PROMISSORY CONTRACT: WHY IS IT SO IMPORTANT?

When buying property in Portugal you need to consider several points from beginning to completion of purchase . Usually after finding a property you like you will make contact with the seller or the real estate agent that is advertising it. E-mails are exchanged, the price is discussed, and you agree on terms in which you will pay.

It looks like it’s all done, doesn’t it?

But, it’s not quite that simple. Several legal procedures need to take place in order to ensure your new purchase goes through smoothly.

First of all, what is an agreement, according to the Portuguese law?

An agreement to buy and sell a property isn’t only about the price, it is also about having the correct documents, ensuring those documents match what you think you are buying, agreeing on the deposit, deciding when will the deal will be made and how the payment is going to be transferred.

Often clients come to me only with the agreement on the price, leaving several jobs still to be done which are the important parts for the promissory contract.

So, what does all this have to do with the promissory contract?

The promissory contract is the contract where you put all of the items in writing, binding both parts to the agreed deal with a signature. There is no model contract that fits all situations. Many times, people get in to trouble by copying the terms of a friend’s promissory contract to save some money, and then when things go wrong it costs a lot more.

Often people also agree a price, deposit terms and then transfer the money to the intended seller, without signing a promissory contract, which leaves them in a difficult situation in case of a default, because the burden of proof in a lawsuit is much, much heavier.

A promissory contract must contain all the above-mentioned issues and anything that must be dealt with by the seller between the signature of the promissory and the signature of the tittle deed (More to come on this in a future post).

Tips

A promissory contract should only be done by a lawyer, this is the only professional under the Portuguese law that can handle all the areas involved: determine the obligations of the parties, clear the penalties in case of default, inform about taxes to be paid and if anything goes wrong, to pursue the clients’ interests in court lawsuits.

Often, we hear about foreign clients that signed promissory contracts in Portuguese, without fully understanding what they have signed. Ensure that you are in the company of a good English-speaking lawyer, that can draft a promissory contract complying with all legal terms. We, in our office, draft the contracts in Portuguese and in English, so our clients can understand clearly what they are about to sign.

Summary

A promissory contract is a document, made by a lawyer, that protects you from any change after it is signed (avoids changes in the price, purchase timeline and determines both seller and buyer obligations between the promissory and the tittle deed) – it makes your purchase more secure, and your life easier.

See you next time.

Nuno de Almeida e Silva

(Lawyer)

(Disclaimer: The information referred in this post is generic and cannot be considered has legal advice nor binds the author to any responsibility if anyone takes action upon it. Please, if you have any legal doubts our questions, contact a lawyer to analyze your case, and give you legal advice to your specific situation.)