Preliminary agreement in Lithuania

Lithuanian practice separates the promise from the sale. First comes the preliminary agreement: a written contract in which both sides undertake to conclude the main purchase-sale contract later, on terms fixed now. The flat does not change hands, yet almost every dispute that arises afterwards is resolved by reading this text.

A promise, not a sale

The Civil Code gives this contract an article of its own. Its subject matter is a future contract — not the flat, but the obligation to buy and to sell it on stated terms by a stated date. It therefore transfers no ownership, creates no right in the flat itself, and produces no entry naming a new owner.

What it does give is the two things a reservation cannot. It fixes the price and all the terms in writing, and it attaches consequences to walking away without grounds. For the seller that is evidence the buyer is serious; for the buyer it is the assurance that the flat will not be re-signed to someone else at a different figure while the bank is still thinking.

Written form, and why notarial form is not needed yet

The preliminary agreement is made in writing. An oral understanding about buying a flat has no legal force, and an exchange of messages is later read as intentions rather than as a contract. Notarial form is not required at this stage — it is required for the main contract, because a sale of Lithuanian real property is certified by a notary.

That is not an argument for keeping the notary out. The opposite: showing the preliminary agreement to a notary or a lawyer is the cheapest check in the whole purchase, because at this point the text can still be changed. On the day of the main contract there is nothing left to change — the main contract is copied out of this one.

What the agreement has to fix

A good preliminary agreement is dull and specific. It states:

• the object — address and unique number, or, where the object does not exist yet, the project index, the area and the way it is measured;
• the price and the payment schedule: how much, when, and against what;
• the deadline for signing the main contract, and who may extend it;
• what comes with the flat — storage room, parking space, share in common premises;
• the condition in which the flat is delivered, with an annex describing what is fitted and what is not;
• who bears which cost — the notary's fee and the registration charge;
• the conditions whose failure ends the agreement, usually the bank's credit decision.

Annexes are the contract as much as the first page is. If the developer describes the fit-out, the engineering or the common areas in a separate document, that document has to be named in the agreement and signed with it.

When the main contract never happens

The point of a preliminary agreement is precisely its consequences. Withdrawing without grounds is a breach, and the party responsible for the main contract not being signed is liable for the resulting loss; contracts usually add a contractual penalty on top. If the deadline passes and neither side demands performance, the obligation to contract simply ends.

For a buyer, the condition clause therefore matters more than the penalty clause. Where financing is not yet confirmed, the agreement has to say that a refusal by the bank lets the buyer withdraw without penalty, and has to say how that refusal is evidenced. Without such a clause, the bank's “no” becomes the buyer's breach rather than an external event.

An unbuilt flat: a rule of its own

Where the home is not yet built, the Civil Code has a separate provision for the preliminary agreement on the purchase of an unbuilt house or flat. Additional requirements apply to the content of such a preliminary agreement, and a buyer who has financed construction under it stands in a better position than an ordinary creditor. This is one more reason why the label and the legal basis of every payment matter.

The payment schedule in these contracts is almost always tied to construction stages, so read what exactly each stage is and who certifies that it has been reached. Read, too, what happens if completion is late: whether the delay has a limit, whether penalties run, and at what point the buyer may terminate. The flat becomes a separate object only after cadastral measurement, and until then no notarial deed about it can be signed at all.

This article is general information and not legal or tax advice. The wording of your own agreement may differ from the common practice described here, so have the actual text reviewed by a notary or a lawyer before you sign it.