STEP-BY-STEP INSTRUCTIONS – continued:
…Go ahead.
An advance payment for an apartment is made in order to “stake out” it for yourself while documents are collected and verified. The essence of the prepayment is to record preliminary agreements on the transaction between the Seller and the Buyer, after which the Seller stops showing the apartment to other buyers and begins collecting documents for the transaction.
In practice, prepayment for an apartment is made either in the form of a deposit or in the form of an advance payment. The essence of both, as well as the fundamental difference between them, is described in the Glossary, following the appropriate links.
The deposit , of course, is more beneficial to the Buyer, because in case of refusal by the Seller, he must return it to the Buyer in double amount.
The advance payment , of course, is beneficial to the Seller, because he can refuse the transaction at any time without risking anything, simply returning the advance to the Buyer (for example, if another buyer is suddenly found who offers a slightly higher price).
In general, a deposit implies mutual control and mutual financial responsibility, so it makes sense for the Buyer to insist on a deposit . Sellers, at the suggestion of realtors, try in any way to avoid this responsibility, and more often accept prepayment in the form of an advance payment , but with additional penalties for the Buyer: if he refuses the transaction, he loses the amount of his advance payment .
an advance is often used , but with some additional conditions, both on the part of the Buyer and on the part of the Seller (see below).
What risks does the Buyer face when purchasing an apartment received by inheritance? Examples, explanations, recommendations.
Deposit.
Such an advance payment will show the seller the seriousness of the buyer's intentions. At the same time, it acts as a guarantee that a purchase and sale agreement will be concluded between the seller and the buyer in the future. Otherwise, i.e. If the agreement is not signed, the party guilty of this will be liable in rubles.
If the transaction does not take place due to the fault of the buyer, the seller will keep the deposit. If the seller is at fault, he will pay the buyer double the amount of the deposit.
The amount of the deposit is not established by law and is determined by the parties through transactions by agreement. In practice, its size ranges from 10,000 to 100,000 rubles.
How does a pledge differ from an advance and a deposit and how is it regulated by law?
Natalya Tikhonenko, executive director of financial service QOOD
The pledge itself does not confirm the reality of the transaction. The collateral can be used to secure obligations that will arise in the future. An example is the conclusion of a credit line agreement or an agreement to provide funds in an overdraft mode. In this case, at the time of concluding the collateral agreement, there is no actual execution of the transaction yet (consensual transaction), but the security already exists.
The law establishes completely different procedures for disputes in the case of the use of collateral and deposit if one of the parties to the transaction has not fulfilled its obligations. When using collateral, the injured party can receive payment or compensation for their costs through the sale of the collateral or keep it for themselves. These procedures are not required for the deposit.
The collateral is property or claims, but not money. Similar rules are only the provisions on the pledge of rights under a bank account agreement, established by Art. 358.9-358.14 Civil Code of the Russian Federation.
What's better?
If you have firmly decided to buy this particular apartment and have previously checked the seller’s documents, we recommend concluding an agreement on a deposit. Such an agreement will significantly reduce the risk of the seller refusing to conclude the transaction. Otherwise, it will double your investment.
If you have doubts about the legal purity of the apartment, the identity of the seller, or feel pressure from his realtor, we recommend that you limit yourself to an advance agreement, which you can terminate and get your money back at any time.
Prepayment – what is it for?
Let's assume that you have already found the apartment of your dreams in Sochi and want to become its full owner. Making an advance payment in this case guarantees that the owner is guaranteed to sell it to you and will not consider other buyers.
An advance payment for the property chosen by the buyer is made for a certain period and is counted towards the total cost of the apartment or house. It is imperative to sign an agreement stating that the buyer transferred the funds and the owner received them. By the way, not only the owner, but also his authorized representative can accept advance payment.
For example, an employee of a real estate agency with appropriate powers. In addition, prepayment gives both parties to the transaction certain financial guarantees and fixes contractual obligations. The prepayment can be a deposit, an advance payment or a deposit.
Below we will look at each of the methods in detail, figure out what their main differences are and how to correctly make an advance payment for the apartment you have chosen.
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How to apply?
An agreement on a deposit or advance must be concluded in writing, with the obligatory indication of:
- information about the parties to the agreement (full name, passport details),
- information about the property,
- the period for concluding the purchase and sale agreement,
- size, type (advance/deposit) and term of prepayment,
- liability of the parties to the transaction in case of violation of the terms of the agreement,
- conditions for the distribution of the prepayment after the conclusion of the transaction (i.e. the advance/deposit is included in the price of the purchased property).
Conditions for such an advance payment can also be provided for in the preliminary purchase and sale agreement.
How to make an advance when buying an apartment
The procedure for making an advance payment when purchasing an apartment is no different from the procedure for making a deposit for an apartment. The difference arises only in the financial consequences described above (liability of the parties) in the event of a deal failure.
To begin with, we determine the deadline for making the advance and its amount .
How to properly arrange the purchase of an apartment along with furniture - see this article.
When to pay?
Before making a deposit or advance payment, we recommend checking the primary documents for the transaction:
- seller's passport,
- document confirming ownership,
- document providing the basis for the emergence of property rights.
- extract from the Unified State Register of Real Estate.
If, based on the results of the check, something alarms you, refuse to sign the prepayment agreement and conduct additional checks, or contact a lawyer to support real estate transactions, or refuse the dubious purchase without making any prepayment.
Advance amount for the apartment
“It won’t be enough!” - the Seller can say, counting our money. "Just right!" – we give a confident answer, and explain to the Seller that the very fact of prepayment is more important than its amount.
The advance amount when purchasing an apartment can, in fact, be anything. But in practice, it usually does not exceed 1-2% of the cost of the apartment, or they choose an approximately comparable round amount, for example, 50 or 100 thousand rubles. (amounts for the Moscow standard housing market). Bargaining is quite appropriate here.
What are the risks of buying a privatized apartment? Nuances of privatization. What the Buyer needs to know – see the link in the Glossary.
The concept, the essence of an advance
Advance payment is one of the methods of advance payment, and the concept of advance payment is regarded as the responsibility of the buyer, customer, etc.
pay for a product, service or work in whole or in part before the seller transfers the goods, the contractor provides the service, or the contractor performs the work. In various dictionaries, an advance is also defined as a sum of money pre-paid towards future payments. Here are some examples of definitions of concepts:
Advance - money or other material assets issued against upcoming payments (Explanatory Dictionary by T.F. Efremova).
Advance – money (or other valuables) given in advance in exchange for earnings due to someone. payments (Explanatory Dictionary of S.I. Ozhegov).
Advance payment is a preliminary payment by the customer of a certain amount of money towards future payments for goods supplied, work performed, services... / Part of the salary paid in advance towards monthly earnings; the day of its issuance... (Large explanatory dictionary of the Russian language. - 1st ed.: St. Petersburg: Norint S. A. Kuznetsov. 1998)
Advance - (from the French avance) - a sum of money or other property value issued in advance on account of agreed payments or upcoming expenses. An advance, like a deposit, serves as evidence of the conclusion of an agreement, but does not ensure its actual execution, since in case of failure to fulfill the obligation, it is subject to return, and nothing more. therefore, any advance payment is considered a., unless the written agreement of the parties to the contract expressly states that it is a deposit (One-volume large legal dictionary. 2012).
Advance (French avance) is a preliminary payment by the customer of a certain amount of money towards future payments for goods supplied to him, work performed for him, services. Typically, a portion of the future payment amount is paid in the form of an advance, amounting to up to 50% of its total volume. An advance is a form of prepayment designed to interest the performer, guarantee the receipt of money from the customer, and reimburse the upcoming expenses of the performer. In case of termination of the contract, the advance payment is subject to full or partial refund. Common forms of advance payment: issuing part of the salary to the employee in advance, providing money to a business traveler before going on a business trip. The advance payment is counted as part of the payment in the final settlement between the customer and the contractors. The issuance of funds for upcoming expenses is called an advance, prepayment (Raizberg B.A., Lozovsky L.Sh., Starodubtseva E.B. “Modern economic dictionary. - 6th ed., revised and supplemented. - M.” ( INFRA-M, 2011)).
In what cases should you be paid an advance?
The Labor Code of the Russian Federation has Article 136, which states that your salary should be paid every half month. In common parlance, advance payment often refers to precisely that part of the salary that is paid to the employee in the middle of the month. Therefore, if your employer does not pay you this money, push him to the wall.
An advance can be paid to hired workers immediately before work begins if they need to purchase materials. And the cost of these materials is included in the amount of money you pay them for all the work. This is logical: if you don’t give an advance, no one will buy you bricks or build a house out of thin air.
A similar situation is the payment of travel allowances to an employee who goes on a business trip. It’s also logical, otherwise he won’t have anything to live on.
Sometimes tax advances are paid - when the taxpayer does not pay all the tax at once, but makes payments gradually.
What is better to choose - a deposit or an advance agreement?
Choosing a suitable prepayment method should first of all be based on your personal wishes. For example, if you are one hundred percent committed to a transaction and are pursuing the goal of establishing the responsibility of the parties, then choose a deposit that strictly regulates all rights and obligations.
If you are worried that the deal may fall through for some reason and do not want to lose money, then it is better to consider the option of an advance payment.
We have already found out what is the difference between a deposit and an advance. Let us just note once again that regardless of the prepayment method chosen, it is very important to record everything in the contract - specify the amount, termination procedure and other nuances.
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Co-financing of construction and overhaul contracts
Another measure designed to support contractors and performers under government contracts in connection with the situation that has arisen due to the pandemic is the provision of a subsidy to co-finance the costs of paying for contracts for the construction, reconstruction and overhaul of capital construction projects, provided that the customer undertakes to establish a condition in the contract regarding advance payment not exceeding 50% of the contract price.
Thus, both at the legislative level and at the level of adoption of by-laws in the field of public procurement, measures aimed at supporting participants in the public procurement market were taken quite quickly.
From September 8, new rules apply for public procurement of certain goods for industrial needs (RF Government Decree No. 1289 of August 26, 2020)
The list of goods approved by Resolution No. 1289 included machine tools (including lathes, for laser metal processing, stone, wood processing, welding and soldering machines), hand tools, replacement tools for machine tools or hand tools (OKPD2 products: 25.73.30 , 25.73.40, 27.90.31.110, 28.41.1, 28.41.2, 28.41.3, 28.49.1).
When purchasing goods with OKPD2 data for government needs, for the needs of defense and security of the country, the advance payment must be at least 80% of the contract price (state contract), but not exceed the limits of budget obligations.
The concept of advance and advance payment in the legislation of the Russian Federation
The Civil Code of the Russian Federation, despite mentioning “advance” in a number of articles, does not contain its definition of the concept. The concepts of “advance” and “advance payment” are contained in the following acts:
Advance on contract
Advance - funds transferred to the contractor against upcoming payments under the agreement between the Customer and the Contractor, for material assets, work performed and services rendered. The advance payment is counted either in full during the final settlement, or in parts when paying for individual batches of material assets or stages of work. The advance payment is paid only in cases and in the amount specified in the law and the contract (clause 3.7. “Standard recommendations for the design, construction, reconstruction and major repairs of buildings and structures of the Federal Tax Service, its territorial bodies and organizations located in under the jurisdiction of the Federal Tax Service of Russia"; approved by Order of the Federal Tax Service of Russia dated 04/09/2012 N ММВ-7-10/ [email protected] )
Advance payment for customs duties
Advance payments are recognized as funds contributed towards the payment of upcoming export customs duties, taxes, customs fees and not identified by the payer in the context of specific types and amounts of export customs duties, taxes, customs fees in relation to specific goods (Article 121 of Federal Law No. 311- Federal Law “On Customs Regulation in the Russian Federation” (as amended on December 29, 2017)
Advance payments are funds (money) contributed towards the payment of upcoming customs duties, taxes, customs duties, special, anti-dumping, countervailing duties and not identified by the payer in terms of specific types and amounts of customs duties, taxes, customs duties, special, anti-dumping, countervailing duties in respect of specific goods, if the payment of such advance payments is established in accordance with the legislation of the member states (clause 1 of Article 48 of the Customs Code of the Eurasian Economic Union" (Appendix No. 1 to the Treaty on the Customs Code of the Eurasian Economic Union).
Advance tax payment
In accordance with this Code, provision may be made for the payment of preliminary tax payments - advance payments - during the tax period. The obligation to pay advance payments is recognized as fulfilled in a manner similar to the payment of tax (clause 3 of Article 58 of the Tax Code of the Russian Federation N 146-FZ (as amended on February 19, 2018).
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A less conflicting way is to choose cars from nearby deliveries or directly from the lot. In this case, it will be easier for the dealer to take on obligations, and you will be sure that delivery times at least do not depend on customs.
What if the dealer refuses?
If the dealer does not fulfill his obligations and does not want to return the advance, you can and should threaten him with legal action. Well-written pre-trial claims detailing all the “Egyptian executions” that will befall him in case of excessive persistence are very sobering. Under certain circumstances, you can even demand bankruptcy of the company. In the end, if the dealer is sane, he will want not only to sell you a car (the profit from the sale is usually small), but also to keep you as a customer of the service - the main cash flow generator for any dealership. This means that he will probably want to come to an agreement with you. As part of a “settlement agreement” (without quotes, this only happens in movies or after a case you win), you can get a discount on a car, and most often, free additional equipment. In some cases, its cost can be measured in hundreds of thousands of rubles.
If you are unable to reach an agreement with the dealer, negotiate with a lawyer. In the most favorable case for you, he will be able not only to return the advance, but also to collect from the failed seller a fee for using someone else’s money. Or at least a penalty for failure to deliver goods on time. According to the Consumer Protection Law, it is one percent per day. Not bad, right?
Does it make sense to make an advance payment?
What consequences will become apparent in case of failure to fulfill obligations regarding prepayment?
If the obligations for which an advance payment has been made are not fulfilled, the consequences may be as follows:
- If the buyer does not fulfill the obligation to pre-pay for the goods or services, the seller has the right to suspend his obligations to transfer the goods or refuse to perform the service.
- If the seller receives an advance payment and does not transfer the goods within the prescribed period, the buyer may demand the transfer of the goods or the return of the advance payment for the goods that the seller did not transfer.
- If the seller does not fulfill the obligation to transfer goods that have been paid in advance, interest for the use of someone else’s money will increase by the amount of the advance payment.
When concluding an agreement, the entrepreneur can decide for himself how to secure the obligations.
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How legitimate is the request for an advance?
By requiring an advance payment, the dealer is not breaking any laws. Moreover, an advance is one of the ways to insure financial risks. Let's say you ordered something exotic - for example, a Toyota Prius in a daring red color. And this, to put it mildly, is not the most popular car. The importing company requires dealers to buy cars before handing them over to customers. What should the dealer do? That's right: go to the bank for a loan - that is, buy cars for money that is not at all free. If the customer refuses to pick up the car, the dealership will have a car on its balance sheet that can only be sold to a militant, colorblind environmentalist obsessed with saving the planet. And while waiting for such a hypothetical client, the car purchased with borrowed funds will have time to bring a significant loss. In the meantime, you, tempted by some special offer, will long ago drive a car of another brand. But if you did make an advance (or a deposit, it doesn’t matter), it will be more difficult to change your mind. And additional working capital would not hurt the dealer.
So we are investing in the dealer?
By replenishing the working capital of dealerships with their advances, clients, of course, become like investors. There are known cases when some crafty businessmen built “pyramidal” financial schemes: they collected money from some clients in order to buy cars for others - those who managed to conclude contracts earlier. This way you can live for some time without borrowing from credit institutions at all (and thereby increasing profitability), but the end, in general, is known: as a result of the work of such a structure, a certain number of “defrauded investors” are formed. Meanwhile, the dealer goes bankrupt and leaves for the Seychelles. It's a shame.
How to avoid falling into the clutches of scammers?
The most recent stories about the bankruptcy of overly inventive dealers have already celebrated their second, or even third birthday. Since then, the legislation has changed, so it has become much more difficult to open one-day dealerships with a business plan that involves escaping to the other side of the globe. The policy of official representative offices has also become tougher: today it is simply impossible to sign a dealer agreement without investing several millions in foreign currency into the business. This means that any official dealer is obliged to play clean. So here's an old, proven recipe: don't buy cars from someone you don't know. Then it will be safe to make an advance payment.
How can I get my advance back?
In order to return the money paid when signing the contract back into your own pocket, you need to prove that the other party (that is, the seller) does not fulfill its obligations. This is where a delicate moment arises. As a rule, dealers try by any means to avoid including a clause on the delivery time of cars in the contract. You, as an honest buyer, have the right to insist on the inclusion of such a clause. Is the dealer being stubborn? Remind him that he is not the only one in this country who sells cars of the brand you love.
