You Might Be Thinking…

“It doesn’t matter, as long as I pay something.”
Not true. Under the law and case law, each payment has a different legal regime and consequences:

• Purchase price → arises only once a valid purchase agreement is signed.

• Deposit (advance payment) → refundable if the purchase agreement is not concluded.

• Security (earnest money) → serves as collateral, may be forfeited if the buyer defaults.

• Reservation fee → a preliminary arrangement, often problematic and invalid if one-sided.

Clients Often Ask Me…

• When is a deposit offset against the purchase price?

• Can a reservation fee always be forfeited?

• How to distinguish a deposit from security?

• Is it safe to pay the reservation fee directly to the estate agency?

• When is escrow advisable?

Legal Framework in Brief

• Civil Code § 2080: Purchase price must be determined or determinable.

• Purchase price arises only once the contract is signed.

• Deposit → refundable if the contract is not signed.

• Security (earnest money) → may be forfeited if the buyer breaches obligations.

• Reservation fee → not regulated in the Civil Code, governed by general contract law; courts repeatedly hold that clauses on absolute forfeiture are invalid.

How to Proceed Safely

1. Reservation Fee

• Never pay directly to the estate agency.

• Always into lawyer, notary, or bank escrow.

• Insist on refund conditions if defects are found or the contract is not signed.

2. Deposit

• Must be expressly agreed as refundable if the purchase contract is not signed.

• If the contract is concluded, the deposit is credited towards the purchase price.

3. Security (Earnest Money)

• Less common in practice, used mainly in development projects.

• Forfeited only if the buyer breaches duties – must be clearly defined.

4. Purchase Price

• Paid only after signing the purchase contract, ideally into escrow.

• Safer than direct payment to the seller.

Risks and Common Mistakes

• Mixing terms → reservation fee is not the same as a deposit.

• Paying without escrow → risk of losing money without recourse.

• Unclear conditions → courts must later decide whether it was a deposit, security, or part of the price.

• Signing estate agency templates blindly → often disadvantageous for the buyer.

Lawyer’s Checklist

✔ Always clarify what exactly you are paying (deposit, security, reservation fee).
✔ Insist on escrow with a lawyer/notary/bank.
✔ Watch the contract wording – what is refundable and when.
✔ Have the reservation agreement reviewed by a lawyer.

FAQ

Is a reservation fee legal?
Yes, but not if it is one-sided and unfair.

Can a reservation fee always be forfeited?
No, absolute forfeiture is often ruled invalid by courts.

What if the estate agency insists it always forfeits?
Demand legal review – such terms are usually unbalanced.

When is a deposit offset against the purchase price?
Only once the purchase agreement is signed – until then, it is refundable.