You Might Be Thinking…

“If the price is written in the contract, then it’s clear, right?”
Not quite. The law (§ 2080 Civil Code) requires the price to be fixed or determinable. But the method of payment is left to the parties’ agreement – and this is where most risks arise.

Clients Often Ask Me…

• How does lawyer’s or notary’s escrow work?

• Can I pay in installments, and how do I structure it properly?

• When is a reservation contract useful, and what should I watch out for?

• How does retention of title work (§ 2132 Civil Code)?

• What happens if the buyer misses an installment – can the seller withdraw? (§ 2133 Civil Code)

Ways to Pay the Purchase Price for Real Estate

1. Lump-Sum Payment

• Most common model – after signing, the purchase price is deposited into escrow.

• Once the Land Register approves the ownership transfer, funds are released to the seller.

2. Escrow of the Purchase Price

• Lawyer’s, notary’s, or bank escrow – the safest option.

• Funds are held until the Land Register records the new owner.

• Protects both parties: the buyer doesn’t lose money, and the seller doesn’t lose the property.

3. Installments

• Possible if agreed by the parties.

• Risk: late payment – § 2133 Civil Code protects the buyer (the seller cannot withdraw for a minor delay).

• Best combined with retention of title (§ 2132 Civil Code).

4. Reservation Agreement

• Signed before the purchase contract.

• Ensures the property is taken off the market.

• Watch out for the amount of the reservation deposit and the conditions for its refund.

5. Security Mechanisms

• Retention of title (§ 2132 Civil Code) – ownership passes only after full payment.

• Contractual penalties – motivate timely performance.

• Mortgage lien – common when financing through a loan.

Risks and Common Mistakes

• Direct payment to the seller’s account → the buyer risks losing money.

• Unclear escrow release conditions → disputes over payout timing.

• Reservation contracts without buyer protection → deposit often forfeited.

• Installments without safeguards → seller has no security, buyer risks withdrawal.

Lawyer’s Recommendation

✔ Always insist on escrow of the purchase price – lawyer, notary, or bank.
✔ Never pay directly until the Land Register transfer is complete.
✔ If you agree on installments, set clear security mechanisms.
✔ Always have reservation contracts reviewed – they are often the riskiest.

FAQ

Is escrow mandatory?
No, but it’s the safest way to protect the purchase price.

Can we agree on installments?
Yes, but they must be clearly defined – timing, method, and consequences of delay.

What is retention of title?
Ownership passes only after full payment (§ 2132 Civil Code).

What if the buyer misses an installment?
If the missed amount is less than 1/10 of the price, the seller cannot withdraw immediately (§ 2133 Civil Code).