Invoke financing reservation

When buying a home, a financing proviso is often included in the purchase agreement. The model NVM sales contract and the Amsterdam model sales contract have a resolutive financing condition by default. A financing condition is a resolutive condition. If the requirements of the condition are met, the purchase agreement be rescinded. The financing proviso allows the buyer to get out from under the purchase agreement if he cannot get the mortgage.

Requirements for invoking financing reservation

If a financing reservation is agreed upon, then by default there are a number of conditions that must be met for it to be successfully invoked. First of all, there is a certain period within which the retention must be invoked. Until then, the buyer must make every effort to actually obtain financing. If that fails, the buyer must prove to the buyer that he has made an effort. The purchase agreement states how he must do this. Usually the sales contract states that the invocation of the resolutive condition must be ‘sufficiently documented’, namely by submitting the mortgage loan application and the bank's rejection letter. This is because the buyer is required to demonstrate that he is justified in invoking the proviso.

Improper reliance on financing reservation has far-reaching consequences

If the appeal to the financing reservation is not made in the right way, it can have far-reaching consequences. First of all, the purchase agreement simply remains in force. The seller can then default and demand compliance. If the buyer subsequently fails to honor the purchase agreement, even the contractual penalty be imposed until compliance is achieved. Alternatively, the seller may impose the dissolve the sales contract, which usually includes a hefty fine.

Lawyer financing retention and resolutive condition

If you want to invoke the financing reservation yourself or you face it as a seller, it is advisable to contact an attorney so that all the steps are followed correctly.