In Philippine real estate transactions, a reservation fee is a sum of money paid by a buyer to secure the option to purchase a specific property. This fee is paid to the property developer or seller and is typically done during the initial stages of the property acquisition process, often before the buyer signs the formal contract or before the property goes through full payment and turnover.
The reservation fee serves several purposes:
- Hold the Property: The payment of a reservation fee “reserves” or holds the property for the buyer, preventing the seller from offering it to other potential buyers during a specified period.
- Show Buyer’s Serious Intent: It demonstrates the buyer’s serious intention to proceed with the purchase, as it involves a financial commitment.
- Offset Future Costs: In some cases, the reservation fee may be deducted from the total purchase price or serve as part of the down payment.
A reservation agreement in a Philippine real estate transaction is a document that outlines the terms and conditions under which a buyer reserves the right to purchase a specific property. Below is a simplified example of what a reservation agreement might look like:
THIS AGREEMENT is made and entered into this _ day of _, 20___, by and between:
[Address of Seller/Developer]
[Address of Buyer]
WHEREAS, the Buyer desires to reserve the right to purchase the property located at Property Address, and the Seller/Developer is willing to accept such reservation under the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants contained herein, it is agreed as follows:
1. RESERVATION FEE:
The Buyer agrees to pay a non-refundable reservation fee of [Amount in Words and Figures] (Php _.) to the Seller/Developer to secure the reservation of the Property.
2. RESERVATION PERIOD:
The reservation period shall be for a duration of _ days, commencing from the date of execution of this agreement.
3. TOTAL PURCHASE PRICE:
The total purchase price for the Property is agreed upon as [Amount in Words and Figures] (Php _.).
4. DEDUCTION FROM PURCHASE PRICE:
The reservation fee shall be deducted from the total purchase price upon completion of the sale.
In the event that the Buyer fails to proceed with the purchase within the agreed period, the reservation fee shall be forfeited in favor of the Seller/Developer.
6. SALE CONDITIONS:
This reservation does not constitute a sale, and the actual sale is subject to the execution of a formal contract of sale between the parties.
IN WITNESS WHEREOF, the parties hereto have executed this Reservation Agreement as of the date first above written.
[SELLER/DEVELOPER’S NAME] Date
[BUYER’S NAME] Date
This is a general example, and the specific terms and conditions may vary depending on the agreement between the parties and any legal requirements.
It’s essential for both parties to clearly understand the terms and conditions associated with the reservation fee, including the duration of the reservation period, any conditions for refund, and how it will be applied to the overall purchase.