Signing the Preliminary Sale Agreement: A Key Step for the Parties Involved

compromis de vente luxembourg

Though no notary is attending the signing of the preliminary sale agreement, this moment duly materializes a commitment for both parties. Practically, this is when the parties agree on a selling price. The owner will then be bound to respect the agreed price and to sell the property to the buyer who signed the document. It is nevertheless highly recommended to add a number of clauses so as to protect the signing parties and to guarantee a smooth process.

What is the value of a preliminary sale agreement?

Though this step is not mandatory, a preliminary sale agreement is generally signed before the meeting with the notary as it constitutes an official agreement between both parties that precisely defines the terms of the sale.

Such document has the status of a contract and commits the buyer and the seller who are therefore bound to complete the transaction in compliance with the agreed terms and price. The common phrase “a sale agreement equates a sale” (“compromis de vente vaut vente”) illustrates this status; therefore, as the sale agreement implies a commitment, you have to be aware of all its implications before signing it.

The common phrase a sale agreement equates a saleillustrates this status; therefore, as the sale agreement implies a commitment, you have to be aware of all its implications before signing it.


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What should a preliminary sale agreement include?

If the sale agreement does not include all the expected items, it might become legally void and have no contractual value. As mandatory information, you have to clearly indicate the name and address of each party, a precise description of the property, the selling price as well as the payment terms.

Besides, it is generally recommended to add several clauses that provide for a number of specific conditions for the sale to be effective.

The following suspensive clause is almost unavoidable: obtaining a loan

The condition precedent that a mortgage credit shall be granted protect the buyer against a complex situation: if he cannot obtain the loan, he is no longer compelled to buy. To protect himself, the seller can add a deadline in order to avoid situations that would drag the process out indefinitely. The determination of the deadline is totally up to you, yet it is usually around 4 weeks, sometimes 6.

The condition precedent that a mortgage credit shall be granted protect the buyer against a complex situation: if he cannot obtain a loan, he is no longer compelled to buy.

Warning: in the absence of a suspensive clause (obtaining a loan) the sale agreement becomes binding right away and cannot be cancelled unless otherwise mutually agreed by the parties.

The penalty clause: it provides for compensation in case the sale/purchase is cancelled

To protect himself against last minute shifts of mind, the seller logically adds a penalty clause, which compels the buyer to compensate the seller in case he decides not to buy, providing he has obtained a loan. The value of this penalty is usually 10% of the selling price plus agency fees.

Eventually, the preliminary sale agreement shall mention all the conditions impacting the decision to buy, like the potential existence of easements, the commencement date, the identification of the party responsible for the payment of the notarial fees and of the registration and recording costs (usually the buyer), and it shall indicate the key remittance date. Theoretically, the name of the notary in charge of the sale should be mentioned, as well as the date of the signature of the deed at the notary’s office.

Potential legal actions in case of violation

As a contract, the preliminary sale agreement has a legal value. Therefore, if one of the parties does not respect its commitments, the other party is entitled to bring the case in front of a court and to request compensation.

If the seller does not want to sell his property any longer or if the buyer decides not to purchase, the guilty party can be legally compelled to pay the value of the penalty clause when the sale agreement includes one. Otherwise, a compensation calculated according to the nature of the damage shall be requested.

Reminder: Luxembourg law does not provide for a withdrawal period once a contract is signed. The signing implies the definitive acceptance of the terms of the contract.

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