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What Is a Pre-Sale Building Contract?

A pre-sale building contract is an agreement under which a buyer purchases a specified residential or commercial unit before the construction project is completed, usually by making payments according to an agreed schedule.

In Iran, pre-sale transactions are regulated by the Pre-Sale of Buildings Act and the regulations governing the official registration of transactions involving immovable property.

Because of recent legislative changes, buyers should pay particular attention to the official registration of pre-sale agreements.

Should a Pre-Sale Contract Be Officially Registered?

Yes. One of the most important legal issues in a pre-sale transaction is the form of the contract.

Under Iranian law, a pre-sale building contract and the transfer of rights and obligations arising from it must be carried out through an official deed. Real estate agents may conduct preliminary negotiations, but the final legal process must follow the statutory requirements for official registration.

The 2023/2024 Law on Mandatory Official Registration of Immovable Property Transactions has also reinforced the importance of registering pre-sale transactions through the official registration system.

What Documents Should the Buyer Check?

Before making a payment, the buyer should verify:

• The seller's official ownership or legal authority to sell;
• The building permit, if issued;
• Relevant insurance documents;
• The property's official registration status;
• The exact specifications of the unit.

Relying solely on advertisements, verbal promises, or informal documents can expose the buyer to significant legal risks.

What Should the Contract Include?

A properly drafted pre-sale contract should clearly specify:

• Full details of the parties;
• Property registration details and address;
• Technical and architectural specifications;
• Unit size and number;
• Parking and storage areas;
• Purchase price and payment schedule;
• Delivery date;
• Date of official title transfer;
• Seller's obligations;
• Delay penalties and damages;
• Insurance and construction obligations.

The more precise the contract, the easier it is to prevent and resolve future disputes.

Does the Buyer Have to Pay the Entire Price Before Delivery?

No.

The Pre-Sale of Buildings Act provides protections regarding payment. At least 10 percent of the contract price should remain payable at the time of execution of the final official deed.

The buyer may also link installment payments to the physical progress of the construction project, subject to the legal requirements.

What If the Developer Delays Delivery?

If the seller or developer fails to deliver the unit on time or fails to perform contractual obligations, the buyer may have the right to claim statutory damages for delay, depending on the circumstances.

For this reason, the contract should clearly define the delivery date and the method for calculating delay damages.

What If the Actual Unit Size Is Different?

A difference between the contractual and actual size of the unit may create legal and financial consequences.

Depending on the extent of the difference, Iranian law may provide the buyer with rights such as claiming the price difference, damages, or, in certain circumstances, terminating the contract.

What If the Seller Refuses to Transfer the Title?

If the buyer has fulfilled his or her contractual obligations but the seller refuses to complete the official transfer, Iranian law provides mechanisms designed to protect the buyer.

Because the appropriate legal action depends on the status of the project, payments, permits, and contract, the documents should be reviewed carefully before filing a claim.

Can a Property Be Pre-Sold to More Than One Person?

If a seller transfers the same property to multiple buyers through fraudulent conduct, the facts may give rise to different civil or criminal claims depending on the circumstances.

This is one of the main reasons buyers should verify the seller's ownership and legal authority through official channels before making substantial payments.

Is a Real Estate Agency Contract Enough?

No.

A real estate agent may facilitate preliminary negotiations, but the legal requirements for an official pre-sale contract must be followed. Buyers should not assume that signing a standard agency form provides the same legal protection as an officially registered transaction.

Buyer's Checklist

Before signing a pre-sale agreement, check:

• Seller's ownership and legal authority
• Property registration status
• Building permit
• Project insurance
• Unit, parking, and storage specifications
• Purchase price and installments
• Delivery date
• Official title transfer date
• Delay compensation
• Rules concerning differences in size
• Developer's obligations
• Official registration requirements

Conclusion

Buying a pre-sale property can be financially attractive, but it also involves significant legal risks. Delayed delivery, differences in unit size, competing claims, failure to transfer title, and even fraud can result from inadequate due diligence.

The safest approach is to verify the seller's legal authority, review the property's official records and project documents, and complete the transaction through the legally required official registration process.

For high-value transactions, having the contract and property documents reviewed by a qualified Iranian lawyer before signing can significantly reduce future legal risks.