Finalizing a property purchase consumes a lot of time. Typically, the final signing of the contract can take several months as both parties still need to undergo extensive due diligence and evaluations. For this reason, signing a promissory contract is the best course of action to guarantee the sale. In this article, we will explore the promissory contract in Portugal.
What is a promissory contract in Portugal?
A promissory contract (contrato de promessa de compra e venda) is essential when buying or selling property in Portugal. It is a legally binding agreement that serves as an intermediary step before the final signing of the Deed of Purchase and Sale, wherein the parties assure that the property transaction will reach finalization.
The promissory contract in Portugal outlines the terms and conditions and is similar to the final deed, but it will serve to establish between the parties to proceed with the sale. Having a promissory contract guarantees that there is a likelihood that a party will back out of the transaction.
Making a deposit
After signing the promissory contract in Portugal, the buyer usually pays a deposit constituting a percentage of the total purchase price. The height of the downpayment ultimately depends on the agreement, but in most cases, a downpayment of 10% of the total purchase price is made. Buyers simultaneously deposit with the signing of the promissory agreement in Portugal.
This deposit serves as the guarantee of the buyer’s commitment. Most clauses would include forfeiture of the warranty if the buyer will not proceed with the sale or violate any terms and conditions.
The importance of the promissory contract in Portugal
A great adviser or lawyer would always insist on having a promissory contract. Here is why:
1. Provides assurance
By signing a promissory contract, both the buyer and the seller commit to the terms and conditions of the property sale. It provides assurance and creates a legal obligation for both parties to proceed with the transaction.
2. The promissory contract offers security
As mentioned, a promissory contract in Portugal always comes with a deposit payment, which benefits both parties. For the seller, the deposit acts as a form of assurance that the buyer is serious about the transaction and compensates them if the buyer fails to fulfill their obligations. On the other hand, the deposit assures the buyer that they have priority over other potential buyers. It is essential, especially in competitive property markets.
3. Gives time to prepare for the final sale
The promissory contract allows time for various procedures to be carried out, such as property inspections, due diligence, obtaining financing, and resolving any legal or administrative matters. This interim period allows both parties to complete necessary tasks and address potential issues before the final signing. It guarantees that the final deed of purchase and sale is free from errors and liabilities.
What you find in the promissory contract
A promissory contract will usually have wording similar to the final deed of sale, except that it is only a guarantee of its completion. Typically, you can find the following elements in a promissory contract:
- Identification of parties.
- Property description.
- Purchase price and payment terms.
- Timeline for fulfilling legal and administrative obligations.
- Consequences of non-compliance.
It’s important to note that the specific contents and provisions of a promissory contract in Portugal may vary based on the individual agreement between the parties and any applicable laws or regulations.
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Frequently Asked Questions (FAQs)
What is a promissory contract in Portugal?
A promissory contract in Portugal is a legally binding agreement between a buyer and a seller in a property transaction. It assures both parties that the agreement will reach finality, serving as a crucial step before the final signing of the deed of sale.
Is a promissory agreement a contract?
Yes, a promissory agreement is a contract in Portugal. Much like a contract, it is enforceable against the parties involved.
What is Article 830 of the Civil Code of Portugal?
Article 830 of the Civil Code in Portugal provides rules on the promise of purchase and sale, much like a promissory contract. It grants the buyer the right to demand the completion of the promised contract, and should the seller fail, he can seek damages.
What is a CCPV in Portugal?
CPCV stands for contrato de promessa de compra e venda and is a promissory contract in English. The CPCV is a legally binding contract between a buyer and a seller in a property transaction.
