Property sale and purchase promise: risks buyers overlook
The preliminary contract is not a formality. It is where you decide who loses money if the bank refuses the loan, the mortgage is not removed, an encumbrance appears in the land register or the seller cannot sign the final contract.
- Do not treat the sum paid at signing as a simple advance payment if the document calls it earnest money. The rules on forfeiture or refund may be much stricter.
- Put the conditions that must be met before the final contract in writing: approved loan, land register without unaccepted encumbrances, complete documents, mortgage removal.
- The final contract must be tied to an updated land register extract, not the position seen at the viewing or during negotiations.
- If the seller presses for direct payment into their account before problems are resolved, request an escrow/notarial account or stop the process until matters are clarified.
What to check before paying a deposit
The sale promise should reduce risk, not conceal it. Link the deposit to clear checks and written conditions.
Verifi helps you prepare the right questions and identify important warning signs. For complex legal situations, clarify the decision to sign with your notary or lawyer.
A good sale promise links money to checks, not haste
The deposit is safer when each important deadline is backed by clear conditions and documents.
Conditions precedent are useful when you cannot clarify everything on the same day.
- 75 lei/property - registration of the preliminary contract in the land register (375 lei for urgent processing) (ANCPI Order 16/2019)
- 6 months - limitation period for asking the court for a judgment taking the place of the contract, from the date on which the contract should have been concluded (Article 1669 of the Civil Code)
- 20 lei online - the land register extract for information used to check encumbrances before the advance payment (ANCPI Order 16/2019)
- 10 working days - validity of the extract for authentication used when signing the final contract (art. 35, Legea 7/1996)
1. What you are actually signing when you sign the promise
A sale and purchase promise does not transfer ownership, but can create binding obligations: to buy, sell, pay a sum, attend the notary's office and bear consequences if the final contract is not concluded. Under the Civil Code, a promise to contract must contain the essential terms without which the promised contract could not be performed, while a promise to sell is subject to specific rules.
In practice, this means you are not simply signing a flat reservation. You are signing up to a price, deadline, parties, property, conditions and penalties. If these details are unclear, the risk usually falls on the party with the greater need to complete the transaction: the buyer.
Official references: Civil Code, Article 1279 and Article 1669. Verifi treats these rules as part of the cautionary context before a preliminary contract.
2. Advance payment or earnest money: the same transfer, different risk
In everyday language, many people call any sum paid under a preliminary contract an advance payment. In the contract, however, the exact term matters. An advance payment is usually a payment towards the price. Earnest money can serve as a confirmation or penalty mechanism, and its effect depends on the wording of the clause and the law.
Ask for the document to state explicitly what happens to the money in each scenario: loan rejection, a bank valuation below the price, new encumbrances in the land register, a seller who fails to provide documents, a co-owner who does not sign, a mortgage not removed. If the answer is not written down, the real answer will come when you are already arguing over the money.
The full rules governing the money, refund clauses and statutory safeguards are detailed in the guide to protecting your advance payment under a preliminary contract.
For earnest money, Articles 1544-1546 of the Civil Code are the basic references. Verifi helps you see whether the property's documents and risks support the proposed clauses.
3. Conditions precedent are the buyer's seat belt
A condition precedent states that the obligation to proceed depends on a clear event: loan approval, obtaining a clear land register extract, removal of the mortgage, presentation of the tax certificate, consent from co-owners or a spouse, or obtaining planning documents for land.
It is not enough to say that the parties will cooperate. A useful clause specifies a deadline, supporting document, who takes action, who bears the cost and what happens to the money if the event does not occur through no fault of the buyer.
4. You are not buying the promise; you are buying the land register position at the final contract
The land register is the property's legal snapshot. The problem is that this snapshot can change between the promise and the sale: mortgages, garnishments, prohibitions, litigation, promises registered for another buyer or other encumbrances. That is why the promise must tie final signing to an updated land register extract, ideally an extract for authentication obtained by the notary before signing.
Request an operational clause, not just a general declaration that the property is free of encumbrances. More useful: the seller undertakes to transfer ownership free of encumbrances, except those expressly listed, and the buyer may refuse to sign and receive a refund if an unaccepted encumbrance appears.
Law No. 7/1996 on cadastre and land registration describes the land register's role in legal records and the publicity of property rights. Verifi reads the land register extract alongside the encumbrances and indicators that may affect the promise.
5. The loan and removal of the mortgage: two separate risks
If you are borrowing, you have your own risk: the bank may refuse financing or lend less than the price. If the property has an existing mortgage, there is also a seller-side risk: their bank must issue consents, receive payment and allow removal of the mortgage. Do not combine them in a single vague sentence.
A safer structure is controlled payment: part of the price goes directly to the seller's mortgage creditor, the balance to the seller under the notary's/bank's conditions, and removal takes place on the basis of the necessary documents. For substantial sums, ask the notary about an escrow or notarial account, so that the money is not released unconditionally before the documents are in order.
6. Check whether the seller can actually sell
The person negotiating is not always the person entitled to sign. Check the identity of those named in the land register, the matrimonial property regime, co-owners, heirs, powers of attorney, authority to represent a company and any registered restrictions. If the property belongs to a company, do not look only at the director: there may be internal approvals, limitations or insolvency issues worth clarifying.
In the promise, require everyone necessary to be a party or ensure that clear powers of attorney exist. A promise signed by only one owner can be very difficult to turn into a final sale without the others.
7. Deadlines and penalties must be balanced and realistic
The deadline for the final contract must allow for the bank, valuation, tax documents, cadastral documents, removal of encumbrances and the notary's appointment. An aggressive deadline can turn an administrative delay into forfeiture of earnest money.
Look at the balance. If you lose the sum paid for any delay, what does the seller lose if they fail to provide documents or remove the mortgage? If penalties apply only to you, the contract does not reflect the transaction's actual risk.
8. When it is worth stopping
Stopping a transaction is not a failure when the risk becomes unclear. Take the signs seriously: the seller refuses to provide a recent land register extract, pressures you to pay quickly, changes the reason they need money, avoids the mutually chosen notary, refuses a financing clause, downplays a mortgage or litigation, or says it will be sorted out after signing.
The simple rule: if the problem is known before the promise, it must be addressed in the promise. If it cannot be clearly written down, it is probably not under control. This guide is for information only and does not replace legal advice; for large sums or unusual situations, discuss matters with the notary and a lawyer before transferring money.
Frequently asked questions
Is the advance payment refunded if the bank refuses my loan?
It depends on what the contract says, not what you discussed verbally. If the document calls the sum earnest money and says it is forfeited if you do not sign by a certain date, with no exception for financing refusal, you risk losing the money. Ask for what happens to the money to be set out explicitly for each scenario: loan rejection, a bank valuation below the price, new encumbrances in the land register or a seller who fails to provide the documents.
What is the difference between an advance payment and earnest money?
An advance payment is usually a payment towards the price. Earnest money can serve as a confirmation or penalty mechanism, and its effect depends on the wording of the clause and the law. The basic references for earnest money are Articles 1544-1546 of the Civil Code.
Does a sale and purchase promise make me the owner?
No. The promise does not transfer ownership, but it can create binding obligations: to buy, sell, pay a sum, attend the notary's office and bear consequences if the final contract is not concluded.
What conditions precedent should I request in the preliminary contract?
Clear conditions on which proceeding depends: final loan approval (not just a simulation or verbal pre-approval), a sufficient bank valuation, a land register extract without unaccepted encumbrances at the final contract, removal of the mortgage or a clear mechanism for simultaneous payment and removal, and signatures from everyone who must sell. A useful clause specifies a deadline, supporting document, who takes action, who bears the cost and what happens to the money if the event does not occur.
When should I stop the transaction?
When the risk becomes unclear: the seller refuses to provide a recent land register extract, pressures you to pay quickly, changes the reason they need money, avoids the mutually chosen notary, refuses a financing clause, downplays a mortgage or litigation, or says you will sort it out after signing. If a known problem cannot be clearly addressed in the promise, it is probably not under control.