Preliminary Sale Contract
SPA · promissory contract · sale-purchase pre-agreement · preliminary purchase agreement
Definition
A Preliminary Sale Contract is a legally binding agreement in real estate transactions that obligates the seller to sell and the buyer to purchase a property under specified terms before final title transfer. In Georgia, registering this contract with the National Agency of Public Registry (NAPR) protects the buyer by encumbering the title against third-party sales or mortgages.
In detail
Overview and Legal Nature
A Preliminary Sale Contract (also known as a promissory contract or preliminary pre-agreement) is a legally enforceable contract executed between a seller and a buyer. It establishes a mutual obligation to execute a final Sale and Purchase Agreement (SPA) in the future under predetermined terms, such as price, payment installments, construction milestones, and delivery deadlines.
Key Structural Components
- Property Identification: Precise cadastral code, unit number, floor plan, and technical delivery state (e.g., Black Frame, White Frame, or Green Frame).
- Financial Schedule: Total purchase price, schedule of stage payments, down payment terms, and default interest rates. In Georgia, developer prices for new-build residential units strictly include the mandatory 18% Value Added Tax (VAT).
- Completion Deadlines: Target completion dates, inspection protocols, force majeure clauses, and penalties for construction delays or buyer default.
- Registration Mandate: Specific terms requiring formal registration at the public land registry.
Public Registry Registration (NAPR)
Under Georgian property law, signing a preliminary contract without registering it at the National Agency of Public Registry (NAPR) leaves the buyer vulnerable to third-party claims. Registration creates an official legal encumbrance—a preliminary right of claim—recorded directly on the property's cadastral file. This public notice prevents the seller or developer from reselling, mortgaging, or pledging the property to another party prior to final handover.
Transition to Ownership
Once construction finishes and all financial obligations are met, the preliminary contract transitions into a final Sale and Purchase Agreement. Formal title registration at NAPR converts the buyer's registered right of claim into full, unconditional real estate ownership.
Georgian context
In Georgia's active primary real estate market across Tbilisi and Batumi, preliminary sale contracts are standard for off-plan purchases from developers. Under the Civil Code of Georgia, registering the preliminary contract with the National Agency of Public Registry (NAPR) grants the buyer a registered right of claim. This encumbers the property's cadastral code, legally blocking developers from double-selling units or taking secondary mortgages against the unit. All advertised developer prices in Georgia legally include 18% Value Added Tax (VAT). Foreign buyers must note that a preliminary contract does not satisfy the requirement for Georgia's $150,000 USD real estate residency permit; full ownership registration of a completed asset is required.
Real example
An investor contracts to buy an off-plan apartment in Tbilisi for $160,000 USD (inclusive of 18% VAT). The developer and buyer execute a preliminary sale contract specifying a 30% down payment ($48,000 USD) and quarterly installments. The contract is immediately registered at the Public Service Hall with the National Agency of Public Registry (NAPR) under the unit's cadastral code. This registration legally prevents the developer from mortgaging the unit. Upon final payment and building completion, the parties execute the final purchase agreement, converting the claim into full registered ownership.
Common mistakes
- ×Failing to register the preliminary contract with NAPR, leaving the buyer unprotected against third-party claims or secondary sales.
- ×Assuming developer prices exclude 18% VAT, whereas Georgian law mandates that advertised prices include VAT.
- ×Omitting detailed finishing specifications (e.g., White Frame parameters) from the contract annexes.
- ×Attempting to apply for Georgian property residency ($150,000 USD threshold) using a preliminary contract instead of a final ownership deed.
Frequently asked questions
Is a preliminary sale contract legally binding in Georgia?
Yes, preliminary sale contracts are legally binding under Georgian civil law. To protect the buyer against third parties, the contract must be formally registered at the National Agency of Public Registry (NAPR).
Do I need a notary to sign a preliminary sale contract in Georgia?
Notarization is optional if the contract is submitted and signed directly at the Public Service Hall or NAPR office. However, non-resident foreign buyers often use a notary or legal power of attorney to ensure proper translation and legal review.
Does a preliminary sale contract transfer ownership of the property?
No. A preliminary contract registers a right of claim on the cadastral title. Full legal ownership is transferred only after signing the final sale-purchase agreement and registering full title with NAPR upon project completion.
Can I use a preliminary sale contract to apply for Georgian residence by investment?
No. To qualify for a Georgian short-term residency permit under the real estate threshold ($150,000 USD), you must hold full, registered ownership of a completed property at NAPR backed by an accredited valuation report.
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