Deposit and preliminary contract when buying an apartment

Why this step matters

Weeks often pass between we have a deal and the signing at the notary: the buyer waits for mortgage approval or sells their own home, the seller gathers documents. To make sure the apartment isn't sold to someone else in the meantime and the buyer doesn't change their mind, the parties sign a preliminary contract and secure it with a deposit.

A deposit is not the same as an advance

Armenia's Civil Code (Article 395) defines a deposit — nakhavchar in Armenian — as a sum one party gives the other against future payments under a contract, both as proof that the contract was concluded and as security for its performance. A deposit agreement must be in writing whatever the amount. If there is doubt whether the sum is a deposit, including when there is no written agreement, it is treated as an advance payment — kankhavchar.

The consequences are set out in Article 396. If the party that gave the deposit is responsible for non-performance, the deposit stays with the other party. If the party that received it is responsible, it must pay double the deposit. On top of that, the party at fault compensates losses minus the deposit, unless the contract says otherwise. And if the obligation ends before performance begins — by agreement or because performance became impossible — the deposit is simply returned.

Why the preliminary contract goes to a notary

Under Article 445 of the Civil Code, a preliminary contract must be made in the form required for the main contract, and failure to follow that form makes it void. Under Article 562, a contract for the sale of real estate is made in writing and is subject to notarisation. So a preliminary contract to buy an apartment must also be signed at a notary: a handwritten receipt will not give the protection the parties are counting on.

The preliminary contract states the period within which the parties undertake to sign the main contract. If no period is set, the main contract must be concluded within one year. If the period ends without a main contract and neither party has offered to sign it, the obligations under the preliminary contract end.

What to put in the preliminary contract

• Exact details of the apartment: address, area, cadastral code — as in the Cadastre extract.
• The price and payment terms: the size of the deposit, when and how the balance is paid.
• The deadline for signing the main contract.
• That the sum paid is a deposit, with consequences clear to both sides.
• The list of people with a right to use the apartment — an essential term of a contract for the sale of a home (Article 570) — and the date by which the seller vacates the flat.
• What is included in the sale: furniture, appliances, storage room, parking space.
• The seller's duty to pay off utility debts before the deal.
• What happens if the bank turns down the buyer's mortgage.

Step by step

1. Order a fresh Cadastre extract and make sure the seller is the owner and there are no restrictions (step 4 of the guide). Anyone can obtain information on rights, including online at e-cadastre.am.
2. Agree on the price, the size of the deposit and the timeline. The law does not set the deposit amount — the parties decide it.
3. Book a notary appointment together with the seller. Check the full list of documents with the notary in advance.
4. Sign the preliminary contract and pay the deposit as it specifies.
5. Keep the contract and proof of payment until ownership is registered.

Key points

• By law a deposit is both part of the price and a guarantee: if the buyer breaks the deal they lose it, if the seller does they pay it back double.
• A deposit agreement must be in writing; without it the sum will most likely be treated as an advance.
• A preliminary contract for an apartment is signed at a notary, otherwise it may be void.
• Check the apartment against a Cadastre extract before you pay anything.