RETURN OF DOUBLE IN CASE OF RESERVATION CONTRACT

CAN A BUYER CLAIM THE RETURN OF DOUBLE THE DEPOSIT DELIVERED TO THE OWNER?

In real estate purchase and sale transactions we often find the phase of the procedure known as “ Reservation ”. This is the case in which the buyer, once the property has been chosen, and the price and purchase conditions are agreed with the owner or with the Agent, is ready to formalize the reservation of the property.

Said reservation implies the payment of an amount called “signal”, “reserve” or “deposit “, which is delivered to the agent or to the owner as a reliable proof of the buyer’s willingness to start the sale process with the owner or owner.

In these reservation contracts it is usually established that, in the event that the buyer desists from the purchase without just cause, he is penalized with the loss of the amounts delivered as reservation.

Reciprocally, in case it is the owner who breaches his obligation to sell the property or reserve it in the name of the buyer without faitr cause, he is obliged to return the amounts received by the buyer. In addition, if the contract so establishes, the owner is forced to return said doubled amounts as compensation for the damages and losses caused to the buyer due to his non-compliance.

Normally, in Spain, reservation contracts are usually formalized by real estate agencies that are intermediaries in the purchase process.

On other occasions, it is the lawyers of the parties who draw up said contract.

But, focusing on the subject, once a reservation contract has been signed by the buyer, and the agreed reserve amount has been delivered, if the owner finally breaches his obligation to sell,  is he obliged to return double the amounts paid with the buyer?.

The answer, unfortunately, cannot be simple. It will depend on how the reservation contract is drafted, and how the contractual procedure has been formalized with respect to the owner.

Let’s look at some assumptions:

• There must be an express mention in the contract:

  The contract must expressly establish that, in the event that the Owner fails to comply with its contractual obligation, it must return to the buyer the amounts delivered as reserve in duplicate.

On many occasions, we find that the reservation contracts do not establish the obligation on the part of the owner to return double the amounts delivered. This does not mean that such contracts are not legal, it simply means that the owner has not accepted said penalty, or the agent has not considered it convenient to include it in the contract.

In these cases, the buyer may recover the amount of the reservation paid, but may not demand that double be returned.

• The Owner must have received the amount of the reservation, or must have accepted that the agent, or his lawyer receive it

  . That is, for the buyer to have the right to claim double the amounts delivered in case of default, the owner (or any of the persons authorized by him – such as the real estate agent, or his lawyer) must have actually received said amounts.

In other words, there are cases in which the contract includes the owner’s obligation to return duplicate amounts delivered by the buyer, and we find that the money delivered by the buyer has been withheld by the agency and not delivered to the owner.

This practice, which is very common in real estate agencies, is actually a guarantee of repayment of the amounts delivered to buyers . In other words, the real estate agent, in order to guarantee the buyer that he will receive the money paid in the event of any type of default by the owner, usually retains the money as a deposit instead of delivering it to the owner. In such a way that, if the owner breaches the contract, it is easier for the buyer to recover the amount of the reservation because the agent keeps it .

But, in these cases in which the owner has not received the amount of the reservation, would the buyer have the right to, in the event of non-compliance by the owner, request the return of the double amounts paid ? That is, would the owner be obliged to return double the amounts delivered by the buyer when he has not received any payment?

Well, in the event that the Owner had signed the contract , and in said contract there is evidence that the money is deposited in the account of the agent, or of owner’s  lawyer, and that there was no instruction or order to transfer it to the owner, in this case the owner would be obliged to return double the amounts delivered, even if he had not received them .

On the contrary, if the owner had signed the contract, and said contract established that the amount paid should be delivered to the owner, in this case, since said amount was not received by the latter, the contract has not been fully formalized, and therefore the buyer could not require the owner to return twice the amounts delivered .

• The reservation contract must have been validly signed by the parties

  . For the reservation contract to be valid, it must have been validly signed by the parties.

With which, if the owner has signed the reservation contract in which the condition of duplicate return in case of non-compliance was established, obviously the owner is obliged to return said amounts in duplicate, even without having previously received them.

That is, the owner, having signed a reservation contract in which it was established that the agent receives and retains the amount delivered by the buyer as a deposit, is accepting that the money is retained by the Agent, and is giving his approval Well.

In addition, the owner is accepting the conditions of the contract where it is established that he must return in duplicate, in the event that, once the contract is signed, he fails to comply with his obligation to reserve the property in the name of the buyer.

Therefore, once the contract has been signed by the owner, they cannot evade their responsibility by arguing that they have not received the amount of the reservation . Therefore, it is obliged to return double the amounts delivered.

• The contract must be signed by the parties or by their attorneys

It is very common to find cases in which owners who hire the services of real estate agents for the sale of their properties sign these agency service contracts . In such service contracts, owners usually authorize and empower real estate agents to receive amounts from buyers as a “deposit” or “reserve.”

This is a totally legal practice and perfectly recognized by the Spanish system. That is, real estate agents can receive reserve amounts on behalf of owners or owners. Therefore, from a legal point of view, the payment made to a real estate agent which has been previously authorized by the owner in the service contract, is a legal payment and has legal effects.

However, from a legal point of view, although the service contract between the agent and the owner may authorize the former to receive amounts and payments on account on behalf of the latter, what it does not authorize is to “sign” the contracts . reservation on behalf of the owner.

Situations often occur in the real estate market in which the buyer has signed a contract and has delivered certain amounts on account as a deposit to the agent, but said reservation contract is not finally signed by the owner. In these cases, as we say, said reservation of property is not legally formalized , with which, in no way can the reservation agreement be considered binding on the parties.

And this, even if said reservation contract has been signed by the real estate agent.

The property agent in Spain does not have legal powers or faculties to represent the owner in the signing of a reservation contract, nor in the signing of any other type of contract.

And, this, even if your service contract says so.

In Spain, as in many countries in the world, the only way to legally represent a person is through Notarial Powers of Attorney , which have to be signed at a notary office , through notarial acts, and only they empower to sign contracts on behalf of  a person.

With which the agents are often confused and consider that the service contract they have signed with the owner authorizes them to sign reservation contracts with future buyers on his behalf.

It may be that the service contract signed with the owner authorizes the agents to “receive” the amounts paid as a reservation, but from a legal point of view, said authorization does not imply any power to ” sign” the contract on his behalf .

As we said, if the agent lacks the appropriate notarial powers of representation, the reservation contract cannot be perfected with the agent’s signature , since it would need to be validated and authorized later by the owner. And, if this is not the case, that is, if the owner has not signed said contract, he may in any way be bound by it.

With which, if a buyer has made a delivery of money to a real estate agent, and has signed a reservation contract, he cannot demand compliance by the owner if the latter  has not directly signed the contract , or has issued powers of attorney the agent to do it.

With which, the mere signature of the agent in the reservation contract does not grant validity to said contract .

With which, in the event that the owner refuses to sell the property to the buyer, the buyer will not be able to demand in any way double the amounts delivered .

At most, and depending on the good faith and good will of the real estate agent, the buyer will be able to obtain the return of the amounts delivered as a deposit.

But without being able to claim double.

TLACORP