What would happen if the mortgage didn't go through? A well-drafted financing clause can prevent high costs and legal disputes.
When buying real estate, whether residential or commercial, a financing clause is an essential legal document. It protects the buyer against the consequences of failing to obtain financing in time. However, many disputes arise in practice from unclear or incomplete clauses, or from the incorrect invocation of the clause. Our real estate lawyers can help you avoid this risk.
It is a clause in the purchase agreement that stipulates the agreement can be dissolved if the buyer does not obtain the necessary mortgage or financing on time. This is particularly relevant for private individuals purchasing a home, as well as for entrepreneurs and investors purchasing commercial real estate.
If you are unable to obtain financing, you must invoke the financing reservation in a timely and formal manner and terminate the purchase agreement. If you do this too late or incompletely, you may be liable for fines or damages, usually amounting to 10% of the purchase price. Our specialists can advise you on how to avoid these risks and support you in legally terminating the purchase agreement. We can also help you to draft an effective financing clause.
Would you like to ensure that your financing clause offers you adequate protection? Or do you need help with a dispute about not obtaining financing? If so, contact our real estate law department for bespoke legal advice.
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