Buyer or Seller Doesn’t Keep Their Promise? Here’s What Happens Next

Fortunately, it doesn’t happen very often, but every now and then a property transaction in The Netherlands comes to a complete standstill. The purchase agreement has been signed, the notary is ready for completion, and the moving boxes may already be packed. Then, at the very last moment, one of the parties fails to show up or refuses to cooperate with the transfer of ownership. Many people assume that the other party can immediately cancel the agreement and claim a substantial penalty. In reality, things are a little more nuanced. Both the law and the standard purchase agreement first provide the defaulting party with one final opportunity to fulfil their obligations.

Everyone Deserves a Second Chance in The Netherlands

The basic principle of contract law is surprisingly reasonable. If one of the parties fails to perform their contractual obligations, this does not automatically mean that the agreement comes to an end. There may have been a misunderstanding, an unexpected delay or a temporary issue that can still be resolved. That is why the concept of a notice of default exists. It gives the party that has failed to perform one final chance to honour the agreement before more serious legal consequences follow.

Only when that final opportunity passes without performance does the party officially enter into default. From that moment onward, the other party may take further legal action, such as terminating the agreement, claiming damages or relying on contractual penalty clauses.

What Is a Notice of Default (‘Ingebrekestelling’)?

A notice of default is a formal written notification in which one party demands that the other party still fulfils its contractual obligations within a specified period. If the obligations are still not fulfilled after that period expires, the defaulting party is legally considered to be in default.

In general, the additional period must be “reasonable.” What is considered reasonable depends on the specific circumstances of each case. In many residential property transactions, however, the purchase agreement already specifies exactly how much additional time must be given, avoiding uncertainty for both parties.

What If the Buyer Doesn’t Show Up at Completion?

One of the most common situations occurs when the buyer fails to appear at the notary’s office on the agreed completion date. This assumes that the buyer is not represented by someone else and that the transfer of ownership cannot proceed as agreed.

In that situation, the seller may send the buyer a formal notice of default, giving the buyer one final opportunity to complete the purchase before additional contractual remedies become available.

A Fixed Grace Period

Most standard residential purchase agreements contain a clearly defined grace period during which the buyer can still perform their obligations. Once that period has expired without performance, the seller may choose how to proceed.

This contractual arrangement avoids immediate termination and allows one final opportunity to resolve the situation without legal proceedings.

Option 1: Terminate the Purchase Agreement

The first option is to terminate the purchase agreement. Most residential purchase agreements contain a contractual penalty clause requiring the defaulting party to pay a penalty, which is often set at 10% of the purchase price.

For example, if the agreed purchase price is €600,000, the contractual penalty could amount to €60,000.

Although courts may, in exceptional circumstances, reduce a contractual penalty if it would be clearly unreasonable, judges generally exercise this power very cautiously. In practice, agreed penalty clauses are frequently enforced as written.

Option 2: Demand Performance Instead

Termination is not always the preferred solution. Sometimes the seller still wants the transaction to go ahead. In that case, the seller may insist on performance of the agreement instead of cancelling it.

Many purchase agreements provide for a daily contractual penalty when completion is delayed. This daily penalty is intended to encourage the defaulting party to fulfil their obligations as quickly as possible while keeping the agreement in force.

Typically, the accumulated daily penalties cannot exceed the amount that would have been payable if the agreement had been terminated immediately under the contractual penalty clause.

It Isn’t Always the Buyer Who Is at Fault

People often assume that these situations only involve buyers. That is not true.

A seller can also fail to perform. For example, the seller may refuse to cooperate with the transfer of ownership, fail to deliver the property as agreed or simply fail to appear at the notary’s office on the completion date.

In those situations, the buyer may also issue a notice of default and, if necessary, rely on the same contractual remedies that would otherwise be available to the seller.

Why This Procedure Matters

The notice of default procedure exists to prevent property transactions from collapsing immediately when something goes wrong. Instead of rushing into litigation, both parties are first given a final opportunity to honour the agreement. Only when that opportunity is ignored do the contractual remedies become available.

Depending on the circumstances, the non-defaulting party may choose to terminate the agreement and claim the contractual penalty, or insist on completion while claiming a daily penalty for the delay.

Because the financial consequences of these situations can be significant, it is always advisable to seek professional legal or real estate advice before taking action. A properly drafted notice of default and careful compliance with the contractual procedures can make the difference between a successful resolution and an expensive legal dispute.