What is a letter of credit in a bank when buying an apartment, payment through a letter of credit when buying an apartment, an apartment purchase and sale agreement through a letter of credit (sample)

Settlements under an apartment purchase and sale agreement are one of the most important issues in real estate transactions. Along with safe deposit boxes and settlement through a notary's deposit, the law provided for two relatively safe ways to transfer money: a letter of credit and an escrow account . The bank acts as an intermediary in such settlements.

In essence, a letter of credit is an analogue of a safe deposit box . The bank undertakes, on behalf of the buyer of the apartment, to transfer a certain amount of money to the seller’s account, subject to the occurrence of certain circumstances.

The seller and buyer agree to pay for the apartment through a letter of credit, stipulating this in the apartment purchase and sale agreement.
The buyer goes with the purchase and sale agreement to the bank, to which he submits an application for opening a letter of credit. The application states how much money will need to be transferred to the buyer’s account, and what documents the seller must bring to receive the money.
The bank receives the application, opens a letter of credit and blocks the amount of payment for the apartment on it. The bank then sends a notification to the merchant that the account has been opened, whether there is money in it, and how to receive it.
The parties register the transfer of ownership in Rosreestr.
The seller, having received the apartment purchase and sale agreement with the Rosreestr mark, goes to the bank and hands over the documents.
The bank checks the documents for compliance with the conditions, then transfers the amount to the seller’s account.

If the seller does not bring the required document, the letter of credit is closed and the money is returned to the buyer.

Design nuances: sample

Although a letter of credit arises on the basis of an agreement between the buyer and the bank, the main terms of the letter of credit should be specified in the main sales agreement so that the payment terms are agreed upon. This will protect the parties in the future if any dispute arises under the main agreement.

There is no need to state that the agreement on opening a letter of credit is a mandatory annex to the purchase and sale agreement. It is enough to specify in detail the conditions for opening a letter of credit in the relevant section of the agreement.

In the “Calculations” section of the main purchase and sale agreement, you need to describe in detail the method of payment for the apartment, indicate in which bank the letter of credit is opened, within what period the payment is made, what documents the seller must submit to the bank in order to receive payment.

“The amount of payment for the apartment in the amount of ______________ rubles _____ kopecks is transferred to the Seller through the use of a letter of credit. A letter of credit is opened on behalf of the Buyer in favor of the Seller up to _______ inclusive. Conditions for opening a letter of credit:

name of the issuing bank: _____________;
name of the executing bank: _______________;
the recipient of funds under the letter of credit is the Seller;
the letter of credit is issued in the amount of: ______________ (_________________) ruble ___ kopecks
type of letter of credit - covered, irrevocable;
to receive funds under a letter of credit, the Seller provides to ________________ (name of the bank) the original of this Apartment Purchase and Sale Agreement No.______ dated _____________ with a mark from the Office of the Federal Service for State Registration, Cadastre and Cartography for ______________ on the registration of the Buyer’s property rights;
documents must be submitted by the Seller to the Bank before the expiration of the letter of credit;
validity period of the letter of credit – ___________ calendar days from the date of opening of the letter of credit;
the costs of opening a letter of credit, advice letter of credit, acceptance and verification of documents (name of bank) to receive funds are borne by the Buyer.

The day the Buyer fulfills its obligations to pay for the Apartment is the date of receipt of funds in full to the Seller’s bank account.”

Take a sample agreement between the buyer and the bank through which you plan to pay, and use the same type to write down the basic terms of the letter of credit in the purchase and sale agreement.

The letter of credit has a number of significant disadvantages:

the buyer and the bank can close the letter of credit without the participation of the seller;
funds on the letter of credit are insured only for the amount of 1.4 million rubles;
The letter of credit agreement is drawn up between the buyer and the bank, the seller has nothing to do with it.

Despite the high security of payments through a letter of credit, more and more participants in the real estate market are choosing a more modern and convenient method - an escrow account, which is devoid of these disadvantages.

Escrow account upon purchase

An escrow account is a modern method of settlement under real estate purchase and sale agreements. It differs from a letter of credit in being more secure due to the following points:

the escrow account agreement is drawn up by three parties: the bank, the seller and the buyer;
the bank bears increased liability for transactions on an escrow account than under a letter of credit;
an account can only be closed with the participation of three parties;
more flexible terms of agreement than with a letter of credit;
funds in the escrow account are insured for the amount of 10 million rubles.

We tell you step by step how to buy and sell an apartment with a mortgage.
Read about the nuances of state registration of preschool education here.
We carefully consider the main and preliminary monetary policy for a mortgage.
Features of the purchase and sale of an apartment with a pledge or arrest - see here.

The scheme for using an escrow account is as follows:

The seller and buyer agree to pay for the apartment through an escrow account.
This is stated in the apartment purchase and sale agreement.
The parties sign an escrow account agreement with the bank. The contract specifies the invoice term, amount and what documents the seller must bring to receive the money.
After opening an account, the buyer transfers money to it.
The parties register the transfer of ownership in Rosreestr.
The seller, having received the apartment purchase and sale agreement with the Rosreestr mark, goes to the bank and hands over the documents.
The bank checks the agreement for compliance with the conditions, then transfers the amount to the seller’s account.

If the seller does not provide the necessary paperwork, the escrow account will be closed and the money will be returned to the buyer.

Sample in DCP

In relation to the escrow account, the parties will have a separate full-fledged agreement, which is concluded by three parties: the buyer, the seller and the bank. This agreement will detail the conditions for opening and using an account; however, the main purchase and sale agreement should also indicate the main points regarding escrow. This is necessary so that the payment terms for the apartment are agreed upon.

It is not necessary to state that the escrow agreement is a mandatory annex to the purchase and sale agreement. If the DCP specifies the basic conditions for using escrow, that is sufficient.

In the “Calculations” , you need to describe in detail the method of payment for the apartment, indicate in which bank the account is opened, when the payment is made, what documents the seller must submit to the bank in order to receive payment. An escrow account clause might sound something like this:

“The amount of payment for the apartment in the amount of ______________ rubles _____ kopecks is transferred to the Seller through an escrow account in full. An escrow account is opened by agreement of the parties with bank ___________ (name of bank) for a period up to _______ inclusive. Conditions for opening an escrow account:

Name of the bank: _____________;
the depositor is the Buyer, the beneficiary is the Seller;
to receive funds from the escrow account, the Seller provides to ________________ (name of the bank) the original of this Apartment Purchase and Sale Agreement No.______ dated _____________ with a mark from the Office of the Federal Service for State Registration, Cadastre and Cartography for ______________ on the registration of the Buyer’s property rights;
documents must be submitted by the Seller to the Bank before the expiration of the escrow account opening period;
The costs of opening an escrow account are borne by the Buyer.

The day the Buyer fulfills its obligations to pay for the Apartment is the date of receipt of funds in full to the Seller’s bank account.”

Agree on the terms of escrow, which you will write down in the main purchase and sale agreement, with the bank through which you will make payments.

Payment for an apartment with the participation of the bank increases the security of the transaction. A letter of credit or escrow account are modern methods of payment through a bank.
Any type of settlement must be specified in detail in the contract.
When choosing a bank, you need to take into account its rating. It is better to contact time-tested credit institutions with good customer reviews.
The money in the escrow account is insured for the amount of 10 million rubles. In many cases, this covers the transaction amount.

Apartment purchase and sale agreement with letter of credit: sample document

Transferring large sums of money when buying a home involves a number of risks, and parties to the transaction seek to protect their investments. One of the ways to insure against risks is to transfer money to the apartment seller through a bank letter of credit, which allows not only to avoid fraud by the counterparty in the transaction, but also to prevent robbery when transferring the amount.

How does a letter of credit settle?

A letter of credit refers to a non-cash bank account in which the homebuyer's money is held. Funds are transferred to the seller’s account upon successful registration of the transfer of rights to the apartment, and otherwise returned to the seller.

A letter of credit is an analogue of a safe deposit box, the main advantage of which is that there is no need to move large sums of money to a bank branch, since all payments are made non-cash. Settlements under a letter of credit are regulated in Art. 867-873 of the Civil Code.

A letter of credit can be of two types:
In the first case, the buyer has the right to withdraw his money from the bank before the registration of the sale and purchase is completed, thus canceling the transaction, and in the second case - when using an irrevocable letter of credit - the buyer withdraws his money only upon expiration of the letter of credit.
The general procedure for the parties when paying for an apartment through a letter of credit includes the following steps:

The parties draw up and sign an apartment purchase agreement.
The buyer opens a letter of credit account with a bank and deposits the purchase amount into it.
The transaction is registered at the Rosreestr branch.
The seller presents documents to the bank confirming the alienation of the home in favor of the buyer.
The bank verifies the documents and credits the purchase amount to the seller's account.

To gain access to the account with the transaction amount, the seller must submit the following documents to the credit institution:

original passport;
an extract from the Unified State Register of Real Estate about the buyer’s registered right to the apartment;
a copy of the agreement with a registration mark from Rosreestr;
a copy of the acceptance certificate signed by the buyer.

Money can also be credited to the seller’s account before the end of the transaction, but with closed access to the account until documents on registration of the sale are presented - this type of letter of credit is called covered.

Currently, many banks participate in the system of interdepartmental electronic interaction and can request data on the property of clients from the Unified State Register without providing documents - such a system is an additional insurance for the buyer against the risk of falsifying an extract from the Unified State Register by the seller, who, in turn, gets rid of the need to obtain such a certificate at the MFC.

Terms of the letter of credit agreement

A typical apartment purchase agreement with payment through a letter of credit should include the following sections:

data of the parties to the transaction;
subject of the contract;
purchase price and payment procedure;
rights and obligations of the parties;
list of encumbrances on the apartment;
terms of use of the letter of credit;
settlement of disputes;
additional conditions.

A sample agreement can be downloaded here.

In the “Data of Parties” section, the full name and passport details of the parties to the transaction are indicated, as well as their contact information. The subject of the agreement is the transfer of ownership of the apartment from the seller to the buyer for a certain fee using a bank letter of credit.

For residential premises, you need to indicate the address, cadastral number and internal parameters - area and number of rooms, type of heating, etc.

The buyer’s responsibilities include accepting the apartment according to the deed and transferring funds to the letter of credit account, and the seller’s responsibilities include the following items:

transfer of the apartment to the buyer with accompanying documents;
participation in state registration of purchase;
providing the purchasing party with complete information about encumbrances on real estate;
acceptance of funds from the buyer's letter of credit account.

When indicating encumbrances, you must list the number of persons registered in the apartment at the time of registration of the transaction and their rights to residence, as well as data on claims to the apartment by third parties.

In the section “Conditions of the letter of credit” you must indicate:

purpose, date of opening and termination of the letter of credit;
name of the credit institution;
letter of credit amount;
bank commission amount;
closing conditions.

If the bank opening the letter of credit and the executing bank are different organizations, you need to provide the constituent information of each of them.

Each party has the right to go to court if its rights are violated, but subject to the pre-trial settlement procedure through negotiations with the counterparty.

Important points

The term of the letter of credit is set by the parties in such a way that the parties have time to transfer the housing and complete the registration of the transaction, as a rule, the length of the period is 30 days, but can be extended by agreement of the parties in the event of unforeseen circumstances.

An extension of the term by one party is possible if there are good reasons:

illness;
death of relatives;
acts of force majeure.

All reasons for extending the period must be listed in the additional terms of the purchase agreement, indicating a list of documents and certificates that must be presented to the bank to prove such reasons.

If the parties have agreed that the buyer cannot withdraw money from the account before the due date (for example, due to financial difficulties), it is necessary to indicate in the type of letter of credit - irrevocable, otherwise it will be considered revocable automatically (clause 3 of Article 868 of the Civil Code ).

A letter of credit allows you to insure the parties to a transaction against loss of money, but requires careful drafting of the text of the agreement and selection of the type of letter of credit depending on the specific circumstances. To protect your investments, you should contact a reliable credit institution and consult with lawyers when drawing up an agreement.

Dear readers, the information in this article may be out of date. If you want to find out how to solve your particular problem, call :

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Letter of credit when purchasing real estate: what is it, scheme, pros and cons of payment form

A letter of credit account for the purchase of an apartment is an account in which the buyer's funds are held until the transfer of rights to the property. After the transfer of rights, the money is given to the seller. Thus, in this scheme, the bank acts as a guarantor, which significantly reduces the risk of failure of the operation.

In addition, most often the so-called “irrevocable” letter of credit account, within which, even if desired, the buyer will not be able to withdraw money early without the consent of the seller. There are also other important nuances.

In this article we examine in detail the benefits of this financial instrument and its features.

What is a “letter of credit from a bank when buying an apartment”?

As you know, buying an apartment for cash or even with a mortgage always involves some risks. Even if the buyer uses a mortgage loan, he still needs to give the seller a down payment.

The amount of such a transfer is usually quite large - depending on the nature of the transaction, the buyer needs to transfer from several hundred thousand rubles to tens of millions.

In addition, the seller can also take risks: provided that all documents have been transferred and the acceptance certificate has already been signed, the buyer may refuse to transfer the agreed amount.

Therefore, in order to avoid the risk of fraud, the scheme of such operations must necessarily include a guarantee of full fulfillment of obligations for both parties.

For this purpose, banking organizations have developed security products. The most popular among these offers are safe deposit box and letter of credit.

We will understand how a letter of credit and a cell work, and also analyze their pros and cons. But first, let’s clarify what a letter of credit account is and why it is needed.

A bank letter of credit when purchasing an apartment is an account opened by the bank to service the parties to the transaction.

The buyer of the apartment transfers the amount established by the purchase and sale agreement to the letter of credit, and the seller receives it only after providing documentary evidence of the transfer of rights to the property.

Thus, the bank acts as a guarantor in this transaction: if the deal falls through, the bank will simply return to the participants what they originally came with (the buyer - money, the seller - the rights to real estate).

What types of letters of credit are there and what are their features?

There are several types of letters of credit; The difference between them is expressed, as a rule, in the transaction procedure.

Some of the types are aimed at ensuring maximum security for both parties to the transaction, others are aimed at the security of a specific party - the buyer or seller.

Therefore, even before opening a letter of credit when buying an apartment, you should carefully understand which offer will suit you best.

Revocable letter of credit. Focus on the buyer: he can withdraw funds at any time during the transaction, thereby canceling the transaction. The seller will not be deceived, because rights to real estate, according to the calculation procedure, are transferred only after payment. But the seller can definitely lose time, so the counterparty rarely agrees to this type of letter of credit;
Irrevocable account. The most popular solution: the buyer does not have the right to withdraw the money ahead of schedule, at least without the written permission of the seller. Most often, the seller and bank manager offer to issue this type of letter of credit;
Direct letter of credit. Does not require the presence of the buyer when receiving money. The seller only needs to present the bank employees with documents confirming the transfer of rights to real estate;
Covered account. It is understood that the bank in which the letter of credit account is opened transfers the buyer's money to the recipient's bank. This money is then kept in the executing bank until the transaction is completed. Typically used in transactions between legal entities;
Uncovered account. In this case, no transfers occur; the money is stored in the correspondent account of the sending bank. Instead, the organization accepting payment for the property is given the right to withdraw the cash itself after providing documentary evidence of completion of the transaction. It is similar to a direct invoice, but differs in that the issue is resolved between legal entities and not individuals.

Most often, in real estate transactions, the parties agree exclusively to an irrevocable account. In this case, the buyer will not be able to withdraw the funds before a certain date. This forces the buyer to approach the transaction more responsibly. This is beneficial, first of all, to the seller, because failed transactions significantly reduce the benefits from the sale of real estate.

What is a bank guarantee, how to obtain and check it?

For what period is a letter of credit issued?

You need to understand that the validity period of a letter of credit is solely a matter of agreement between the parties to the transaction. It can be anything, although banks often impose restrictions - for example, an account can be opened for a period of no more than two quarters (six months).

In addition, unlike a safe deposit box, the cost of a letter of credit does not depend on its validity period: the fee is charged for the amount of storage, and not for the duration of the account. The only thing that needs to be taken into account is that tariffs are calculated per quarter of use, i.e.

3 months of account validity.

The validity period of the invoice is agreed upon in advance by the parties and is reflected in the initial or final purchase and sale agreement. If it turns out that the period established by the contract is not enough to complete the transaction, it can be changed - but you will have to pay for it.

On average, banks charge 0.2% of the amount held in the letter of credit account for changing the validity period.

Considering that the letter of credit most often contains amounts from 1 million rubles, 0.2% can become a significant fee.

Therefore, we recommend carefully calculating the storage period - for example, even before signing the contract, you should take into account possible force majeure, because Due to complete ignorance of their capabilities, people find themselves in awkward situations.

To summarize, most often the validity period is 3 months, i.e. exactly one block. This period can be changed if desired.

Scheme for purchasing an apartment through a letter of credit

So, we have already explained what a letter of credit is when buying an apartment in simple words. Now you need to understand what role this account plays during the operation itself. The procedure for using a letter of credit is as follows:

First, the parties to the transaction carefully discuss the terms of purchase and sale. A purchase and sale agreement is concluded;
This document is provided to the bank where it is planned to open a letter of credit. If the bank approves the transaction, another letter of credit agreement is signed with the participation of three parties - the buyer, seller and bank representative;
The buyer deposits funds in the established amount into an open account. The replenishment operation is documented;
The letter of credit agreement for the purchase of real estate is either kept by a bank representative or transferred to another organization (relevant for covered and uncovered accounts);
The purchase and sale agreement is registered in Rosreestr. The apartment has practically been handed over to the buyer;
The seller provides the bank with all the necessary papers: a certificate from Rosreestr on the transfer of rights, an extract from the Unified State Register of Real Estate, etc. The bank carefully checks the entire legal side of the issue, namely: whether the rights were actually transferred, whether there were any violations during the transfer process, etc.;
If everything is correct, in accordance with the letter of credit agreement, the money is credited to the seller’s account. At this stage, the seller is obliged to document the receipt of money with an acceptance certificate. The deal is completed.

Nuances of the agreement for opening a letter of credit account

The terms of the agreement, its main sections, etc., are usually unified. The following data deserve special attention:

Carefully check the details of the recipient and sender. All full names, account numbers, address of the object of sale and purchase, etc. must be written without errors. If you notice a typo, ask for it to be corrected;
Carefully study the section “Settlement Procedures”. There should be clear wording without double reading (discrepancy). There must be regulations regarding the validity period of the letter of credit, the specific amount and currency of the transaction, the required package of documents to complete the transaction, etc.;
Be sure to examine the “Payment for services” section. Pay attention to who will be financially responsible for opening and closing the account (who will pay the bank);
Finally, please read the entire Responsibilities of the Parties section carefully. In different contracts, the responsibility of the parties is regulated differently, and this term is also not always understood in the same way. You must be completely satisfied with this section, otherwise your rights may be infringed in the future.

You can view and download a sample letter of credit agreement (using the example of Sberbank) here.

The advantages of this form of payment

The main advantage of a letter of credit is that the parties to the transaction are fully protected from possible fraud or failure to fulfill obligations;
Additional legal assistance and support from the bank. So, if any questions arise, a bank representative will immediately draw attention to them;
Equal security is ensured for all parties - seller, buyer and bank.

What does a public offer mean?

Possible risks of such a payment scheme

Buying a home using a letter of credit also carries some dangers, although to a lesser extent than if clients turn to a safe deposit box.

Transferring funds through a letter of credit account is a lengthy procedure, complicated by a large-scale verification of all documents provided. Therefore, clients can lose a lot of time and money;
Not flexible enough. Changes to the terms of the contract will result in an increased cost of service. An irrevocable letter of credit also does not imply early withdrawal of funds;
High cost of the service;
The bank's participation in the transaction is expressed, in particular, in the full knowledge of the tax authorities about the status of your transaction, its amount and participants. Therefore, additional problems with the Federal Tax Service are possible.

Which is better - a letter of credit or a safe deposit box?

It depends on the terms of the transaction and the needs of its participants. If you need to save money, there is nothing better than a safe deposit box. In terms of price/quality ratio, a safe deposit box is significantly ahead of a letter of credit.

But if clients want to protect themselves as much as possible from force majeure during the procedure for transferring funds, the most suitable thing is a letter of credit . It is much more expensive, but it also provides the highest security of all possible options.

In addition, the procedure for settlements with the bank should be taken into account. They pay for a cell depending on the duration of the contract, for a letter of credit - depending on the size of the protected amount.

Therefore, when transferring large amounts, a locker may be more profitable, and if it is necessary to have a long storage period, a letter of credit is better suited.

Who should pay for opening a letter of credit - the seller or the buyer?

It all depends on the agreements between the counterparties. If desired, even the seller can pay for the services, although by default he is considered the main beneficiary of the transaction in financial terms. Therefore, most often the real estate buyer pays for opening an account and its maintenance .

Which banks can issue a letter of credit?

There are five established banking organizations in this service sector, which account for almost 85% of all open and closed letter of credit accounts in the country. Accordingly, it makes sense to consider their conditions, and not the offers of lesser-known banks.

Bank name Tariffs for the quarter in rubles

Sberbank	For transfers between individuals: 0.2% of the total payment amount, which averages 1,500-5,000 rubles. A transfer between an individual and a legal entity costs 2,500-15,000 rubles (0.5% of the total payment amount).
VTB	Within the framework of a mortgage for individuals - a fixed 1500-4500 rubles depending on the transfer amount. For other transfers 0.2% of the amount, i.e. 1500-5000 rubles on average.
Rosselkhozbank	0.15-0.2% of the amount, from 1000 to 15,000 rubles.
Alfa Bank	0.15-0.2% of the amount, but not less than $50.
UniCredit Bank	0.5%, but not less than 12,500 rubles.

Conclusion

A letter of credit allows you to transfer funds from the buyer to the seller as securely as possible. Therefore, this banking product is popular.

However, these privileges come at the cost of translation times and relatively high service costs. In this regard, you should choose a letter of credit when transferring money carefully and carefully: often transactions up to 2 million.

rubles can be easily carried out using a less expensive safe deposit box.

What is a letter of credit from a bank when buying an apartment and how to conclude such a deal?

A letter of credit is one of the most popular financial instruments for settlements among real estate market participants.

It is quite expensive, but as a result, the parties receive a 100% guarantee of security and documentary evidence of settlements. Let's consider what types of letters of credit banks offer and all the nuances of registration.

To solve your problem RIGHT NOW, get a free LEGAL consultation: +7 (499) 504-88-91 Moscow +7 (812) 385-57-31 St. Petersburg

What it is?

A letter of credit is a convenient payment scheme in which the bank undertakes to transfer an apartment to the seller after he provides the purchase and sale agreement with the registrar’s mark and other documents.

non-cash form of payment;
execution upon presentation of documents;
quick account opening (in 20-30 minutes);
bank liability for violation of conditions;
minimum risks in calculations.

The procedure for settlement under a letter of credit is regulated by the Civil Code of the Russian Federation (§ 3. Settlements under a letter of credit), the Bank of Russia Regulations on the rules for transferring funds (N 383-P), the purchase and sale agreement with a letter of credit, as well as the agreement on opening a bank account.

What types do banks offer?

There are two most popular types of letters of credit: irrevocable and revocable . Both options are used for transactions in the real estate market.

Any letter of credit is considered revocable unless otherwise specified in the agreement with the issuing bank. Under the terms of Art. 868 of the Civil Code of the Russian Federation, a revocable letter of credit can be changed or canceled by the bank without prior notification to the recipient of the funds. But the money is transferred if the terms of payment have not been changed and if the seller presents all the necessary documents.

An irrevocable letter of credit cannot be changed without the consent of the recipient of the money.

Can also be used:

letter of credit with a reservation (the deposit is transferred to the seller even before the purchase and sale agreement is registered);
deposited option (when funds are already frozen in the account);
and extremely rarely guaranteed (for execution, the bank first debits money from its account and only then demands it from the apartment buyer).

Who pays for it when selling real estate?

Basically, the costs of opening an account under a letter of credit are paid by the buyer of the apartment , who enters into an agreement with the issuing bank. If desired, the parties can split the costs in half.

To open an account you will need to pay from 1.2 to 5 thousand rubles. The same amount will have to be paid for the execution of the letter of credit. Additionally, there may be bank commissions (for example, for cashing out money by the seller after execution, changing its conditions).

Calculation scheme

The buyer and seller enter into a sales contract with a letter of credit. To do this, the buyer first opens a bank account and transfers the original letter of credit to the seller. That, in turn, must also have a current account in this or another bank.

Next, after registering the purchase and sale agreement, the seller presents the documents to the executing bank (where he has an account) and after a thorough check, the money is transferred to him. If the buyer's and seller's accounts are opened in the same bank, then settlements can be carried out more quickly than usual.

Let's look at this procedure in more detail, step by step.

Contacting the bank

To open a letter of credit, you need to contact the bank and open an account . To do this, fill out an application for opening, which indicates the details of the recipient and payer, the amount of the letter of credit and the execution period.

For registration you need:

passport;
foundation agreement (purchase and sale of an apartment).

Download the application form for opening a letter of credit at Sberbank

The application clearly indicates the purpose of the payment (payment for the apartment), as well as a list of documents to be submitted.

Compilation procedure

The letter of credit must indicate:

number and date, amount;
details of the payer and recipient, as well as the issuing bank and the executing bank;
type of letter of credit;
validity period and method of execution;
list of documents submitted by the recipient of funds;
purpose of payment;
deadline for submitting documents;
procedure for paying bank commissions.

Typically, the list of documents includes a purchase and sale agreement (original or notarized copy) with a note on state registration of the transfer of ownership to a specific person - the buyer and payer under the letter of credit, or an extract from the Unified State Register of Real Estate.

The period for document verification should not exceed five working days. The day the buyer fulfills his obligations to pay for the apartment is the date the money is received in the seller’s bank account.

Download letter of credit form
Download a sample letter of credit

Conclusion of a purchase and sale agreement

The agreement is drawn up in writing with or without notarization (depending on the type of transaction). When drawing up an agreement, the date, place of conclusion, all data of the parties (full name, passport data, INN or SNILS) are indicated.

The main points of the real estate purchase and sale agreement through a letter of credit (a sample can be downloaded below):

subject of the contract (cadastral number of the apartment, area, address, number of rooms, floor);
link to the title documents of the apartment seller;
transaction price;
procedure and terms of payments (using a letter of credit);
rights and obligations of the parties;
buyer and seller liability;
conditions for early termination of the policy.

The type of letter of credit and its amount must be indicated , as well as a list of documents for execution (agreement with a registration mark or an extract from the Unified State Register). It is also necessary to make a note about who bears the opening and execution costs.

The apartment is transferred to the buyer according to the acceptance certificate, usually within 5-7 days from the moment of written notification by the bank to the seller about the opening of a letter of credit in his favor. Within 10 working days from the date of transfer of the apartment, the parties undertake to submit documents to Rosreestr to register the transfer of ownership.

Registration of ownership

After signing the agreement for the purchase and sale of an apartment using a letter of credit (a sample can be downloaded above), it is submitted along with the documents to Rosreestr for registration. The procedure lasts on average 5-9 days. For registration you will need to pay a state fee of 2 thousand rubles .

Money transfer

Immediately after checking the passport and list of documents, the bank executes the letter of credit and sends a notice of execution to the issuing bank.

Translation is possible:

no later than three days from the date the bank makes a decision that everything is in order with the documents;
with a deferment of execution on a certain date specified in the contract.

If, on the contrary, the executing bank has claims to the documents brought by the seller, then it has the right not to pay him the funds. Refunds are made by payment order from the executing bank.

In relation to a transaction for the purchase and sale of real estate, a deadline for the execution of a letter of credit may be set with a margin , since sometimes registration is delayed for reasons beyond the control of the parties.

Important! The payer under a letter of credit can be either an individual or a company.

Advantages and disadvantages

Pros:

non-cash money transfer;
documents after execution of the letter of credit that can be used for tax deduction;
The bank's responsibility for verifying documents.

Money is not transferred from hand to hand - everything happens in a non-cash form. After the letter of credit is executed, the buyer remains with documentary evidence of the transfer of money to the seller (in addition to the receipt).

Video about the benefits of a letter of credit:

Minuses:

high costs;
problems with receiving money if registration is delayed or is refused;
exclusively transfer from account to account, which is not always convenient for the seller.

Disadvantage of the letter of credit scheme: high cost of opening and execution . If you have to change something in the conditions, the bank will also ask for an additional fee.

In addition, this payment option may scare off many apartment sellers, since they do not quite understand what it is or do not trust banks. However, if everything is explained correctly, this problem will disappear by itself.

Comparison with cell

Opening a safe deposit box costs less than opening a letter of credit. You only need to pay for rent once – when concluding a contract for a certain period. You will have to pay for a letter of credit at least several times (at opening and execution). The risks in both cases are approximately the same.

Advantages of a safe deposit box:

100% safety of money in the vault;
access to the seller’s locker only after checking the documents (purchase and sale agreement with a registrar’s mark, etc.);
the ability to check banknotes using banking equipment.

On the day the documents are received from Rosreest, the buyer and seller can meet in the bank vault, count the money, check the banknotes for authenticity and prepare a receipt. This is quite convenient, especially if the seller requires cash.

Disadvantages of a safe deposit box:

risks of money theft by bank employees (rare, but sometimes happens);
incomplete amount in the box (if the seller takes it without the participation of the buyer);
lack of indication in the documents of the amount - the cost of the apartment.

The parties decide for themselves whether to choose a cell or a letter of credit . If the seller needs cash, then it is certainly cheaper and easier to take it from a bank safe deposit box. If the amount is large, there are fears that the buyer is unscrupulous, then it is better to spend money and open a letter of credit.

In this case, the letter of credit agreement will remain, you can take a certificate from the bank about its execution, and if the seller declares that he has not received the money, then this evidence can be presented in court.

We wrote about transferring money through a safe deposit box in a separate article.

Video on the topic

Video about concluding a letter of credit when buying an apartment:

Conclusion

To pay for the purchase of an apartment, parties often use a letter of credit . To do this, a savings account is opened in the bank, in which the required amount is placed; it is transferred to the seller of the apartment only after registration of the transfer of ownership rights and documentary confirmation of this fact.

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Conditions for opening and types of letters of credit when buying or selling real estate. How to conclude a settlement agreement?

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What it is?

The seller will receive funds after completing all the necessary documents required to register ownership, followed by their provision to the credit institution. At the same time, both parties are protected from losses in the event of dishonest actions of the other party to the transaction.

We invite you to watch a video about what a letter of credit is:

Conditions of registration

The purchase and sale agreement must include a clause according to which payment will be made through a letter of credit opened with the bank.
The next step is to submit an application to the bank to open a letter of credit account.

Along with the application, you must submit an identification document, as well as the basis for opening a letter of credit - a purchase and sale agreement (or a preliminary DCT).
Then the buyer transfers the required amount to an open account.

He also pays for all bank services for the provision of this service, unless otherwise specified in the agreement.

Types used

There are no restrictions on the types of banking operations used when conducting such transactions. However, an irrevocable letter of credit is recommended as it protects the interests of both parties to the contract.

The buyer can withdraw the money only if the terms of the contract are violated or he was unable to register the property in his name. The seller is guaranteed to receive money as soon as the other party completes the procedure for registering ownership.

This is how long it usually takes to transfer all signed documents to the registration chamber and receive confirmation of the transfer of ownership.

Calculation scheme

Settlements using a letter of credit account occur according to the following algorithm:

A purchase and sale agreement is concluded, which provides for a letter of credit invoice as payment.
The seller, under the agreement, sends an application to the bank to open a letter of credit.
A set of documents that each party must provide is agreed upon. These conditions are prescribed in the contract and are indicated as necessary for opening a letter of credit.
The bank opens a letter of credit account in the name of the seller and transfers money from the buyer's account to it.
The parties complete the deal. The buyer provides the credit institution with all the documents required by the agreement and the terms of the letter of credit, and the seller then receives the money into his account.

Important: each stage of the transaction is controlled by the bank and requires documentary confirmation from the parties.

Read about the payment procedure for the purchase and sale of real estate here.

Conclusion of a settlement agreement

Since you need to pay a certain amount for opening and servicing bank accounts, it is very important to compare all the conditions offered by credit institutions and choose the appropriate ones. Each of the banks offering services for opening a letter of credit sets its own commission for this operation.

It is also worth paying attention to the reputation of the financial organization: the presence of good reviews and high ratings indicate that they will more strictly control the fulfillment of the terms of the contract by the parties.

The entire amount is deposited into the letter of credit account at a time. A commission for servicing the account and transferring funds is also immediately paid.

Required documents

When opening a letter of credit you must provide:

Passport.
Application for opening a letter of credit account.
Agreement on settlements through the chosen payment method or the main purchase and sale agreement, if these conditions are specified in it.

The contract itself must be in writing and must contain the following clauses:

The bank where the letter of credit will be issued.
The bank where the money will be transferred.
Seller's name.
The amount transferred to the letter of credit (must be written in numbers and words).
Type of letter of credit (indicate that the letter of credit is irrevocable).
Terms of payment (it is recommended to write “without acceptance”).
Account opening date.
The conditions under which the funds will be transferred (documents that the buyer provides to the bank to open an account).
Identification of real estate.
Who pays the fees for opening and transferring funds?

It is necessary to include in the contract a clause stating that no mortgage obligations arise in connection with the use of the letter of credit.

If you don’t want to contact a lawyer, you can take a sample contract from the Internet and adjust it to your needs. You must make sure that the document is suitable for the selected type of real estate and that it contains a clause stating that the parties will make payments through a letter of credit.

The condition for opening a letter of credit is usually the provision to the bank of a purchase and sale agreement with a mark from Rossreestr or an extract from the Unified State Register of Real Estate, where the new owner of the real estate is registered. To avoid controversial situations, this point must be reflected in the contract.

Who pays?

All costs associated with opening a letter of credit and transferring funds, according to business customs, are borne by the buyer of real estate. However, the law does not prohibit the payment of the bank commission from the seller or from dividing this amount in an arbitrary proportion (for example, 50/50, 40/60 or 70/30).

Where you can open profitably: TOP-3 reliable banks

Any bank that provides such a service is suitable for opening a letter of credit. Below is a brief overview of banks and the conditions they provide; the most favorable conditions are selected.

Sberbank offers three types of letters of credit for opening:
- Without acceptance.
- Irrevocable.
- Coated.
Accounts are opened for both individuals and legal entities.
- Individuals are charged a commission of 0.2% of the value of the letter of credit.
- For legal entities the fee is set at 0.5%.
It is possible to open a letter of credit for 120 days with subsequent extension for another 60 days. This option is useful for transactions when the parties are in different cities.
Promsvyazbank has a flexible payment system for opening a letter of credit: you can open it for 2,500 rubles per month of use. Also, according to the tariff, depending on the amount, you will need to pay 0.1% or 0.2% of the transferred amount. A pleasant bonus for clients will be the accelerated process of documents: they promise to check them and transfer money within 24 hours.
VTB 24 conducts operations with letters of credit throughout the Russian Federation. Clients are invited to use an irrevocable covered letter of credit for up to 90 days for payments when purchasing any real estate and land.

Banks do not impose restrictions on individual entrepreneurs, which allows them to also participate in transactions.

Advantages	Flaws
Reliability and security of payments.	Due to additional checks, the transaction takes longer.
There is no need to check the money for authenticity.	Complex paperwork is used.
The bank values its reputation, therefore it monitors the fulfillment of all terms of the transaction, as well as its purity.	When using apartment purchase and sale transactions, some banks charge additional commissions.
When fulfilling obligations, each party is guaranteed to receive what is due under the transaction.	The buyer can return the money by filing a claim with the seller in court.
The money will not disappear anywhere (which can happen if you use a regular cell).	The tax office will be aware of the completed transaction.
Opening a letter of credit is usually cheaper than paying for recalculation services and renting a safe.	Often the tariffs are inflated and the parties, in order to save money, choose other payment methods.

This development puts the buyer at a disadvantage. The letter of credit is added to the general bankruptcy estate of the bank that has ceased operations, and getting your money back in the event of non-fulfillment of the agreement becomes problematic. It will also be difficult for the seller to obtain them if the transaction is closed and all conditions are met.

If the transaction is successful and registered by Rosreestr, in accordance with clause 4 of the Information Letter of the Presidium of the Supreme Arbitration Court of the Russian Federation dated January 15, 1999 N 39 “Review of the practice of resolving disputes related to the use of letter of credit and collection forms of payment,” the buyer will be required to make the payment again. Then contact the bankruptcy trustee to include yourself in the queue of creditors.

The downside is that it is unlikely that all the money will be returned, since the bankruptcy estate is divided evenly between all creditors in the queue.

As insurance for such cases, the buyer can add language to the contract according to which the obligation to pay under the contract is considered fulfilled at the time the letter of credit is opened. However, the seller may not agree to such a condition, since then he will potentially lose both the property and funds. Only negotiations and choosing a reliable bank will help here.

Alternative

An alternative to a letter of credit can be a safe deposit box. Its use occurs as follows - in the bank there are:

lawyer;
realtor;
buyer;
salesman;
and a bank representative.

The cost of renting a safe deposit box at a bank varies from 1,000 to 5,000 rubles , depending on the bank.

The advantage of using it to keep the contents secret: no one except the realtor, seller and buyer will know how much money is inside. The downside is an increased risk of fraud.

The seller can take advantage of the bank’s ignorance of the terms of the transaction, gain access to the bank safe deposit box, take the money and demand repeated payment, since there is no money in the safe deposit box, and therefore there is no receipt for receipt of funds.

Transactions with letters of credit are rarely used in Russia. Parties most often use cash, however, with an increase in amounts and cases of fraud, a letter of credit becomes more popular and more convenient.

Its advantages over cash or safe deposit boxes are becoming more and more obvious.

The only thing that slows down the process is the instability of the banking sector in Russia, but this will not always be the case, which means that the popularity of this payment method will grow.

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