When making various transactions with real estate, vehicles or other objects, citizens and realtors have to regularly come across many new terms. Therefore, it is important to understand well how the deposit differs from the pledge when they are used, and also what are the features of their application. What they have in common is that they are the forerunners of the final settlements between the buyer and seller, but at the same time they have significant differences.
Deposit concept
Before deciding on how the deposit differs from the pledge, you should find out the meaning of each concept. The deposit is a certain type of guarantee for the fulfillment of obligations under the contract. It is represented by a certain amount of funds transferred to the seller of the property against future transfers for valuables.
It is the deposit that serves as evidence of the conclusion of the contract and the provision of the transaction. What is the difference from a deposit when buying an apartment or other property? The deposit is a guarantee of this transaction, and also confirms the conclusion of the agreement. A pledge, however, involves the transfer of a direct object as a pledge instead of cash.
The main functions of the deposit
Before you find out how the deposit differs from the pledge when selling an apartment or other item, it is important to determine the purpose of each concept. The deposit has certain significant functions, which include:
- the payment function, which consists in the fact that the transfer of funds against future money transfers is a certain way of paying for a particular object;
- the security guarantee that the other party, which is assigned certain obligations by the provisions of the contract, will fulfill them properly and on time, and if these conditions are violated, then the funds will not be returned by the recipient;
- the evidence function is that it is the transfer of the deposit that confirms that a certain agreement was reached between the two parties, therefore they have obligations secured by the transfer of a certain amount of funds.
Thanks to these functions, the deposit acts as the best way to ensure transactions. When studying what distinguishes a deposit from a pledge when selling real estate, one should take into account all the functions and features that these concepts have.
Is the deposit a fine?
The deposit is not returned to the payer, as it is a guarantee of the transaction and the transfer of the remaining amount of funds. Therefore, he often performs even a penalty function, which is absent from the pledge. When considering how the deposit differs from the pledge when buying an apartment or other real estate, the possibility of using the deposit as a fine is taken into account.
If the buyer for various reasons decides to refuse to fulfill his obligations under the contract, then he loses a certain amount of funds paid by him earlier for a particular property. The other party, which is the seller of the item, reserves this amount for itself as a fine.
In practice, obligations are violated even by the party that received the money. The seller may change his mind, so if he refuses to sell the object, he must also pay some penalty. Under such conditions, they perform the following actions:
- the full amount of the deposit is returned;
- a fine is additionally charged, and usually it is equal to the size of the deposit.
It is easiest to understand the difference between a deposit and a pledge when buying a house, since when making this transaction, a fine in the form of a deposit involves non-refund. If the security is used, then it will have to be collected, for which the party to the transaction will have to go to court.
If the agreement is terminated for good reason, which include various natural disasters, serious illnesses or other force majeure, then the parties may come to an agreement on the basis of which no one should pay fines, so the money is returned to the payer.
Features of the deposit
When studying what distinguishes a deposit from a pledge in Roman law, one should evaluate all the features of each term. These include:
- if a transaction is concluded that is considered valid from the moment of registration with state bodies, then if there is a deposit, such an amount may be recognized in advance by the court, therefore it is often returned if the agreement is not signed by the parties for various reasons;
- this rule also applies to rental contracts concluded for a period exceeding one year, since under such conditions they must be registered;
- Often, realtors independently form a separate document, which regulates the rules for transferring a deposit.
What is the difference from a deposit? The deposit is represented by a guarantee that a certain transaction will be executed, therefore it is considered beneficial for each party to the agreement interested in signing the document.
Rules for drawing up a preliminary contract
In order to prevent an unfair attitude of any participant to the transaction, a contract is usually drawn up, called a preliminary one. It is not registered with state bodies, therefore it gains legal force immediately after signing.
The buyer is usually interested in the deposit, and not in advance. The fact is that if he provides an advance, then this amount can be returned to him if the seller simply changes his mind to sell the object. Under such conditions, he will lose time and effort, and at the same time will not receive any benefit. The seller will be able to use his money for any purpose. Therefore, often unscrupulous sellers deliberately indicate in the agreement a clause on an advance rather than a deposit. They can use large amounts of funds without interest.
Therefore, often when drawing up a preliminary contract, the parties interested in the transaction require the introduction of a clause on the deposit.
Is a separate agreement being drawn up?
It is important not only to know how the deposit differs from the pledge when renting or buying real estate, but also how the transfer of money is made out. Most often, a separate agreement is formed to provide a deposit. It is it that guarantees the execution of the transaction.
If, for any reason, the transaction breaks down, the person who issued the deposit receives not only his money back, but also compensation for losses. Therefore, buyers are often negative about drafting this agreement.
Collateral concept
A pledge is considered a completely different concept, so all people planning to become participants in different transactions should know how the pledge differs from a deposit and an advance. Often these terms are confused by participants in the transaction and even novice realtors.
The pledge lies in the fact that the fulfillment of the obligations prescribed in the agreement is ensured with the help of the property form, therefore money is presented in the form of property. The features of its application include:
- if for various reasons the obligations are not fulfilled or are not performed in the form provided for by the agreement, the creditor may sell the subject of the pledge, which will lead to the satisfaction of his requirements;
- under such conditions, the creditor has the property right to receive payment from the price of the property held by him in pledge;
- if a citizen buys any object on credit, then usually this item acts as a pledge, which ensures that he will surely return all the funds to the creditor in a timely manner and in the right amount;
- banking institutions most often require collateral, but even private buyers or sellers may require its use, which is enshrined in a separate agreement.
Understanding the difference between a deposit and a pledge when buying a car or real estate is quite simple. These concepts are completely different, but they are often used by different citizens or companies in numerous transactions.
The nuances of collateral when renting
The pledge is most often used when making a lease, and not when buying or selling real estate. Therefore, the owner of the apartment may demand from the tenant payment not only for the month of residence, but also a certain amount of funds that will be used by the owner of the property in case of damage to property. Therefore, the repair of broken items will be paid by the direct owner, for which he will use the available collateral.
The pledge is considered effective material security. But it is more complicated in design than a deposit.
Is it necessary to transfer money without drawing up documents?
Understanding the difference between a deposit and a pledge when buying a property or when renting it out is quite simple. At the same time, each participant in any transaction must remember that any transfer of funds must be official, for which a separate agreement is necessarily drawn up for this.
It is allowed to enter the necessary information directly into the contract of sale or lease, but it is most important to formulate a separate agreement. The procedure is regulated by the provisions of Art. 380 GK. If documents are available, the parties can confirm that a certain amount of funds was transferred from one participant to another.
When compiling the document, the features are taken into account:
- formed in any form, for which you can use the form of a real estate agency or any company that is a party to the agreement;
- without fail the agreement reflects the amount of the deposit or pledge;
- details of the parties are presented, submitted by F. I. O. of citizens or the name of the companies;
- places of residence of citizens or legal addresses of enterprises are registered;
- the dates are indicated during which all obligations listed in the agreement must be fulfilled;
- a lot of attention is paid to the description of the subject matter of the agreement, which can be represented by a property, vehicle or other element;
- signatures of the parties are put at the end.
The above requirements are relevant for the preparation of a deposit or pledge agreement. If an advance is transferred, then it is additionally recommended to form a receipt that confirms the receipt of a certain amount of funds by one of the parties to the agreement.
Is verbal agreement allowed?
If people trust each other, then they may not draw up a preliminary contract, and may also not use the agreement to confirm the transfer of collateral or deposit. Under such conditions, they will not be able to officially prove the existence of an agreement. They can only refer to witness statements.
In the absence of official documents, usually a pledge and a deposit are only a fraction of the payment, and not a guarantee of the transaction. If the requirements of the parties are violated, it will not be possible to prove that the object is pledged to another party to the agreement.
What is relevant when buying a property?
Each person should understand how the deposit differs from the pledge. Under such conditions, he can rationally choose which method of securing the transaction will be relevant when buying a property. For this, the nuances are taken into account:
- the deposit is considered beneficial for each participant, as it reduces all kinds of financial risks;
- if there is an agreement on a deposit, participants are more responsive to their obligations;
- Buyers resort to collateral if they do not have the opportunity to invest heavily on their own, so they resort to the help of credit organizations.
Therefore, the application of these interim measures depends on the financial situation and other characteristics of the parties to the transaction.
Conclusion
When concluding a transaction, on the basis of which housing or transport is sold, agreements are often concluded regarding the provision of a deposit or transfer of real estate and a pledge. Bidders should be well versed in these terms.
The drafting of an agreement depends on the financial situation of the participants and the characteristics of the transaction.