Deposit (zadatek) vs advance payment (zaliczka) when buying a flat – what is the difference?

Buying a property involves drawing up a preliminary agreement (umowa przedwstępna) between both parties to the transaction. When drafting it, we should pay attention to the terms used in it. Bear in mind that a deposit (zadatek) and an advance payment (zaliczka) are two separate terms, and the differences between them are hugely important when buying a flat.

Buying a flat – essential documents

Drawing up a preliminary agreement (umowa przedwstępna) alone is not sufficient protection in the process of buying a flat. The process should be accompanied by the payment of a certain sum of money towards the amounts due under the signed document. This is a safeguard and a guarantee that the transaction that has been started will be completed. It is worth checking, however, whether it is called an advance payment (zaliczka) or a deposit (zadatek). This distinction is of fundamental importance. Below we explain why.

Deposit vs advance payment

Being aware of the differences between a deposit (zadatek) and an advance payment (zaliczka) is, as we mentioned, extremely important. Although the two terms are often used interchangeably, the differences between them are huge. First of all, it should be noted that a deposit has its own definition in Polish law and can be lost irretrievably. Where a preliminary agreement has been drawn up between the parties, the buyer has paid a deposit and the transaction falls through because of the buyer, the buyer loses the money paid. If the seller backs out of completing the transaction, the seller is obliged to return double the amount of the deposit. The situation is different with an advance payment. Where this financial safeguard is used, it does not matter why the sale did not go through. The seller must return the money received from the potential buyer.

READ ALSO – A DEPOSIT ON A FLAT AND FAILING TO GET A MORTGAGE

How much should you pay as an advance payment or deposit?

Estate agents point out that it has become something of a custom for the buyer to pay 10% of the value of the flat or house under the preliminary agreement. It has also become established practice to sign the preliminary agreement for a period of 3 months. These are safe conditions for both parties, and the time set in the document allows all the necessary formalities to be dealt with. This is when details are settled concerning, among other things, the financing of the purchase. The aim is to complete the formalities related to the mortgage and the like. Let us remember, however, that the deposit should not be too large. Why? An inflated payment of this kind may be regarded by the tax authorities as an attempt to reduce the amount of tax due. A court may also raise objections if any problems arise in performing the agreement. The court may deem an excessively high amount paid under a preliminary agreement to be contrary to Polish law.

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Payments made even before the purchase agreement for a flat is signed are, as we can see, an important issue. It is worth paying attention to how they are described in the document you sign. By watching out for this important detail, you can avoid many unnecessary problems and misunderstandings.