The best and in practice most common solution for a secure handling of the purchase price payment in a real estate transaction is the appointment of a trustee.
When purchasing real estate in Slovakia, the parties conclude a contract of sale but the acquisition of ownership of the real estate takes place only after registration in the land register. The parties must first prepare an application and submit it to the relevant land registry office with all the necessary formalities. Registration takes place within 30 days or, if a higher registration fee is paid, within 15 days.
When processing the purchase price payment, it must therefore be ensured that the buyer actually pays the purchase price after registration in the land register. If the buyer is already registered in the land register, but does not pay the purchase price, a reversal is only possible via the long and cost-intensive court route. For this reason the payment of the purchase price must be sufficiently secured in the time between the signing of the purchase contract and the registration of the real estate purchase. Only then will the seller have a guarantee that he will receive his money. At the same time, the buyer can also rely on the fact that the purchase price will be refunded if the land registry does not carry out the entry or significantly postpones it, for example due to formal errors.
The best and in practice most common solution for a secure handling of the purchase price payment in a real estate transaction is the appointment of a trustee. This is then usually either a bank or a notary public. Both open a special account for the parties, to which the purchase price is deposited step by step with the signing of the sales contract. It does not matter whether the money comes from the buyer’s own funds or from real estate financing.
The bank establishes a so-called transfer restriction (Vinkulácia), which is also known as escrow, and agrees with the parties the exact conditions for the transfer of the purchase price. If the property is properly registered in the land register for the benefit of the buyer, the bank transfers the money to the seller, otherwise it lifts the transfer restriction and the money remains with the buyer. If the parties choose a notary as their trustee, the latter will hold the purchase price in trust. The notary will draw up a formal protocol which will, among other things, contain the conditions for the transfer of the purchase price.
It is highly recommended that the conditions for the transfer restriction or the notarial safekeeping of money are very precisely defined and agreed in writing in order to avoid later any trouble. Both transfer restrictions and notarial safekeeping have their advantages and disadvantages, which must be taken into account depending on the specifics of the particular real estate purchase. For these reasons the involvement of a lawyer is absolutely necessary. When financing real estate, the financing banks often prefer escrow agreements, as banks are often more flexible when formulating escrow conditions and better consider the desired purchase price processing (e.g. conditions of real estate financing, real estate tax, etc.). In the private sector, notaries are cheaper and therefore more in demand.