Deferred purchase price in a property purchase: how to regulate the seller mortgage, amount, interest and land-register priority.
BRANDAUER Rechtsanwälte
Salzburg law firm for real estate, property and corporate law
Every matter is handled by a coordinated team of lawyers, legal staff and specialists. In property purchase matters we look at the contract, land register, escrow and tax consequences together.
A deferred purchase price moves payment to a later date. This creates a risk of non-payment for the seller. The buyer receives the property as part of the agreed completion even though the purchase price has not yet been paid in full.
The label seller mortgage must therefore be used carefully. Section 1063 of the Austrian General Civil Code (ABGB) generally treats delivery without receipt of the purchase money as a sale on credit with immediate transfer of ownership. Land-register security for the outstanding purchase price requires a separate effective agreement and an appropriate registration.
The key points are the exact due date, the amount secured, interest, the form of the mortgage deed and its priority in the land register. This article addresses deferred payment in a real-estate purchase. General seller loans, instalment purchases without real estate and the buyer's bank mortgages are outside its focus.
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The contract should state the due date, instalments and conditions for releasing the purchase price.
First set out the outstanding purchase price, due date, possible instalments and conditions for payment. An oral promise by the seller does not replace a clear contractual arrangement. Only then can the security required until full payment be assessed.
Review the secured maximum amount, interest, legal basis, certified declarations and intended priority. A contractual reference to a seller mortgage is insufficient if the land-register application cannot implement the registration clearly.
If the contract, land-register extract, mortgage deed and escrow instruction are consistent, the security can be reviewed in a targeted way. Before payment, check the current land register, the time the application was received and the purchase price still outstanding.
A deferral moves the due date. It does not remove the purchase-price claim. The contract should therefore state which amount is due on which date and whether payment is made in one sum or in defined instalments.
The conditions for payment also need a clear structure. In an escrow completion, release may depend on registration, release of encumbrances or other evidence. The deferral must fit that structure. The article Purchase price due date in a property contract covers the general due-date rules.
If the date remains open, it becomes difficult to establish when default began. This complicates default consequences and the decision whether a notice or grace period is needed. The due date and the security should therefore be read as one contractual arrangement.
Section 1063 ABGB addresses delivery by the seller without receipt of the purchase money. The statute treats this as a sale on credit. Ownership generally passes to the buyer immediately. Retention of title must be agreed.
This provision therefore does not create automatic land-register security for the seller of real estate. The contract must state which claim remains outstanding and which mortgage is intended to secure it. Registration in the land register is a separate step that must be checked.
The general purchase contract review helps classify the draft. For a deferral, the link between the purchase-price claim, mortgage deed and land-register application must also be consistent.
Section 14 GBG requires a pledge to state a numerically defined sum of money. If the claim bears interest, the interest rate must also be registered. The outstanding purchase price should therefore not be secured only by an undefined description such as “remaining purchase price”.
The contract and mortgage deed should clearly name the secured principal, agreed interest and the beginning and conditions of the payment obligation. A variable or later-determined claim requires particular review of how it can lawfully be represented in the land register.
Section 26 GBG requires deeds in the legally prescribed form for registration or provisional registration. The deed must also state a valid legal basis for acquiring or changing a right in rem. This includes the appropriate mortgage deed and any required certifications.
This overview separates the contractual payment arrangement from its land-register security.
| Point | In the contract | For completion |
|---|---|---|
| Due date date, instalment or condition | escrow release and proof of payment | |
| Claim outstanding principal and interest | numerical certainty under section 14 GBG | |
| Legal basis mortgage securing the purchase-price claim | valid deed under section 26 GBG | |
| Priority intended land-register position | time received under section 29 GBG | |
| Release full payment and release declaration | prepare cancellation of the mortgage |
The appropriate structure depends on the land-register position, the contract and completion of the specific purchase.
A mortgage agreement is economically useful only together with its land-register position. Section 29 GBG links the priority of registrations to the time when the application reaches the land-register court. Signing the contract alone therefore does not reserve a priority position.
The current land register should be checked before filing. Existing mortgages, priority notices, prohibitions on disposal or further applications can affect the position available to the seller mortgage. The land register and encumbrances topic page explains the main review points.
A priority notice for an intended sale serves a different protective purpose. The existing article on priority notices should therefore not be treated as the same step as registering the seller mortgage. Both measures must be coordinated in completion.
If the deferred amount is not paid on the agreed date, the first step is to establish due date from the contract. Then check whether a notice, grace period or other contractual step is required. General statements about deadlines do not fit every contract.
Section 918 ABGB generally allows the contractual partner facing defective performance to demand performance and damages for delay or to withdraw after setting a reasonable period. The available response depends on the contract, whether performance can be divided and the extent of the delay.
The seller mortgage does not replace a precise payment arrangement. It secures the outstanding claim. The contract should also set out default interest, completion costs, cooperation in releasing the mortgage and the consequences of early or late payment in a way that can be followed.
The buyer may wish to pay the outstanding amount before the final date. It should then be clear when the seller confirms full payment and which deed will be issued for cancelling the mortgage. Automatic cancellation without a clear declaration should not be assumed.
On a resale, the outstanding purchase-price claim remains a central completion issue. The buyer cannot simply transfer the property free of encumbrances while the seller mortgage remains in place. Seller, buyer, new purchaser and escrow agent must coordinate release or continuation of the security.
An existing mortgage should therefore be linked to a release mechanism from the outset. The purchase contract risk check can make open points visible for the subsequent review.
Practical rule: The phrase “seller mortgage” is not enough on its own. Set the amount, interest, due date, legal basis, form and priority together with the actual land-register documents.
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Section 1063 ABGB generally classifies delivery on unpaid purchase money as a sale on credit with immediate transfer of ownership. Land-register security for the outstanding price must be agreed separately and registered in the required form.
Under section 14 GBG, the secured monetary amount must be defined. If the claim bears interest, the rate must also be registered. The registration also requires a valid deed with an appropriate legal basis under section 26 GBG.
Priority follows the land-register rules and in particular the time the application is received under section 29 GBG. The position depends on the current land register and other applications.
Due dates and release conditions in a real-estate purchase contract.
How priority planning works for an intended sale.
A topic page on mortgages and other encumbrances.
Review the draft, documents and security mechanisms together.
When buying property, the contract and the land register decide. Call us directly or send an email, callback within one business day.
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