What is a reservation, and what is the money you pay for it?
A reservation is the first payment in many Georgian purchases: you pay a sum, and the seller or developer takes the apartment off the market for a period while you check it and prepare the contract. The word "reservation" does not appear in the Civil Code as a contract type. What the Code does know is the legal character of the money, and that is what decides whether you get it back. A payment made at this stage is usually one of three things: earnest money, an advance on the price, or a fee for holding the property. Each has different consequences when the purchase does not go ahead.
The first task, before any amount is agreed, is to make the document say which of the three it is. A receipt that says only "reservation, $2,000" leaves the question to an argument later. This page explains the three, shows with numbers what happens to each when a deal fails, and sets out how to pay a reservation so that the money is traceable. The next documents in the chain, the preliminary agreement and the sale contract, are covered on their own pages.
Earnest money, advance or holding fee: what is the difference?
| Kind of payment | What it is | If the deal fails |
|---|---|---|
| Earnest money | A sum paid as a sign that the contract is concluded (Article 421), credited against the price (Article 422) | If you break the deal, the seller keeps it; if the seller is at fault, the seller returns double, and you may also claim damages (Article 423) |
| Advance on the price | Part of the price paid early, under the terms the parties write down | Returned according to the agreement; where the obligation does not arise or ends, a payment made for it can be claimed back as unjust enrichment (Article 976) |
| Holding fee | A payment for taking the property off the market, kept by the seller whatever happens, if the agreement says so | Kept by the seller unless the agreement provides a refund |
Earnest money is the only one of the three with its own chapter in the Civil Code, and its rules work in both directions. It binds the buyer, who loses it by walking away, and it binds the seller, who pays it back twice over by failing. That symmetry is why it is used, and also why a buyer should agree to it only after the legal check, not before, because a buyer who discovers a problem in the title and withdraws may find the seller arguing that the buyer broke the deal.
What happens to the money? A worked example
Take an apartment priced at $100,000 and a reservation payment of $2,000. The table follows the money through three endings under each kind of payment, assuming the agreement says nothing more than the label.
| Ending | Earnest money | Advance | Holding fee |
|---|---|---|---|
| The purchase completes | $2,000 counted towards the price; $98,000 left to pay | $2,000 counted towards the price | Depends on the agreement; often not counted |
| You withdraw without a reason the agreement accepts | The seller keeps $2,000 | As the agreement provides | The seller keeps $2,000 |
| The seller fails or sells to someone else | The seller returns $4,000, and you may claim damages | $2,000 returned; damages possible | Refund only if the agreement provides one |
The middle row is where most disputes start. A buyer who withdraws because the registry extract shows a mortgage the seller did not mention is not, in their own eyes, breaking the deal. Whether the law sees it that way depends on what the agreement said. That is why the most valuable sentence in any reservation agreement is the one listing the reasons for which the buyer may withdraw and get the money back.
What should a reservation agreement say?
When should you pay, and how?
The safest order is: cadastral code, registry extract, a first legal read, and only then the reservation payment. The extract can be ordered by anyone and shows the registered owner, the area, the category and every encumbrance, so a short delay to read it before paying costs the seller nothing. A seller who refuses to give the code until money is paid is asking you to pay for a property you cannot identify.
Pay by bank transfer to an account in the name of the registered owner, or of the developer company that holds the land and the construction permit, with a payment reference that names the property and the agreement. Do not pay in cash, and do not pay to an agent, a manager or a relative of the seller, however convenient it seems. A transfer to the owner's account is your evidence that the money reached the person bound by the agreement.
Reservations with developers
Developers often take a reservation payment before the main contract, using their own standard form. The same questions apply, and two more. First, ask whether the developer will register a preliminary ownership right for your unit once the contract is signed; the Public Registry records such a right for its standard registration fee, GEL 150 in four working days, and a registered right puts your claim on the public record. Second, read how the form treats the payment if the developer changes the unit, the floor plan, the price or the delivery date: a reservation that the developer can cancel freely but the buyer cannot is not balanced. Our guide to checking a developer lists the documents to see before paying anything to a project.
What if the seller will not return the money?
Start with paper, not phone calls. Send the seller a written demand that quotes the clause of the reservation agreement you rely on, states the amount and sets a date by which it must be returned. Keep the bank confirmation of the original payment, the agreement and every message in one place. If the payment was earnest money and the seller is at fault, the demand is for double the amount under Article 423; if it was an advance, for the amount itself and whatever the agreement adds.
If the demand is ignored, a lawyer can assess the claim, under the agreement or, where no valid obligation existed, as unjust enrichment under Article 976. Time matters: the Civil Code sets a limitation period of three years for contractual claims and six years for contractual claims relating to immovable property, running from when you knew or should have known of the breach. A claim made promptly, with the documents in order, is far easier to settle than one raised a year later from memory.
Risks and exceptions
- Paying before the extract. You may reserve a property with a mortgage, a seizure or a different owner.
- Paying an intermediary. If the money never reaches the owner, the owner is not bound by anything.
- Earnest money agreed too early. Withdrawing after a bad legal check can be argued to be your breach.
- A form that binds only you. Check that the seller's obligations, and the consequences for the seller, are as clear as yours.
- No written agreement at all. A claim to get the money back may still exist, but it starts as a dispute instead of a clause.
Frequently asked questions
Is a reservation payment legally required in Georgia?
No. It is a commercial practice, not a legal step. Some purchases go straight to a preliminary agreement or a sale contract.
How much is a usual reservation?
There is no legal amount. Keep it proportionate to the period and to what is at stake if the deal fails, and agree it in writing.
Can a seller who received earnest money sell to someone else?
The seller can physically sign with another buyer, but then the seller is at fault and, under Article 423, must return double the earnest money, with damages possible.
Does a reservation stop the property being sold at the registry?
No. A private reservation is not recorded in the Public Registry. For an apartment under construction, a registered preliminary ownership right is the public protection.
Does the reservation need a notary?
The law does not require one for a reservation. A notary can still be useful, especially when one side acts through a representative.
What if nothing was written down?
You may still be able to claim the money back, for example as unjust enrichment if the obligation never arose, but you start from evidence of payment rather than from a clause. Keep the bank confirmation and every message.
After the reservation: what the preliminary agreement must say and how to pay the price safely.
Sources
- Civil Code of Georgia (Articles 323, 421 to 423 and 976), consolidated 25 June 2026, Legislative Herald of Georgia (accessed 12 October 2026)
- Immovable property registration: fees and terms, National Agency of Public Registry (accessed 11 October 2026)
- Real Estate 2026: Georgia, MB Legal for Chambers and Partners (accessed 11 October 2026)
Change log
- - Explainer published from the Civil Code's rules on earnest money, unjust enrichment and form; being reviewed by the partner lawyer.