Pledge Agreement: How to Avoid Headaches in a Real Estate Transaction

In this guide you will understand its real advantage and any contingencies that may arise and affect a real estate transaction.

From the first visit to the property to the completion of the public deed, it takes some time, and there may be adverse situations to the acquisition of your home of choice. Thus, in addition to driving potential competitors away from your dream home, by performing the CPCV, you are legally assured of possible contingencies, delays or breaches of the contract and possible sanctions.

Commonly used in Portugal, the drafting of this contract is not mandatory by law. Still, and as we explained in today's article of the biweekly rubric 'financial health', insured by Doctor Finance for the idealist / news, it can be quite important and useful to do so when buying a property or land.

It's because? In many respects, namely because it is a written document with legal value (Article 410 (1) of the Civil Code), prepared and signed between those who promise to sell the property (the promising owner) and those who promise to buy the same property (the promising). buyer).

So, so that you can defend your rights and interests and the process of buying your home goes smoothly, it is best to be well informed.
Elements to be included in this contract

The CPVC must comply with certain rules and must contain some key elements and information. Are they:

    Identification of who sells and who intends to buy: Full name, address, marital status, ID card number and Tax Identification Number (TIN);
    Identification and characteristics of the property: Address, typology, building description, matrix registration, whether or not has other parts of the fraction, such as pool, garage or storage;
    Housing or building permit, or proof that it was requested from the City Council by means of a replacement statement;
    Sale price of the property and means of payment;
    Signal value given by the promising buyer, as well as the payment date. By cash is meant the amount of equity paid by the promising buyer to the promising seller (usually 10% to 20% of the sale value of the property), as an initial down payment and as a guarantee of compliance with the contract and as proof of seriousness. and the buyer's real intent. This amount is delivered upon the celebration of the CPCV;
    Indication that the property does not have any encumbrances or charges at the date of CPCV celebration
    Expected date for the execution of the public deed and its consequences or sanctions, if applicable, if not executed by that date;
    Mention that the housing is in a habitable condition, with all that implies: internal networks and installation of water, electricity, sewage and gas in normal working conditions.

What are the possible contingencies for its realization?

The CPCV, although not mandatory, has some specificities, which you should be aware of and informed before signing, because there are factors external to the business, which may influence its outcome and formalization - the so-called contingencies - that should know and know how to be aware of them if the public deed of purchase and sale is not performed. It is therefore important to know that:

When the buyer does not have the required amount to purchase and needs to resort to bank financing, the approval of mortgage is a factor that can negatively affect the acquisition of the property. You must first ensure that the bank is willing to lend you the amount you need. Alternatively, you should include a clause in the CPCV that cancels the contract in the event that you are unable to get the requested credit and you do not have to forego the signal if you prove that you did not have the approved credit.
    Another important aspect external to the prospective buyer is the valuation of the property. That is if the valuation does not cover the full amount you need to purchase the property, you should be aware of this by creating a clause in the CPCV that addresses this otherwise.
    In case you want to buy a house still under construction, and if the builder or owner does not comply with the agreement, for not completing the work, for example, in this case the promising buyer may, by law, demand the refund of the double signal. . As well, if the owner gives up on selling the property for any reason other than the CPCV, this law also applies.
    Another important aspect to consider as a deterrent is the change of ownership. For this the law provides two ways:
    The so-called Royal Effectiveness, a law that allows the CPCV to be given greater effectiveness, covering not only both parties, but also including third parties. With the signatures of these third parties contained in the CPCV, the prospective buyer acquires the right to acquire the real property in question, regardless of who is, at the time, its owner. This assignment must be registered and in the public deed.
    Another example is that the fulfillment of the deed of sale may be compromised by the death of the seller, the non-location of the seller or his refusal to sign the deed. For cases such as this, there is contemplated in the law the Compulsory Award Action. Said action allows the substitution of the signature of the seller for judicial authorization in the deed of sale, thus enabling the buyer to conclude the deal.
    Another external factor to take into account is the municipality's non-granting of the habitability license. If you are unable to obtain this document from the city council, you will not be able to apply for a mortgage or make a purchase deed. Only after an inspection carried out by the municipality in four key areas (sanitation, water, gas and electricity) can this license be granted or not.
    These are some of the most important contingent external factors to consider, whether or not to perform the final contract - Public Deed.

In short, buying a home is a financially important decision in people's lives, so consumer / buyer protection is central. For this reason, and even though it is not mandatory, always consider the elaboration of a CPCV, if you consider buying a property, taking into account all these assumptions discussed above.

Source: Idealist, 25 July 2019