyer will take possession of the property. This includes:

• The date when the buyer takes over the property,
• The condition of the property upon handover (e.g., whether it will be vacant or furnished).

If the property will only be vacated after a certain date, this should be clearly stated.

5. Warranties and Declarations

The seller should confirm in the agreement that:

• They are the rightful owner of the property and have the right to sell it,
• The property is not subject to any undisclosed legal defects,
• There are no ongoing legal disputes concerning the property.

The buyer, on the other hand, may declare that they are aware of all relevant details about the property and accept its condition.

6. Obligations of the Seller and Buyer

The purchase agreement should outline the obligations of both parties, such as:

• The seller's obligation to deliver the property in the agreed condition,
• The buyer's obligation to pay the agreed amount on time,
• Any obligations related to settling debts (e.g., transfer costs or taxes).

7. Financing via Mortgage

If the buyer is financing the purchase through a mortgage, the agreement should include conditions related to this loan, such as provisions for the case where the mortgage is not approved.

8. Money Escrow

If the purchase price is to be held in escrow (e.g., with a notary or in an attorney's escrow account), the agreement should specify the terms and conditions under which the funds will be released.

9. Legal Consequences of Breaching the Agreement

The agreement should specify what happens if one of the parties breaches its terms, including:

• The right to withdraw from the agreement,
• Penalties for non-compliance (e.g., forfeiture of a deposit or fines).

10. Signatures of Both Partie

The agreement must be signed by both parties to confirm their agreement to all terms. If the agreement is executed in the presence of a notary or attorney, their signatures should also be included as witnesses.

A purchase agreement is a fundamental legal document in the property transfer process. It is crucial to include all necessary elements to ensure legal certainty for both parties. Before signing, it is always advisable to have the agreement reviewed by an expert, such as a lawyer or real estate agent, to avoid future issues.

By focusing on details and properly addressing all terms, you can ensure a smooth process for buying or selling property.