We have all heard of deposit contracts at some time, but if we have never bought or sold a home, we may have many doubts about what they are, what they are for and how many models there are.
In the first place, we must know that the deposit contract is a private document that reflects all the conditions agreed during the negotiation of the sale of a property, as well as the penalties that must be faced in the event of its breach.
This document has a lot of weight before the law, since it will be the one that the notary will use to prepare the deed of sale of the property, so it is important to inform us of the key points of the deposit contract.
3 types of deposit contracts
There are three types of earnest money contracts: penitential, confirmatory and penal. Signing one or the other will depend on the objective we have regarding the sale of the property.
How is the penitential deposit contract?
The penitential deposit or withdrawal contract allows, as its name indicates, either party may freely withdraw from the contract.
In this case, it will involve paying the exact amount that has been previously stipulated in the contract, by the person who renounces it.
Buyer. If the buyer breaches the contract, he will lose the amount that he has previously paid at the signing, which is usually 10% of the value of the sale.
Owner. If the owner breaches the contract, he will be forced to return double the amount that he received from the buyer at the time of signing.
What is the confirmatory deposit contract like?
The confirmatory deposit contract guarantees that the sale will be carried out and supposes an advance of the amount of the property, on account of the price.
In this case, the penalties are not clearly established. However, in case of breach of contract, the affected party may demand the sale or compensation for damages, but must file a lawsuit.
In the event that nothing is specified in the contract, it will be understood that the agreed deposit is, by default, confirmatory.
How is the penal deposit contract?
The penal deposit contract establishes the amount that the buyer will lose in the event that the sale is not carried out due to a breach of their obligations.
As in the confirmatory deposit contract, a reserve signal is delivered, but in this case it will work as compensation if the contract is broken. The penal deposit contract cannot be withdrawn either.
- The three types of deposit contracts must include certain information, without which it cannot be considered valid, such as:
- The personal data of both parties
- A detailed description of the home
- The amount that must be paid as a down payment
- The price to be paid for the house
- The maximum time to finalize the sale before the notary
- The possible charges of the property
- The distribution of the expenses of the sale
How and how much should we pay in the deposit contract?
In deposit contracts, two payments are usually established:
First payment: it is made at the time the contract is signed.
Second payment: it is made within a maximum period of two months from the signing of the contract. It is usually done by means of a bank check at the time of formalization before a notary.
Regarding how much money must be paid, it is usually 10% of the total value of the sale, although there is no minimum or maximum amount set by law, so the parties will decide this amount based on their needs. This amount will be deducted from the final price.
In the same way, a penalty will be agreed that will affect any of the parties that does not comply with everything agreed in the contract.
How can we claim the breach of a deposit contract?
In case of breach of the deposit contract, we have two ways to claim the penalty that corresponds to us.
Out of court. It is the simplest. The first recommended step is to send a burofax to the other party requesting compliance with the contract. If this option does not work, there is the option of filing an appeal known as a "conciliation act", in which the execution of the contract is required.
By judicial means. In this case, we must file a lawsuit, with the help of a lawyer, who must represent us.
The deposit contract is, as we have been able to verify, a very important document, so we must pay special attention to it if we want to sell or buy a flat.