Concepts such as "advance" and "deposit" are used in the sale and purchase of real estate and other transactions. Advance payment and deposit are monetary transactions regulated by the Civil Code of the Russian Federation.
What are the deposit and advance payment?
Deposit - an amount of money that is transferred by the buyer to the seller as an advance payment for the purchased housing and in order to prove that the purchase obligations will subsequently be fulfilled. As an advance payment, the deposit has all the properties of an advance payment.
In turn, the advance is the minimum amount that the buyer pays to the seller as part of the payment of the full value of the property. Unlike the deposit, it performs only a payment function.
The difference between an advance and a deposit is significant. If the buyer changes his mind about paying for the purchase, the deposit will still remain with the seller. If the seller changes his mind, he will have to pay the other party double the amount of the deposit.
In addition, when transferring money, even against a receipt, it must be clearly indicated that a certain amount is paid as a deposit. This will save both the seller and the buyer from unnecessary worries.
The main differences between an advance and a deposit
The main difference between the deposit and the advance is that the first serves as proof of the conclusion of the contract, as well as a way to ensure the fulfillment of obligations. And an advance payment is only an advance payment for an apartment, which is paid to secure the reservation of a certain option.
In this case, the transfer of money is also formalized by an agreement on the payment of an advance. The document stipulates the rights and obligations of the two parties, as well as the consequences of their violation (one of the parties returns the other advance in full and in a single amount). The deposit requires an agreement on the deposit, which is concluded in writing, regardless of the amount. The agreement can also be in the form of a receipt. It must contain the surnames, names and patronymics of the buyer and the seller, the place of registration, passport data, the amount of the deposit and the deadline for fulfilling the obligation on it.
The advance payment does not have such a strong formal basis. Moreover, the civil law does not even talk about it, although it plays an important role in the purchase of real estate. In order to protect themselves from unjustified risks, the seller and the buyer must also enter into an agreement on the payment of an advance (in writing).
Summarizing
An advance is a payment prior to the transfer of property or the provision of services. Its main difference from the deposit is that it is not a guarantee of the performance of an obligation, and can also be reimbursed at any time. The advance payment does not oblige both parties to conclude an agreement with each other.
Deposit - an amount that is issued under a contract as proof of security for its execution. The very process of transferring and receiving a deposit is regulated by Articles 380 and 381 of the Civil Code of the Russian Federation. The agreement is made in writing; it is legally binding. The deposit is a kind of guarantor that ensures the fulfillment of obligations. That is why the registration of deposits is very common in the rental market and fully justifies itself.
Both of these concepts should not be confused with a pledge - a way of securing obligations, in which the pledgee gets the right to dispose of the money when some debt of the other party is discovered. For example, when renting a house, a deposit is usually collected in case of any damage to property, an apartment, etc. Having received the money as a deposit, the property owner has the right to reimburse the damage caused by the tenant and pay for repairs.
