What is a property deposit and how much should you expect to pay?

In the context of a deferred sale, a property deposit is usually paid to the seller when signing the preliminary agreement before a notary. For the buyer, it is a way to formalise their commitment and reserve the property in question (apartment, house or condominium). Although this payment is not a legal obligation, it has become a widespread practice in Switzerland. What should you know about the property deposit? How much should you expect to pay? FGP Swiss & Alps explains.

What is a property deposit?

A property deposit refers to a sum of money paid by the buyer into the notary’s account for a property, as a partial payment of the sale price. This procedure applies to deferred sales or direct sales and ensures both parties that the final transaction will take place on the agreed date stated in the preliminary contract. For the buyer, it is a way to formalise their commitment and reserve the property while securing the necessary funds, whether by selling another property or by obtaining a mortgage loan.

As a reminder, a deferred sale is used in Switzerland when the buyer and/or the seller requires more time. They agree on a later sale date. This arrangement grants a pre-emption right to the buyer, registered in the Land Register of the property. This right protects the buyer by allowing them to enforce the conditions defined in the deed of sale, signed before a notary, and prevents any legal modification of the property before these conditions are fulfilled.

Is the payment of a property deposit mandatory?

From a strictly legal perspective, the property deposit is not an obligation: its payment results from an agreement between the buyer and the seller. However, it becomes mandatory in two situations:

• In the case of a VEFA (vente en l’état futur d’achèvement / sale before completion), at the time of signing a reservation agreement. However, buyers should be aware that if the developer becomes insolvent, the deposit may be at risk.
• When the period between signing the preliminary contract and the final deed extends beyond 18 months. In this case, a minimum deposit of 5% must be paid by the buyer.

How much should be paid as a property deposit?

Since there is no legal obligation, the amount of the property deposit can be freely agreed between the buyer and the seller: it may be a fixed sum (for example, CHF 10,000) or a percentage of the sale price.

In practice, the second option is the most common: the property deposit usually corresponds to 10% of the property’s sale price. This specific percentage has two main reasons:

• On the one hand, the buyer must contribute at least 10% of the purchase price in the form of liquid assets (savings, pillar 3 funds, securities or advances on inheritance). It is therefore natural that they dispose of this amount when signing the initial contract.
  
• On the other hand, Swiss sale contracts usually include a penalty clause: a contractual penalty payable if one of the parties withdraws. By custom, this penalty is set at 10% of the sale price. In the event of an unjustified withdrawal by the buyer, the seller simply retains the deposit without further action.
  

Whatever amount is agreed for the property deposit, it must be specified in the preliminary contract and then transferred to the account of a notary active in the canton where the property is located. The sum may be blocked in escrow until the signing of the final deed of sale, or released to the seller if both parties agree. It is then deducted from the total amount due by the buyer, who only pays the balance. (In the case of a direct sale, however, the entire amount is paid in one go.)

What happens if the sale is cancelled?

In a deferred sale, the contract becomes binding as soon as it is signed, with no right of withdrawal for the buyer. If the buyer decides not to finalise the purchase, they lose the deposit, which serves as compensation for the seller for the time and efforts invested. If it is the seller who withdraws, the buyer not only recovers the deposit but also receives compensation equivalent to 10% of the sale price, paid by the seller.

A particular case arises when the preliminary contract includes a suspensive clause that provides a legitimate reason for withdrawal — for example, if the buyer fails to obtain mortgage financing, which leads to the cancellation of the sale. The contract may stipulate that the buyer loses the deposit in case financing is not secured, unless a clause states that the deposit is refundable under this condition. However, certain transaction fees may still be deducted, such as notarial costs related to drafting the preliminary deed of sale.In summary, the property deposit aims to protect both the buyer and the seller. It is therefore a serious legal commitment with real consequences, requiring both parties to be certain of their willingness to complete the transaction.

Frequently asked questions about the property deposit