The Purchase and Sale Agreement sounds rather familiar to those in the process of buying or selling a property. Although not mandatory, it is highly recommended to protect both the seller and the buyer, providing clear indications of their rights and obligations until the day the deed is signed. Essentially, it's a way to ensure the protection of both parties! The seller gets a down payment and the buyer gets their dream home booked!
But, specifically speaking, what is the Purchase and Sale Agreement and what is it for? How is it done? What information does it include? What are its main advantages? What sanctions are applied in case of non-compliance? Find out the answers below!
The Purchase and Sale Agreement is a written document, signed by those who want to buy and those who want to sell a certain property, which aims to obtain the commitment of both parties with the execution of a future contract (Deed of Purchase and Sale) that will close the deal. In other words, when signing this agreement, both the property owner and the potential buyer commit to wait the amount of time that is necessary for the sales’ conditions to be met.
It is not mandatory, but in Portugal this type of contract is very common, especially when the decision has been taken, but the conditions for the deed are not yet in place, for example:
- when the property is still being built.
- when the property does not yet have a housing permit.
- when the buyer is still waiting for the approval of the housing loan.
- when the buyer still does not have the necessary amount to carry out the purchase of the property.
The formulation of a Purchase and Sale Agreement should always be done by a lawyer or a solicitor, so that the clauses contained in the document are in compliance with the law.
In case of purchase of the property, the following information must be included:
- Identification of the buyer and seller: full name, address, marital status, Citizen Card number and taxpayer number (NIF).
- Identification of the property: typology, location, parts related to the property, matrix registration and property description.
- License to use or build the property, provided by the respective municipal council or proof that it was requested to the municipality.
- Clause of disposal free of any liens or charges to protect the buyer from the responsibility of responding to any charges on the property, such as mortgages or liens.
- Purchase price of the property and respective payment method.
- Down payment value of the property, that is, the down payment for the acquisition of the property, which the buyer will provide with equity.
- Expected date for completion of the deed.
- Sanctions applicable if the deed is not carried out within the established period.
- Termination clauses to safeguard some contingencies that invalidate the purchase at the end of the Purchase and Sale Agreement term.
It depends on what you agree with the seller, as most clauses can be adjusted and the down payment amount is one of them! Even so, traditionally the down payment corresponds to 10% of the purchase price stipulated in the Purchase and Sale Agreement and, as is obvious, the amount given as a down payment is then deducted from the final payment amount.
When is the down payment done?
Normally, payment is made upon signature of the Purchase and Sale Agreement.
Is the down payment mandatory?
It is not mandatory, but the payment of a certain amount as a down payment is a common practice, taken as proof of the buyer's good faith. In addition, the value of the down payment serves as the basis for any compensation in the event of non-compliance with the Purchase and Sale Agreement.
- Quickly formalizes a binding document between seller and buyer.
- Ensures the validity of the contract until the day of the deed.
- Ensures that the deal will be completed within the established deadline.
- It establishes legal parameters regarding cases of non-compliance, preventing possible judicial lapses and enabling the defense before the law.
The final Purchase and Sale Contract may be signed by a lawyer or a notary.
Basically, if the seller (owner or builder) does not fulfill his part of the agreement, they have to refund the amount of the down payment in double to the buyer. On the other hand, if the signed contract meets all the requirements, the buyer can still go to court to demand that the contract is to be fulfilled. And even if the seller has chosen to sell the property to someone else, the buyer can prove the priority in the business through the Purchase and Sale Agreement, and demand its fulfillment in court. And what about the buyer? If they fail to comply with any clause of the Agreement, they are left without the paid down payment or are even obliged to indemnify the seller (if so stipulated in the Purchase and Sale Agreement).
Now that you have all the information about the Purchase and Sale Agreement, contact Engel & Völkers Portimão as a partner to help you buy or sell your property. We have a wide range of properties in Portimão, Alvor, Ferragudo, Silves and Monchique.