Increase in the Price of a Property Under Construction When a Preliminary Purchase Agreement is Signed

Increase in the Price of a Property Under Construction When a Preliminary Purchase Agreement is Signed

Purchasing a property under construction often includes signing a preliminary purchase agreement, outlining the terms and conditions of the transaction. However, one common issue faced by buyers is the increase in the agreed price during the construction phase. This article explains your rights and legal options if you encounter such a situation.

What is a Preliminary Purchase Agreement?

A preliminary purchase agreement is a legally binding document signed between the buyer and seller before the final notarial deed is executed. It outlines the essential terms of the transaction, including:

• The agreed purchase price.
• Payment terms.
• Deadlines for construction completion.
• Penalties for non-compliance by either party.

Can the Seller Increase the Price After Signing the Preliminary Agreement?

The price agreed upon in a preliminary purchase agreement is binding for both parties. However, some developers attempt to raise the price, citing various reasons, such as:

1. Increased Construction Costs:
   • Rising material or labor costs are a common justification for price increases.
2. Changes in Building Specifications:
   • Alterations in project specifications, such as higher-quality materials, may lead to additional charges.
3. Economic Factors:
   • Inflation or other macroeconomic conditions can be used as reasons for increasing the price.

Legal Perspective:

• If the preliminary agreement does not explicitly allow price adjustments, any unilateral change by the developer is a breach of contract.
• Buyers have the right to challenge such changes and demand adherence to the originally agreed price.

What Are Your Legal Rights as a Buyer?

1. Enforce the Original Agreement:
   • Under Article 19 of the Bulgarian Obligations and Contracts Act, a preliminary agreement obligates the seller to adhere to its terms. If the seller refuses, the buyer can file a lawsuit to enforce the agreement.
2. Terminate the Agreement and Seek Compensation:
   • If the seller breaches the contract, buyers can terminate the agreement and claim damages for financial losses.
3. Negotiate New Terms:
   • Buyers can negotiate a compromise with the seller if both parties agree to revise the terms.
4. File a Complaint with the Consumer Protection Commission:
   • If the price increase involves unfair commercial practices, buyers can report the developer to the Bulgarian Consumer Protection Commission.

Steps to Take If the Price Is Increased

1. Review the Preliminary Agreement:
   • Check for clauses allowing price adjustments. If no such clause exists, the price increase is likely illegal.
2. Request Written Justification:
   • Ask the seller to provide detailed reasoning and documentation for the price increase.
3. Consult a Real Estate Lawyer:
   • Seek legal advice to understand your options and the best course of action.
4. File a Court Claim:
   • If negotiations fail, buyers can file a lawsuit to enforce the agreement or seek compensation.

Common Clauses to Watch for in Preliminary Agreements

1. Price Adjustment Clauses:
   • Some agreements include clauses allowing price changes based on external factors like inflation or increased costs. Ensure these clauses are clearly defined.
2. Penalty Clauses:
   • Ensure the agreement includes penalties for non-compliance by the seller, such as late delivery or unauthorized price increases.
3. Termination Clauses:
   • Look for clauses specifying the conditions under which the agreement can be terminated.

Legal Assistance for Property Disputes

Real estate transactions can be complex, especially when disputes arise. A qualified lawyer can:

• Review your preliminary agreement.
• Negotiate with the seller on your behalf.
• Represent you in court if necessary.

How Legal Frame Can Help

At Legal Frame, our team of real estate law experts can assist with:

• Drafting and reviewing preliminary agreements.
• Handling disputes related to price increases.
• Filing complaints with regulatory authorities or taking legal action.

Frequently Asked Questions

1. Can I refuse to pay the increased price?

Yes, if the preliminary agreement does not allow price adjustments, you can refuse to pay and demand adherence to the original terms.

2. What happens if the seller refuses to honor the agreement?

You can file a lawsuit to enforce the agreement or terminate it and seek compensation.

3. Is it legal for the developer to increase the price?

Price increases are only legal if explicitly allowed in the preliminary agreement.