How to arrange a deposit correctly when buying property

A deposit is the most common way to confirm both parties' intent before the main deal - and, when set up incorrectly, the most common source of disputes. Here is how a deposit differs from an advance payment and how to arrange it without risk.

How a deposit differs from an advance payment

Legally these are different concepts. An advance payment is simply prepayment: if the deal falls through, the seller must return it in full regardless of who backed out. A deposit is governed by Articles 380-381 of the Russian Civil Code and carries a penalty function: if the buyer backs out, the deposit stays with the seller; if the seller backs out, they must return the deposit doubled.

Why a deposit needs to be in writing

A deposit agreement must be made in writing - a verbal agreement has no legal force and, in a dispute, cannot prove that the sum handed over was a deposit rather than an advance payment. Without a written agreement, a court is likely to treat the money as an advance payment.

What a deposit agreement should include

• The exact deposit amount and how the money is transferred.
• Property details - address, cadastral number, characteristics.
• The deadline by which the parties commit to signing the main contract.
• An explicit statement that the sum handed over is a deposit, not an advance payment.
• The consequences if either party backs out of the deal.

How to transfer the money safely

Cash against a receipt is not the most reliable option - a receipt is easy to lose or dispute. A safer method is a bank transfer with a payment purpose referencing the deposit agreement, which leaves a paper trail in case of a dispute.

What happens if the deal falls through through no one's fault

If the main contract isn't signed for reasons beyond either party's control - for example, the bank denies the mortgage through no fault of the buyer's - the deposit agreement usually provides for returning the sum at face value. It's worth spelling this out in the agreement in advance, not deciding it after the fact.

Need help arranging a deposit

Call us and describe the deal terms - we will prepare a deposit agreement that protects both sides' interests.

8 909 440-80-80

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