𝗜𝗻𝘁𝗿𝗼𝗱𝘂𝗰𝘁𝗶𝗼𝗻
CeylonProperty.lk recently released a podcast conversation with Mr. Sameera Silva, discussing important legal considerations buyers should understand before paying an advance or reservation fee for a property in Sri Lanka.
The discussion highlights several red flags buyers should be aware of before committing money to a property. From checking the title to understanding a sales agreement, taking these steps early can help buyers avoid unnecessary complications during the property buying process.

𝗪𝗵𝗮𝘁 𝗕𝘂𝘆𝗲𝗿𝘀 𝗦𝗵𝗼𝘂𝗹𝗱 𝗖𝗵𝗲𝗰𝗸 𝗕𝗲𝗳𝗼𝗿𝗲 𝗣𝗮𝘆𝗶𝗻𝗴
Before paying an advance or reservation fee, buyers should understand the legal position of the property and the terms under which their payment is being made. A property may look like a good opportunity, but the legal checks should come before committing money.

𝟭. 𝗣𝗮𝘆𝗶𝗻𝗴 𝗮 𝗥𝗲𝘀𝗲𝗿𝘃𝗮𝘁𝗶𝗼𝗻 𝗙𝗲𝗲 𝗕𝗲𝗳𝗼𝗿𝗲 𝗮 𝗧𝗶𝘁𝗹𝗲 𝗖𝗵𝗲𝗰𝗸
One of the important red flags for a buyer is being asked to pay a reservation fee before the relevant property documents are provided for a title check.
A title check is an important part of the property buying process. Buyers should be able to examine the relevant documents and establish whether the seller has the legal ability to sell the property before committing to an advance payment.

𝗧𝗵𝗲 𝘁𝗶𝘁𝗹𝗲 𝘀𝗵𝗼𝘂𝗹𝗱 𝗯𝗲 𝗰𝗵𝗲𝗰𝗸𝗲𝗱 𝗯𝗲𝗳𝗼𝗿𝗲 𝗮 𝗯𝘂𝘆𝗲𝗿 𝗽𝗮𝘆𝘀 𝗮𝗻 𝗮𝗱𝘃𝗮𝗻𝗰𝗲 𝗼𝗿 𝗿𝗲𝘀𝗲𝗿𝘃𝗮𝘁𝗶𝗼𝗻 𝗳𝗲𝗲.

𝟮. 𝗡𝗼𝘁 𝗞𝗻𝗼𝘄𝗶𝗻𝗴 𝗪𝗵𝗮𝘁 𝗛𝗮𝗽𝗽𝗲𝗻𝘀 𝗧𝗼 𝗧𝗵𝗲 𝗥𝗲𝘀𝗲𝗿𝘃𝗮𝘁𝗶𝗼𝗻 𝗙𝗲𝗲
Another important consideration is understanding whether the reservation fee is refundable if the transaction cannot proceed.
For example, there may be an issue with the property documentation or the required approval may not be obtained. Buyers should understand the terms governing the refund and whether a certain percentage of the payment may be retained, depending on what the parties have agreed.
The conditions should be clear before the buyer pays the reservation fee.

𝟯. 𝗡𝗼𝘁 𝗛𝗮𝘃𝗶𝗻𝗴 𝗮 𝗖𝗹𝗲𝗮𝗿 𝗦𝗮𝗹𝗲𝘀 𝗔𝗴𝗿𝗲𝗲𝗺𝗲𝗻𝘁
Once a buyer and seller are ready to proceed, a sales agreement can establish the terms agreed between both parties. This can include the agreed price, the identity of the buyer and seller, and the conditions that need to be fulfilled before the property is transferred.
A buyer should understand the agreement before signing it. Where appropriate, the sales agreement may also be registered at the Land Registry, providing an additional legal consideration for the parties.

𝟰. 𝗙𝗮𝗶𝗹𝗶𝗻𝗴 𝗧𝗼 𝗖𝗼𝗻𝘀𝗶𝗱𝗲𝗿 𝗜𝗳 𝗧𝗵𝗲 𝗣𝗿𝗼𝗽𝗲𝗿𝘁𝘆 𝗛𝗮𝘀 𝗕𝗲𝗲𝗻 𝗣𝗿𝗼𝗺𝗶𝘀𝗲𝗱 𝗧𝗼 𝗦𝗼𝗺𝗲𝗼𝗻𝗲 𝗘𝗹𝘀𝗲
A potential buyer should also be mindful of whether the seller has already entered into an agreement with another person.
A seller may receive a higher offer after agreeing to sell the property to another buyer. If the original arrangement is not properly documented, this can create complications for both parties. Buyers should therefore understand the legal position before paying money to secure a property.

𝟱. 𝗡𝗼𝘁 𝗨𝗻𝗱𝗲𝗿𝘀𝘁𝗮𝗻𝗱𝗶𝗻𝗴 𝗧𝗵𝗲 𝗖𝗹𝗮𝘂𝘀𝗲𝘀 𝗕𝗲𝗳𝗼𝗿𝗲 𝗦𝗶𝗴𝗻𝗶𝗻𝗴
The terms of the sales agreement are important, particularly when the property transfer is expected to take place several months later.
The agreement should clearly establish what both parties are required to do and what happens if an issue with the documentation prevents the transaction from being completed. Clauses dealing with the seller's obligation to complete the sale at the agreed price to the agreed buyer can also be important.
Buyers should understand these terms before signing the agreement or making a significant payment.

𝗖𝗼𝗻𝗰𝗹𝘂𝘀𝗶𝗼𝗻
Paying an advance or reservation fee is an important step when buying property in Sri Lanka, but buyers should not let the pressure to secure an apartment, house, or land prevent them from carrying out the necessary legal checks.

As Mr. Silva explains in the podcast, checking the title before paying an advance, understanding the terms of a reservation fee, and having a clear sales agreement can help buyers make more informed property decisions.
The key is to identify potential red flags before committing your money. Taking the time to understand the property's legal position and the terms of the transaction can help reduce the risk of complications later.
Listen to the full conversation with Mr. Sameera Silva on the CeylonProperty.lk podcast for a detailed discussion on the legal considerations buyers should know before paying an advance or reservation fee for property in Sri Lanka.