
Knowing each step in the sale and purchase process is fundamental. What is a pre-sale contract?
Buying a home is one of the most important decisions a person will make in their lifetime. For this reason it is extremely important to know the legal concepts, obligations and rights involved in acquiring a property, as well as the steps to follow.
Although there are differences between the different types of property regimes, in this case we will focus on the pre-purchase contract, resolving the most frequent doubts regarding this term when buying a property.
- Pre-purchase contract: what is it and what is it for?
- The promise of purchase in Spain
- Types of pre-sale contract for the purchase of a property
- What is needed to formalise a pre-purchase contract?
- Breach of the preliminary sales contract
Pre-contract of sale: what is it and what is it for?
The pre-contract of sale is the document that guarantees the fulfilment of the agreement between buyer and seller with legal validity. It must be signed once it has been verified that the property to be purchased has the legal or technical guarantees.
Its purpose is to secure the purchase and sale transaction by agreeing between the parties the delivery of an advance payment on the total value of the property. In addition, failure to comply with it will have financial consequences, whether it is the seller who fails to comply with it or the buyer.
The promise to purchase in Spain
Although the term “pre-contract” is not regulated by Spanish law, we do find the concept of “promise to buy” regulated by article 1451 of the Civil Code, which explains that “the promise to sell or buy, having agreed on the thing and the price, will give the contracting parties the right to reciprocally claim the fulfilment of the contract”.
Furthermore, it warns that “whenever the promise to buy and sell cannot be fulfilled, the provisions on obligations and contracts in this book (Civil Code) shall apply to the seller and buyer, as the case may be”.
The clearest difference between a pre-contract of sale and a contract as such is that, in the latter case, the parties involved have reached an agreement regarding the property, whereas in the case of a pre-contract, the parties are unwilling or unable to conclude the definitive contract at that time and undertake to do so within a certain period of time.
The promise to buy in Spain
Although the term pre-contract is not regulated by Spanish law, we do find the concept of “promise to buy” regulated by Article 1451 of the Civil Code, which explains that “the promise to sell or buy, having agreed on the thing and the price, will entitle the contracting parties to reciprocally claim the fulfilment of the contract”.
Furthermore, it warns that “whenever the promise to buy and sell cannot be fulfilled, the provisions on obligations and contracts in this book (Civil Code) shall apply to the seller and buyer, as the case may be”.
The clearest difference between a pre-contract of sale and a contract as such is that, in the latter case, the parties involved have reached an agreement regarding the property, whereas in the case of a pre-contract, the parties are unwilling or unable to conclude the definitive contract at that time and undertake to do so within a certain time.
Types of pre-contract for the purchase and sale of a property
Although there are as many types as there are agreements between the parties, the most common are:
- Reciprocal promise of sale: This is a preliminary contract whose purpose is the future conclusion of the contract of sale of a property, that is to say, it is a pre-contract similar to the earnest money contract, but where there is no monetary signal. However, it does give the parties the right to demand the fulfilment of what has been agreed and, if this is not the case, to claim damages.
- Contract with option to buy: This contract allows the purchase of a property on a specific date, at an agreed price and under certain conditions. It is a preliminary document that only obliges the seller to enter into the contract under pre-established conditions, being a right for the buyer, who can decide whether or not to exercise the purchase.
- Earnest money contract: The reservation of the purchase of the property is formalised in writing. The buyer hands over a sum of money as a deposit and a commitment is made to sign the contract in the future, with consequences in the event of non-compliance. This contract must include the final price agreed for the purchase of the property and the amount to be paid as a deposit.
What is needed to formalise a pre-purchase contract?
Before going to a notary’s office to sign the pre-contract, the parties involved must collect and verify all the documentation relating to the property. Subsequently, they will have to agree on the drafting of this pre-contract.
This document will detail, among other points, the reservation agreements, the amount that will be provided as a deposit, the data that will appear in the public deed or the period within which the purchase will be formalised before a notary.
Breach of the pre-purchase agreement
If, for whatever reason, the pre-purchase agreement is breached, the party who has performed the pre-purchase agreement is entitled to claim damages. The pre-contract will establish those terms and conditions that the parties involved deem appropriate.
If there is no peaceful solution and what is stipulated in the contract is not carried out, there are several ways of claiming:
- Extrajudicially urging the party in breach of contract to respect and fulfil each and every one of the obligations that were signed in the contract. It should be borne in mind that, if the intention is to initiate legal proceedings, it is essential to prove that compliance has been demanded out of court prior to the lawsuit.
- Mediation between the parties: Through this mediation, the parties will inform a third party (mediator) of their positions and an attempt will be made to find an effective solution for all parties involved. It should be noted that mediation is voluntary for the parties.
- To go to court and file a verbal or ordinary lawsuit in the competent court.
A typical case of breach of contract with a claim for damages is the delivery of the house by the seller with hidden defects, understood as those which are not visible to the naked eye and which become apparent shortly after delivery of the house, such as the appearance of leaks in the roof.
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