How to dissolve a purchase agreement
After signing the preliminary purchase contract, you're one step closer to buying your dream house. But what are the possibilities to terminate the purchase agreement, for example, if you have doubts or if something goes differently than expected? We'll explain it to you step by step.
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- Include clear provisions on terminating the purchase in the purchase agreement
- Terminating the purchase agreement within the statutory reflection period
- Terminating the purchase agreement based on a condition precedent
Include clear provisions on terminating the purchase in the purchase agreement
If your offer on a house is accepted, the seller (or real estate agent) will then proceed with drafting the preliminary purchase contract. Read the provisions in the preliminary purchase contract carefully, so you know exactly what it states before you sign it.
Make sure that clear provisions on terminating the purchase are included in the purchase agreement, such as:
- Provisions that describe which conditions precedents apply; and
- Provisions that describe how you can terminate the purchase.
Are you not sufficiently knowledgeable yourself? Then have someone look over it who is knowledgeable. A real estate agent for example, or a family member with enough knowledge.
Provisions on the applicable conditions precedents
It is important to include the right conditions precedents in the purchase agreement. If any of these conditions occur after the expiration of the statutory reflection period, you can still terminate the purchase within the agreed timeframe.
Commonly included conditions precedents are:
- Purchase subject to financing
- Purchase subject to a structural inspection
- Purchase subject to NHG
- Purchase subject to the sale of your own property
- Purchase subject to a housing permit
- Purchase subject to changes in the property
On our page about the conditions precedents you can read in detail what these conditions precedents mean and how you can have them included in the purchase contract.
Discuss with your real estate agent which provisions you do and do not want included in the purchase contract. And check the provisions regarding the conditions precedents carefully in the drafted purchase deed by the seller.
A provision for financing is not necessary, for example, if you buy a house without a mortgage. A structural inspection is also not always necessary. For example, if there has been a recent structural inspection (by the previous buyer) and it is a relatively new home, you may choose not to have a new structural inspection performed.
Provisions on how you can terminate the purchase agreement
Also include provisions in the purchase agreement that clearly describe how you can terminate the purchase. It is important to include clear deadlines for each condition precedent. And to clearly describe how the purchase can be terminated.
For example, you can include that you can terminate the purchase agreement by registered letter within five working days after the result of the structural inspection. Include such a clear description for the other conditions precedents in the purchase contract. Your real estate agent can of course help you with this.
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Terminating the purchase agreement within the statutory reflection period
After signing the purchase agreement, as a consumer-buyer, you have three days of statutory reflection period. For the statutory reflection period, at least two of the three days must be working days. During this period, you can terminate the purchase contract without giving a reason.
You may agree with the seller on a longer reflection period. Both parties must agree, and the agreement must be included in the purchase contract. A shorter reflection period is not legally permitted.
The statutory reflection period only applies to houses and holiday homes from private individuals. If you are not a consumer or are buying, for instance, a houseboat or caravan, you cannot use the statutory reflection period.
How can you terminate the purchase within the statutory reflection period?
If you want to terminate the purchase within the statutory reflection period, you can do this by sending a registered letter. Note that the cancellation must have reached the seller (or real estate agent) within the statutory reflection period. Therefore, it's wise to also send your cancellation by email.
After the reflection period expires, you are generally bound to the purchase. Unless there is a condition precedent.
Terminating the purchase agreement based on a condition precedent
Do you want to terminate the purchase of the house based on a condition precedent? Then pay close attention to the following three things:
- Terminate the purchase agreement in writing
- Provide a good justification
- Make sure you terminate the purchase on time
Terminate the purchase agreement in writing
You must always terminate the purchase in writing via a 'common means of communication'. If you've always been in contact with the seller (or real estate agent) via email, that likely counts as a common means of communication.
However, we advise always terminating the purchase (also) via a registered letter. This way, you have written proof that your termination notice reached the seller. It's wise to also send the same letter by regular mail and email. Also send a copy to the notary involved in the sales process.
Provide a good justification
Check the purchase contract to see what exactly you agreed upon with the selling party regarding the termination of the purchase. Do you want to terminate, for example, because you didn't secure financing? In the model purchase agreement, it states that you need to show one rejection from a recognized mortgage lender to terminate the purchase. That will be your justification for the cancellation.
You could have also agreed on something else in the purchase contract, such as needing to provide two rejections from recognized mortgage lenders. There may also be additional agreements made. Always check the content of the purchase contract so you can provide the correct justification.
Ensure you terminate the purchase on time
The purchase contract contains clear deadlines for terminating the purchase agreement. It is very important that you know these deadlines and adhere to them. Is there, for example, a financing condition in the contract? Then there is a provision stating by which date you must have clarity on a possible refusal of financing from the mortgage lender.
After that, you usually have one or more days to ensure your termination notice reaches the selling party. How many days you have for this is also stated in the purchase contract.
Need more time to arrange your financing?
You can make a proposal to the seller to extend the condition precedent. Consult with your mortgage advisor on how much extra time you need and make the proposal to the seller. The extension only applies if the selling party agrees.
Read more about arranging a mortgage when buying a property. Or read more about buying a house.
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