Deposit agreement for the purchase of land - sample

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Published: 10/29/2019

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• 1 Document execution 1.1 List of documents
• 1.2 Design nuances

Document preparation

The deposit agreement is drawn up in two cases:

1. The buyer does not have the necessary amount to purchase a plot of land and expects to receive money in the near future (takes out a loan, enters into inheritance rights, sells his property, etc.).
2. The seller does not have any documents required to complete the sale and purchase.

This agreement is the best way to secure the right to acquire land to a specific buyer. The deposit agreement is signed by both parties, which means that the risk of loss of funds and fraud is minimized.

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The text of the document records the final cost of the allotment. This allows the parties to know the exact amount in order to make the final settlement under the purchase and sale agreement.

If for some reason the deal falls through due to the fault of the seller, the deposit is returned to the buyer in double amount. If it is the buyer's fault, then he loses the amount paid. If controversial issues arise, the deposit agreement is quite suitable as evidence of the transfer of funds in court.

To understand whether or not to enter into an agreement on a deposit, it is worth understanding what a deposit is from a legal point of view. This concept is provided for by civil law.

According to Art. 380 of the Civil Code of the Russian Federation, a deposit is a sum of money that is transferred in favor of one of the parties to the contract towards payments due under the main contract as evidence of the conclusion of the contract in the future and to ensure its execution.

If the buyer transfers any amount to the seller without documentation, he will not be able to return these funds by law. In addition to the agreement, a receipt can serve as a document confirming the fact of transfer of money.

In the event of fraudulent actions on the part of the seller in the absence of a document, it will be extremely difficult to prove that you are right. Words alone will not be enough for the court, so you should not neglect the preparation of an official paper.

The deposit agreement for the purchase of land does not have a legally established form. The parties can draw it up themselves or use the services of a lawyer.

You can get legal advice on our website. Enter your question in a special field, and an expert will provide you with legal assistance.

Typically, the agreement has the following structure:

1. Name of the locality where the transaction is carried out;
2. Date of preparation.
3. Main text.
4. Signatures of the parties with transcripts.

The text part must include the key points of the transaction. The text states:

• the amount of the deposit and the final cost of the land plot (in numbers and in words);
• characteristics of the site by which it can be individualized (location, area, cadastral number, etc.);
• period of validity of the contract;
• conditions for returning money if the purchase and sale does not take place;
• contact details of the parties;
• other conditions that the buyer or seller considers necessary to include in the text.

The parties may be represented by their legal representatives on the basis of a power of attorney certified by a notary.

List of documents

To formalize the agreement, the following documents will be required:

• general passports of the parties;
• an extract from the Unified State Register or a certificate of land ownership;
• cadastral passport (if available);
• documents confirming ownership of buildings located on the land (if there are buildings).

In addition to the listed papers, others may be required depending on the situation. Concluding an earnest money agreement allows the seller to start collecting the missing papers without wasting time and without fear that the deal will fall through.

Design nuances

First of all, you need to verify the authenticity of the documents provided. Carefully study the title and title documents. Compare cadastral numbers, area and other characteristics of the land plot.

When composing the text, you must accurately enter the full names and passport details of the parties. If errors are found, this may be grounds for invalidating the document.

Do not transfer funds or enter into a transaction if the seller does not have a certificate of ownership or an extract from the Unified State Register of Real Estate! These papers are the basis for the possibility of selling the land, so if one of them is missing, you should find another plot to purchase.

Be sure to agree on the deposit amount in advance. It is calculated in proportion to the value of the real estate and, as a rule, does not exceed 10%, although there are no restrictions. The amount must be fixed in the agreement.

Another equally important detail is the validity period of the agreement. Usually the document is concluded for a maximum of two months. This time should be enough to prepare for the purchase and sale. The next day after the expiration of the agreement, it is necessary to sign a land purchase and sale agreement.

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Deposit

The definition is contained in Art. 380 Civil Code of the Russian Federation. According to the law, a deposit is an amount of money that is transferred from one party to another to fulfill upcoming payments under a concluded agreement. The essence of the deposit is that it certifies the conclusion of a contract, an agreement between the parties on the terms of a future transaction. He disciplines both the seller and the buyer. The first is confident that the buyer's intentions are serious. The second is that the seller will give the property to him. And the parties prepare a sample purchase and sale agreement. They are confident that its ratification will take place and the subject of the agreement will be transferred from one side to the other.

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Based on this, the goal pursued when drawing up a deposit agreement is to encourage both parties to the legal relationship to fulfill their obligations under the future agreement. The interests of all parties to the contract, with their proper legal behavior, must be respected. Therefore, the legislator included the deposit in the list of security for the fulfillment of backgammon obligations with a bank guarantee, penalty, etc.

Subject of the Agreement

1.1. The Buyer makes a deposit to the Seller in the amount of

………………………………………………………….……………(…………………..) rubles. (in words / numbers)

to secure the purchase and sale agreement concluded by the Parties for a land plot owned by the Seller by right of ownership.

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1.2. Land plot: located at: …………………………………………….………………..………………., cadastral number ……………… …………………………………..…………..………………total area ……………………………………………………… ………………… square meters, (in words) permitted use: …………………………………..……………………….category of land: ……………… ……………………………..…………………………..there are no buildings, structures or structures on the land plot.

1.3. The price of the Land Plot is determined by the Parties in the amount

….………………………………………………………………………………………(……………) rubles. (in words / numbers)

and remains unchanged until the purchase and sale agreement is signed.

1.4. The deposit specified in clause 1.1. of this agreement is not subject to value added tax (VAT).

1.5. The land purchase and sale agreement must be concluded on time

………………………………………………………………………………………………………………… (date or event upon the occurrence of which the contract will be concluded )

2. Payment procedure, receipt of a deposit 2.1. Buyer ………………………………………………………………………………… (transfers the deposit in cash / transfers the deposit to the Seller’s bank account)

the entire amount of the deposit specified in 1.1. of this Agreement upon signing this Agreement.

2.2. Payment of funds as a deposit is carried out personally by the Buyer.

2.3. The date of payment of the deposit is considered to be ……………………………………………………….(date of transfer of the deposit to the Seller in cash / date of receipt of the deposit amount to the Seller’s bank account)

General conditions for registration of a deposit

The parties draw up a contract after they have reached an agreement on the essential terms of the upcoming transaction. In particular, we inspected the site, looked at its location and the presence of developed infrastructure. They also agreed among themselves on its cost. The buyer must be sure that the land plot put up for auction belongs to the seller by right of ownership. A document confirming this fact is a certificate of ownership. And the buyer has the right to ask the seller for it for the purpose of inspection and analysis.

The amount of funds transferred as a deposit is not established by law. But in practice, the parties to the contract settle on figures ranging from 5 to 10% of the price of the purchased plot.

The pre-agreed amount is deposited into the account or given in cash. But realtors recommend conducting all financial transactions through banks. If any problems arise, it will always be possible to prove that the deposit was given by the buyer, that is, he fulfilled previously existing agreements.

Usually, after making a deposit, the seller removes his advertisement for sale. The buyer stops searching for a plot of land, since he has transferred the deposit and made a meaningful decision to buy exactly the one for which he agreed with the seller.

Despite reaching an agreement, the parties may behave unexpectedly. For example, the seller: if he refuses to transfer the plot according to a pre-drafted scheme of the relationship between the parties, then the amount of the deposit is returned to them. In addition, he pays a fine. Its size is a percentage of the value of the land plot. Financial liability in this situation arises for the failure of the transaction.

The essence of the deposit is that the parties are insured against the risk of failure to fulfill the obligation. Moreover, the deposit is in the interests of both parties to the contract.

If the buyer also decides not to purchase the plot and gives reasons and motives, then the deposit will not be returned to him. But this is the case if the seller behaves properly without breaking the law.

Legal Features

3.1. The Buyer is obliged to conclude a purchase and sale agreement for the Land plot with the Seller within the period before “…..” …………………. 20….. inclusive.

3.2. Transferred in accordance with Article 1.1. of this Agreement, the amount of the deposit is counted against future payments by the Buyer.

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3.3. In case of failure to fulfill the deposit agreement by the Seller (refusal, evasion from concluding a contract for the sale and purchase of the Land plot on “…..” ….…..….……. 20… inclusive), the Seller pays the Buyer within …………… ………… banking days amount in the amount of

those. in accordance with Art. 381 of the Civil Code of the Russian Federation double the amount of the deposit.3.4. In case of failure to fulfill the deposit agreement by the Buyer (refusal, evasion from concluding a contract for the sale and purchase of the Land plot under “…..” ….…..….……. 20… inclusive), the amount of the deposit in the amount in accordance with Art. 381 of the Civil Code of the Russian Federation remains with the Seller.

3.5. The parties act voluntarily, are fully capable, are not under guardianship, trusteeship or patronage, do not suffer from illnesses, including mental ones, or are in any other condition that deprives them of the opportunity to understand the meaning of their actions and manage them.

3.6. The Parties guarantee that they are not entering into this Agreement due to a combination of difficult circumstances or on extremely unfavorable conditions for themselves and that this Agreement is not an enslaving deal for them.

Without drawing up a deposit agreement, it is strictly forbidden to transfer money to the seller. Without this document, according to the law, there is no payment itself.

The seller must have original documents. The presence of only copies should alert the buyer, because they are easy to fake. Even certified copies should not be trusted. Unfortunately, cases of collusion are common in the real estate market, so ask for originals.

To minimize financial risks, keep in mind that:

• the buyer has the right to legally demand all title papers;
• if the seller is married, it is necessary to make sure that the plot is not joint property or has the written consent of the spouse.

It is not recommended to sign an agreement based only on photographs of the site. Be sure to check it out.

What to look for during inspection?

1. Presence/absence of buildings. If there are buildings on the site, remember their number.
2. Characteristics of structures. Are these buildings residential or not, what material are they made of, what is their size.
3. Presence/absence of trees and shrubs.
4. Maintaining the correct location of buildings from the boundaries of the site and trees.

All this information will be needed to compare the documents with what is actually on the site. For example, if on the territory of the allotment there are buildings that do not exist in technical terms, the new owner may subsequently have problems, since such buildings are considered unauthorized, that is, illegal.

Please also take into account that it is impossible to buy a plot of land with maternity capital if there are no residential buildings or a residential building under construction on the land.

Subtleties of the document

The document transferring the deposit is in free form, but in structure and content it resembles a purchase and sale agreement. If the outcome is positive, it will become an application, so it is important that there are no contradictions or inconsistencies in the documents.

When filling out, it is recommended to adhere to the following scheme:

1. Indicate the participants in the process. It is necessary to indicate not only the full names of the seller and buyer, but also passport details, including residential address.
2. The amount of the deposit (exact amount) and method of transferring funds.
3. Description of the object for which money is being paid. If the buyer plans to purchase a house with a garden plot, then information about the land (area, location, additional buildings) and about the house is specified separately. Information in the same form will have to be duplicated in the purchase and sale agreement.
4. Provide documents confirming the seller’s ownership of the property specified in the contract.
5. Total cost of the plot. This section does not indicate the balance that the buyer must pay, but rather the full cost of the property.
6. The period of validity during which the purchase and sale agreement must be concluded. It can be specified as a specific number or period of time. The deposit agreement is valid from the moment the seller receives the funds. The purchase and sale agreement must be concluded within 3 months from the date of entry into force of this agreement.
7. Responsibility of the seller in case of termination of the transaction. This section states the need to return the full amount of the prepayment and a fine. In the event of termination of the transaction due to the fault of a party called the Seller, he is obliged to reimburse the party called the Buyer the amount of the deposit in double amount.
8. Buyer's responsibility. The buyer is usually not charged a fine, but is stated to be unable to return the money previously paid.
9. Possibility of terminating the contract without penalties.
10. Additional circumstances of the agreement, if any.

At the end, the signatures of the parties with the decoding of the initials are placed. The agreement is drawn up in 2 copies.

1. agreement to receive a deposit
2. agreement to receive a deposit

When will the deposit be returned?

Circumstances vary and sometimes deals fall through. For the issue of returning the deposit to be raised, the transaction may not take place due to the fault of the seller or the buyer. And this should also be provided for in the agreement.

The situation with the deposit in case of failure of the transaction is regulated by Art. 381 Civil Code of the Russian Federation. If for some reason the buyer refuses to purchase the land, the seller has the right to keep the amount paid. Refund of funds in this situation is possible only if the party who paid the deposit reveals fraud or legal impurity of the real estate. To get your money back, you will need to go to court.

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If the transaction does not take place due to the fault of the seller, then he is obliged to return the deposit to the buyer in double amount. If this legal requirement is ignored by the seller, the buyer has the right to go to court.

It does not matter what the circumstances were why the purchase and sale did not take place. In any case, both parties have the right to appeal to the courts if one of them violates the existing agreements.

Difference between advance and deposit

Deposit and advance payment are often confused with each other. An advance is an amount of cash. In the contract, it performs two functions: payment and certification. But not security. This opinion was formed by judicial practice, namely the ruling of the Lipetsk Regional Court No. 33-690/2016, the Supreme Court of the Republic of Bashkortostan No. 33-5570/2015.

In practice, the absence of a security function in an advance means that if the obligation is not fulfilled, regardless of the reasons for this phenomenon, the party who received the advance returns it. Judicial practice also speaks about this. In particular, the resolution of the Third APS, case No. A33-10091/2013.

Parties to a contract often confuse these two terms. An advance is called a deposit and vice versa. This leads to the fact that in the courts, ignorance of basic legal norms leads to the fact that the party refers to the obligation that is more beneficial to it (advance payment or deposit). But the court evaluates at the hearing not the name that the disputing party pronounces, but the very essence of the obligation (Article 431 of the Civil Code of the Russian Federation). Based on the requirements of legal norms, reasonableness and fairness, the judge classifies the payment as an advance, even if the parties called it a deposit. This rule arose from the definition of the RF Armed Forces No. 37-KG16-6. If the parties in the signed agreement mixed these two concepts with each other, and the amount issued is interpreted as an advance in one part, or as a deposit in another, then the payment does not qualify as a security measure for the agreement. This rule was approved by the resolution of the AS North-West Administrative District in case No. A56-52252/2015. And the explanation for this decision is simple. If in the process of reading the contract justifiable grounds arise - whether the payment should be considered an advance or a deposit, then it is interpreted as an advance. Unless it is proven during the process that the payment was transferred from one party to the other as a deposit. These are the main differences between an advance and a deposit.

What to do next with the agreement?

The deposit agreement does not need to be registered. It is enough to keep a copy for each of the parties. In the future, the deposit agreement acts as an annex to the purchase and sale agreement.

The buyer of land is more vulnerable and takes more risk than the seller. To ensure guarantees, you can additionally have the document certified by a notary.

Lawyers recommend concluding not a deposit agreement, but a preliminary purchase and sale agreement. In this case, there is a greater chance that the parties will fulfill their obligations, since penalties increase significantly. Such documents specify absolutely all the conditions of the upcoming transaction, which cannot be said about the deposit agreement.

Transactions related to land plots are associated with high risks. We recommend that you contact a competent lawyer for advice and to verify the correctness of the documentation provided.

Before signing

Without an agreement on a deposit when purchasing a house with land, an apartment or other premises, it is absolutely impossible to transfer funds to the seller or another person. No document means no transfer according to the law. Excessive gullibility of potential buyers plays into the hands of scammers and unscrupulous sellers, who receive money and sell the property to a completely different person, if they sell at all. A deceived citizen has no right to demand anything from such persons if there was no official document.

However, before signing the deposit agreement, it is important to read each clause very carefully and check absolutely all the details with the original documents. If the seller does not have the originals, this is a reason to be wary, since copies are much easier to counterfeit. In addition, if there is indeed a good reason for the absence of originals, all copies must be certified by a notary. But we shouldn’t rule out fraudulent collusion, which is a very real thing in the real estate market.

In addition, to reduce financial risks, it is important to know that:

• The buyer has the legal right to see absolutely all original documents of title to the real estate, the purchase of which is negotiated;
• The spouse of the owner of real estate may lay claim to such an object, so it is important to check whether it is jointly acquired during marriage and, if so, whether there is a written, notarized consent of the spouse to the transaction;
• At the time of signing the agreement, it is desirable that all residents be deregistered.

Final provisions

6.1. This Agreement is drawn up in two original identical copies having equal legal force, one copy for each of the Parties.6.2. Any changes, additions, or agreements to this Agreement are valid if they are made in writing and signed by both Parties.

7. Addresses and details of the Parties

………………………………………………………….… ………….……………………………(full full name) (full name) fully)

………………………………………………………….…………….……………………………(signature)(signature)

“……” …………………. 20….. “……” …………………. 20….. g.

Risks and nuances

The transfer of the deposit must guarantee the protection of interests of both parties. However, for the buyer, postponing the execution of the purchase and sale transaction is more risky, because:

• 
  According to the law, money can be returned only if the seller decides to terminate the transaction;

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• if the buyer experiences force majeure circumstances not specified in the contract, he will not be able to return the money;
• the procedure for returning money is lengthy, and if the contract is drawn up incorrectly, then it will not be possible to return the funds;
• If the transaction takes place, but defects in the property are identified, causing the purchase and sale agreement to be terminated, the deposit will still not be returned.

Important! It is convenient for the buyer to immediately complete the purchase. Since only after registering the transfer of ownership he will become the new owner. And the prepayment agreement does not even give the right to use the site.

How does a deposit differ from an advance?

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Advance and deposit are legally different concepts, although many people confuse them. An advance payment is an advance payment for the purchased real estate property. It cannot serve as a guarantee of fulfillment of obligations.

A deposit is a form of securing obligations and fulfilling agreements reached. If these agreements are violated, the guilty party will lose a certain amount of money.

This will not happen in the case of an advance payment. If the transaction does not go through, it is simply returned to the buyer.

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Despite this significant difference, an advance and a deposit equally serve as confirmation that the parties have agreed to conclude a transaction in the future. However, the advance represents part of the final cost, and the deposit acts as a guarantor that the buyer has serious intentions to buy the land, as well as the other party to sell.

Structure and content of the document

There is no established form of agreement - the parties can draw up the document independently or with the involvement of a lawyer.

The deposit agreement form contains the following sections:

• name of the locality, date of compilation;
• information about the parties;
• text part;
• signatures of the parties.

• the amount of the deposit and the full cost of the land plot, both in numbers and in words;
• main characteristics and location of the plot, including area, cadastral number;
• validity;
• conditions for the return of transferred funds if the transaction does not take place;
• force majeure;
• contacts of both parties for notification in case of changes in circumstances;
• other.

It is allowed for any of the parties to be represented by a trusted person, with a notarized document.