Reservation Agreement Review

Why the reservation agreement matters

The reservation agreement is the first document a buyer signs when purchasing a property, and often under time pressure. Yet it bindingly sets the price, the deadlines and the conditions under which the purchase can be cancelled without losing the reservation fee. The purchase agreement then only moves within the framework set by the reservation agreement. Anything not agreed in the reservation agreement will be hard to negotiate later – with the reservation fee already paid and deadlines running.

What you commit to by signing a reservation agreement

A reservation agreement usually includes a future contract agreement, i.e. a commitment to enter into the purchase agreement within a certain period. It also typically provides that if the buyer does not sign the purchase agreement in time, the reservation fee is forfeited to the seller or the estate agency, often as a contractual penalty. This is typically a few per cent of the purchase price – for a property worth several million crowns, hundreds of thousands.

Who must sign the agreement

Only the owner of the property, or someone representing them under a power of attorney, can commit to selling it. If the reservation agreement is concluded only between the buyer and the estate agency, it does not bind the seller in any way, and you have no certainty that the purchase agreement will ever be signed.

What I focus on in the review

Agreements prepared by estate agencies tend to be written mainly with the seller's interests in mind. In the review, I therefore focus in particular on:

• cases in which you do not have to sign the purchase agreement and are entitled to a refund of the reservation fee,
• the owner's declarations and guarantees, especially regarding legal encumbrances on the property,
• the owner's obligations until the purchase agreement is signed,
• the basic terms of the future purchase agreement.

I write about each of these points in more detail in the article Reservation Agreement for an Apartment, House or Land in the Czech Republic: What to Check Before You Sign.