In real estate transactions, drafting a sales compromise is a crucial step, governed by precise and often complex rules.
In Belgium, a "clear language" compromise model was developed in January 2020 by representatives of the real estate and notary professions. This model aims to make the sales compromise more understandable for the parties, especially the buyers.
However, far from simplifying the situation, this clarification approach seems to have introduced dangerous inaccuracies for buyers. These omissions could easily lead to disputes with serious consequences.
Below, we outline some examples.
Suspensive condition of obtaining financing: ambiguities with serious consequences
One of the most sensitive aspects of a sales compromise is the suspensive condition of obtaining financing by the buyer. This clause is essential, as a significant number of real estate purchases in Belgium depend on credit. On this point, the “clear language” compromise model is worded as follows:
“This sale is concluded under the suspensive condition that the buyer obtains financing for an amount of # EUR, within # weeks from the signing of this compromise.
The buyer will do everything possible to obtain this financing.
If the buyer does not obtain this financing within the set period, the buyer must notify their notary # and the real estate agent # by email. The proof of the financing refusal is attached to the email.
The sale is then considered void, and the buyer recovers the guarantee, if any, paid.
If the buyer does not notify the refusal of financing by email within the set period, the suspensive condition is considered fulfilled. This means that the sale continues under the terms provided in the compromise.”
First, the current compromise model fails to explicitly provide a penalty if the buyer does not make every effort to obtain this financing. The Civil Code (Article 5.144) stipulates that if a party does not do what is necessary to meet a suspensive condition, the condition is considered met. Consequently, the sale would become final, placing the buyer in a situation with serious consequences.
It would be imperative to include a clause reminding this obligation and its consequences to avoid differing interpretations and the occurrence of disputes.
A second major weakness of this text lies in the lack of precision regarding the modalities of obtaining the loan.
Notably, it does not specify that the loan must be requested "at market rate." This detail is crucial because the buyer could claim a preferential rate, for example, for social housing, which complicates the financing process significantly. This omission could open the door to disputes between the parties.
The issue of notifying the financing refusal and banking realities
Another fundamental shortcoming of the model is the obligation for the buyer to inform their notary and real estate agent in the event of a financing refusal, and this within a specified period.
In practice, however, it is not uncommon for the credit institution not to have made a decision by the expiration of the period. In this case, the buyer may not be able to provide proof of the refusal in time. The text does not anticipate this common situation, leaving room for differing interpretations, which could lead to potential conflicts.
In the absence of explicit notification of refusal, the suspensive condition is considered fulfilled, and the sale continues. This silence is particularly problematic, as the buyer could be deemed at fault despite circumstances beyond their control, such as delays by the bank.
This is a well-known banking reality: delays are frequent in processing loan applications. Today, it is difficult, if not impossible, for a buyer to put pressure on banks to obtain a response within the contractual period. This omission exposes the buyer to significant legal risk that is clearly not addressed in the "clear language" compromise model.
This situation raises an important question: is it fair to consider a sale final when the buyer has fulfilled their obligations by requesting a loan, but the bank has not yet made a decision? The Civil Code is clear: if a contract text is ambiguous or imprecise, it must be interpreted in favour of the party making the commitment, in this case, the buyer. However, the absence of provisions for this particular situation in the sales compromise could, depending on the circumstances, also lead to judicial decisions unfavourable to buyers.
Like the aforementioned imprecision, another issue is the lack of a specified deadline for notifying the financing refusal. The fact that the deadline for obtaining the loan is clearly defined does not mean that this same deadline applies to communicating the refusal. The buyer does indeed have the right to wait until the very last minute to find out whether or not the loan is granted. It would have been wise to include a short and well-defined additional period during which the buyer must notify the notary and real estate agent of this refusal.
Conclusion: The need to draft a more precise compromise to avoid conflicts
It is essential to understand that a well-drafted sales compromise should aim to avoid disputes, not generate them. However, in its current state, this "clear language" compromise model presents many flaws that could lead to differing interpretations and conflicts between the parties. Excessive simplification of legal language, while it may make the text more accessible, should not come at the expense of the rigor and precision required in such contracts. This situation is particularly problematic as this model is frequently used by real estate professionals.
Faced with these ambiguities, it is therefore imperative that the sales compromise be drafted with rigor and precision to avoid any misinterpretation that could lead to disputes. Additional clauses should be considered to regulate the suspensive condition of obtaining credit, including introducing an additional period for notifying a possible refusal and specifying the obligations of each party in detail.
Both buyers and sellers must be aware of these risks and ensure that the sales compromise is drafted precisely and comprehensively. The same goes for real estate agents and notaries, who risk seeing their civil liability engaged.
With our decades of experience and excellence in real estate law, at Vanbelle Law Boutique, we would be delighted to assist you at every stage of your real estate transaction. If you have any doubts or questions about drafting a sales compromise, our experts are at your disposal to provide personalized advice and help you avoid costly and unnecessary disputes.
Mirjan Gjoni
Senior Associate
