Which points to review in the property purchase contract before signing: land register, discharge of encumbrances, escrow, registration consent and warranty.
BRANDAUER Rechtsanwälte
Salzburg law firm for real estate, property and corporate law
Every matter is handled by a coordinated team of lawyers, legal staff and specialists. In property purchase matters we look at the contract, land register, escrow and tax consequences together.
A property purchase contract is often signed under time pressure. The seller pushes for a quick deal, the draft looks pre-formulated and serious and the wish not to lose the desired property prevails. This is precisely where the risk lies: with your signature you commit to every sentence of the contract, including clauses you have skimmed over.
This post shows which points you should review before signing. The focus is on the land register status, the discharge of encumbrances, the handling of the purchase price through an escrow agent and securing your acquisition of ownership through registration. Warranty, handover and incidental costs also play a role.
Anyone who reads the contract carefully before signing and clarifies the critical points avoids costly disputes after the purchase. From a lawyer perspective much is decided already in the phase before signing, because an agreed text can later only be changed with difficulty.
Answer one or two questions on the land register, encumbrances and purchase price handling. You receive an initial classification of the most important review points.
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Only a current extract shows who the owner is and which encumbrances are registered in the land register.
Without an up-to-date land register extract it remains unclear who the owner is and which encumbrances burden the property. Request a current extract before signing and reconcile it with the draft contract. Our checklist of documents before the contract review offers guidance.
With complete documents the draft can be reviewed reliably before you commit.
If discharge of encumbrances and escrow handling are governed, the settlement is well secured. Also check the declaration of registration consent, the maturity of the purchase price, the handover date and the warranty provision. The allocation of incidental costs and taxes should be settled too.
A short legal review reveals disadvantageous clauses before they bind you.
Open encumbrances, payment without escrow or a missing declaration of consent shift the risk to you. Such points can be improved before signing: a secured discharge of encumbrances, escrow handling and a maturity tied to proof that the encumbrances have been deleted.
Have the draft reviewed before signing and the critical clauses adjusted. A signature binds you to the agreed text.
Every review begins with the land register extract. In sheet A it shows the property, in sheet B the ownership and in sheet C the encumbrances such as mortgages, easements or a prohibition on encumbrance and sale. Only an up-to-date extract reflects the true status, because entries can be added at any time.
Reconcile the details in the draft contract with the land register. Does the seller match the registered owner? Does the designation of the property correspond to the extract? Are all encumbrances that the contract deals with recorded? You find a deeper treatment on our focus page on the land register and encumbrances and in the post on how to read a land register extract correctly.
In Austria ownership does not pass with the contract but only with registration in the land register. The contract is the title, the registration is the act of acquisition. It is therefore decisive that the contract creates the basis for a clean registration of your ownership.
When you buy a property you usually want to acquire it free of the seller debts. If a mortgage of the seller bank burdens the property, it must be deleted before or step by step with your registration. The contract should govern this discharge of encumbrances expressly and tie it to the purchase price payment.
The purchase price should be handled through an escrow agent, usually a lawyer or notary. The escrow agent receives the purchase price and releases it only once the agreed conditions are met, for example proof of the discharge of encumbrances and the secured registration. This way you do not pay before your acquisition of ownership is secured. Read more in the post on paying the purchase price via escrow.
Caution applies to a direct payment to the seller without escrow. Anyone who transfers the purchase price before the encumbrances are deleted and registration is secured bears the risk of ending up, in the worst case, without unencumbered ownership. Escrow handling protects both sides.
So that your ownership can be entered in the land register, the declaration of registration consent is required. This is the express consent of the seller to the registration of your right of ownership. If it is missing from the contract or from a separate deed, registration cannot take place. Check therefore whether the draft contains an effective declaration of consent.
The notation of priority ranking for the intended sale serves to secure the acquisition. It reserves the rank for your registration and protects you from the seller selling or encumbering the property a second time in the meantime. The priority ranking is time-limited, so the timing of its request should be coordinated with the settlement.
How the declaration of consent and registration interact is explored in the post on the declaration of consent and registration. We also explain the terms in the glossary.
These points decide on your rights and risks. Check each one before you sign.
| Review point | Recommended | Possible risk |
|---|---|---|
| Land register status Up-to-date extract | Reconcile owner, property and encumbrances with the contract | An outdated extract conceals new entries |
| Discharge of encumbrances Deletion of encumbrances secured | Discharge tied to the purchase price payment | Open mortgages burden your ownership |
| Purchase price Handling through escrow | Release only after proof of discharge of encumbrances | Direct payment without securing the acquisition |
| Registration Consent and priority ranking | Effective declaration of consent and notation of priority ranking | A missing declaration prevents the entry |
| Warranty Period under the Civil Code | Clear provision instead of a blanket exclusion | A far-reaching exclusion weakens your position |
Towards consumers the warranty may not be shortened below the statutory protection standard. When buying from a private seller, an exclusion for hidden defects is often disputed.
Caution with direct payment: If the purchase price is paid directly to the seller without escrow, before the encumbrances are deleted and your registration is secured, you bear the full risk. Have the settlement reviewed before signing. Booking an initial consultation (72 euro) can quickly bring clarity.
Defects of the property are covered by the warranty under the Austrian Civil Code. When buying from a business the period for immovable property is three years from handover. When buying from a private seller the warranty is often restricted. An exclusion does not, in case of doubt, cover fraudulently concealed defects. How to proceed with hidden defects is covered in the post on the warranty for hidden defects.
Clarify the handover date and the passing of risk. From handover the benefits, burdens and the risk of accidental loss pass to you. A handover protocol records the condition and the meter readings. More in the post on the handover protocol for a house or apartment purchase.
Factor in the incidental costs. In addition to the purchase price there are the real estate transfer tax, the registration fee, the costs of drawing up the contract and of the escrow as well as, where applicable, a broker commission. Our incidental costs calculator gives an overview. A first risk assessment is provided by the purchase contract risk check.
In Austria ownership does not pass with the purchase contract but only with registration in the land register. The contract is the legal title, the registration is the act of acquisition. The contract therefore needs an effective declaration of registration consent from the seller so that your ownership can be entered.
The escrow agent receives the purchase price and releases it only once the agreed conditions are met, for example proof of the discharge of encumbrances and the secured registration. This way you do not pay before your unencumbered acquisition of ownership is secured. A direct payment without escrow shifts this risk to you.
When buying from a private seller the warranty is frequently restricted. Such an exclusion does not, in case of doubt, cover fraudulently concealed defects. Towards consumers, for example when buying from a commercial seller as a business, the warranty may not be shortened below the statutory protection standard.
Our focus page on reviewing the property purchase contract with the central review points.
How the land register is structured and which encumbrances can affect your ownership.
How handling through an escrow agent secures your acquisition of ownership.
What sheets A, B and C mean and what to look for in the extract.
When buying property, the contract and the land register decide. Call us directly or send an email, callback within one business day.
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BRANDAUER Rechtsanwälte GmbH Giselakai 51 5020 Salzburg
Phone
+43 662 6280000