Thursday, February 08, 2007

Purchasing Real Estate in Sweden - Additional Clauses in the Purchase Contract

In addition to the compulsory content of a Swedish real estate purchase contract a number of clauses are usually to be found. The most common are covering the following:

  1. Payment Conditions

Normally a down payment is made at the signing of the purchase contract. If a real estate agent is involved in the transaction, he will insist on having the down payment deposited in his account. This safeguards his interest in getting paid his commission even if the purchase is not followed through.

The remaining part of the purchase price, normally about 90 %, will be paid on the transfer date.

  1. Debts secured in the real estate

The parties have to decide to what extent any part of the seller’s loans secured in the real estate will be taken over by the buyer. Such take-over will of course require the consent of the lender in question. If no take-over is agreed, the seller will repay his loans at the transfer date and the mortgage deeds thereby released will be handed over to the buyer or, probably more realistic, to the buyer’s bank financing the buyer’s purchase.

  1. Transfer of Risk

The parties will agree on whether the risk of damage etc. to the real estate will remain with the seller until the transfer date and the consequences of any damage occurring between the time of signing and the transfer date.

  1. Insurances

The seller normally undertakes to keep the real estate fully insured until the transfer date.

  1. Division of real estate income and costs

The seller will carry any and all costs for the real estate until the transfer date and will also enjoy any income of the real estate until that date. From the transfer date these roles are reversed.

  1. Costs of registration etc.

When the transfer of titled to the real estate is registered, the court will charge a registration fee and a transfer tax. This tax is 1.5 % of the purchase price if the buyer is a private person and 3 % in case of a legal entity as buyer. It is almost always the buyer who will undertake to pay the fee and tax.

In connection with the purchase additional mortgages are often registered in order to secure the financing of the purchase and the parties normally agree that the cost of this should be carried by the buyer. The cost of registering a new mortgage is 2 % of the nominal amount of the mortgage.

  1. Present condition of real estate

The seller should inform the buyer of the condition of the real estate including any known defects. This is of course of importance in relation to the warranties and the future liabilities resting on the seller.

As part of the condition of the real estate, any limitations as to use of the real estate for a specific purpose etc should be considered.

  1. Warranties

If the purchase concerns a villa you would normally not find many warranties by the seller. He may warrant the he is the lawful owner, that only mortgages and other encumbrances on the villa set out in the Swedish Land register exist etc.

If the object of the transfer is e.g. a commercial building or industrial land, the seller will be required to give substantial warranties including warranties as to rent and tenants, possible environmental issues etc.

  1. Pre-emption rights etc.

The municipality within whose borders the real estate is situated may have a right to step in as buyer on the same terms and conditions as the buyer who entered into the purchase contract with the seller. The purchase contract will normally be made conditional upon the municipality confirming that it will not exercise its pre-emption right.

Purchases of tenement buildings and of farming real estate require approvals by various government bodies.

I will comment upon these questions in a later post.

  1. Issue of Bill of Purchase

The seller will undertake to issue the purchase deed upon receipt of full and final payment. This is of major importance to the buyer as he will ordinarily apply for registration of the transfer of titled based on the purchase deed and not the purchase contract.

  1. Attachments

The content of the attachments may vary depending on what kind of real estate is purchased. One attachment that should be included is an excerpt from the Swedish Land Register showing the ownership and mortgage situation of the real estate.

No comments: