Buyer’s Right: When and How Can a Buyer Withhold Part of the Purchase Price Under ZVKSES Provisions
A buyer is entitled to withhold part of the purchase price until the seller fulfills all actions necessary for the proper performance of their obligations. The purpose of this article is to clarify the conditions under which a buyer can exercise the right to withhold payment as a means of protection in cases of the seller’s unfulfilled obligations.
Withholding 10% of the Purchase Price Until Conditions for Property Handover Are Met
The buyer may withhold 10% of the purchase price until the seller:
- Delivers the property with the characteristics stipulated in the sales contract: The seller must obtain an occupancy permit, ensure the property is built according to the specifications in the sales contract, enter into a property management contract with a property manager (if required by the Housing Act (SZ-1)), and ensure the manager takes over the common areas of the building; and
- Provides possession of the property, copies of the occupancy permit, and, if the subject of the sale is an individual unit in a building, the sectional plan for the unit. Additionally, the seller must deliver the required certificates, warranty documents, and declarations of conformity for equipment and appliances, as well as as-built project documentation.
Once these conditions are met, the buyer is no longer entitled to withhold the remaining purchase price.
Withholding 5% of the Purchase Price Until Obvious Defects Are Rectified
If the buyer discovers and reports obvious defects during the property handover, they have the right to withhold 5% of the purchase price. To exercise this right, the seller must allow the buyer to inspect the property at least three days before the agreed handover date.
The buyer’s right to withhold part of the purchase price under ZVKSES is limited to 10% or 5%, and the buyer must then timely assert warranty claims in accordance with the Obligations Code (OZ).
Withholding 5% of the Purchase Price Until Submission of a Bank Guarantee for Latent Defects
The seller is obligated to rectify any defects that may arise within the two-year warranty period and must provide an irrevocable bank guarantee upon property handover. This guarantee commits the bank to pay the specified amount upon the buyer’s first demand without objections.
The bank guarantee must correspond to 5% of the purchase price as per the sales contract, with a validity period of at least 26 months from the issuance of the occupancy permit.
The buyer exercises this right by depositing the withheld amount with a notary in favor of the seller, subject to the seller’s fulfillment of the obligation to provide or deposit the bank guarantee for rectifying latent defects.
Withholding 5% of the Purchase Price Until Conditions for Registration of Ownership Rights Are Secured
The legal actions the seller must perform to secure conditions for the registration of ownership rights in favor of the buyer depend on whether the property is a single-family house or an individual unit in a multi-unit building. In both cases, the final requirement is the issuance of a land registry permission for the registration of ownership rights in favor of the buyer.
The buyer must pay the withheld portion of the purchase price concurrently with the seller’s fulfillment of all conditions for registering ownership rights in favor of the buyer. This obligation may also be fulfilled if the seller deposits the land registry permission with a notary for the benefit of the buyer, provided the buyer submits proof of full payment of the purchase price minus any legitimately withheld amounts.
Conclusion
An agreement on early payment of the purchase price does not exclude the buyer’s right to withhold part of it. The buyer is not obliged to pay any installment of the purchase price until the conditions for registering ownership rights on a single-family house or sectional ownership of an individual unit in a multi-unit building in favor of the buyer are met, or until the seller is able to deliver the property with the characteristics specified in the sales contract and in the manner stipulated by ZVKSES.
