Everything you need to know about the Promissory Purchase and Sale Agreement (CPCV)

What is a promissory purchase and sale agreement?

A Promissory Purchase and Sale Agreement (CPCV) is a written document signed by the buyer and the seller of a property, which aims to secure both parties’ commitment to entering into a future contract (the Deed of Purchase and Sale) that will close the deal. In other words, by signing a CPCV, both the property owner and the potential buyer agree to wait until the necessary conditions for the sale are met.

Is the promissory purchase and sale agreement mandatory?

It is not mandatory, but in Portugal, this type of contract is very common, especially when the decision is made, but there are still no conditions to execute the deed. Examples include:

• When the house is still under construction;

• When the property does not yet have a habitation licence;

• When the buyer is still waiting for mortgage approval;

• When the buyer has not yet gathered the necessary funds to complete the purchase.

How is a promissory purchase and sale agreement made?

The preparation of a Promissory Purchase and Sale Agreement should always be done by a lawyer or notary to ensure that the clauses in the document comply with the law.

What information should be included in the promissory purchase and sale agreement?

When purchasing a property, the following information should be included:

• Identification of the buyer and seller: full name, address, marital status, Citizen Card number, and tax identification number (NIF);

• Identification of the property: type, location, areas associated with the property, registry number, and property description;

• Usage or construction licence for the property, provided by the local municipality or proof that the licence has been requested from the municipality;

• Clause ensuring the property is free of any encumbrances or charges, protecting the buyer from potential liabilities such as mortgages or liens;

• Purchase price of the property and the payment method;

• Value of the deposit, i.e., the down payment made by the buyer;

• Expected date for the deed to be executed;

• Penalties that apply if the deed is not executed within the agreed timeframe;

• Termination clauses to protect against contingencies that could invalidate the purchase at the end of the CPCV term.

What is the value of the deposit?

The deposit amount depends on what is agreed upon with the seller, as most clauses in the CPCV can be adjusted, and the deposit is one of them. Traditionally, the deposit is 10% of the agreed purchase price, and, as expected, this amount is deducted from the final payment.

When is the deposit paid?

The deposit is usually paid when signing the Promissory Purchase and Sale Agreement.

Is paying a deposit mandatory?

It is not mandatory, but paying a deposit is a common practice, seen as evidence of the buyer's good faith. Furthermore, the deposit amount serves as the basis for potential compensation in the event of a breach of the Promissory Purchase and Sale Agreement.

What are the advantages of the promissory purchase and sale agreement?

• Quickly formalises a binding document between the seller and buyer;

• Ensures the validity of the contract until the deed is executed;

• Guarantees that the transaction will be completed within the agreed timeframe;

• Establishes legal parameters for cases of non-compliance, preventing potential legal oversights and enabling legal defence.

Where can the definitive purchase and sale contract be executed?

The definitive purchase and sale contract can be executed by a lawyer or a notary.

What happens in case of breach of the promissory purchase and sale agreement?

If the seller (owner or builder) fails to comply with the agreement, they must return the deposit to the buyer, doubled. However, if the signed contract meets all requirements, the buyer may also take legal action to ensure the contract is enforced. Even if the seller has opted to sell the property to someone else, the buyer can prove their priority in the transaction through the Promissory Purchase and Sale Agreement and demand compliance in court.

What about the buyer? If the buyer breaches any clause of the CPCV, they may lose the deposit or even be required to compensate the seller (if stipulated in the contract).

Now that you have all the information regarding the Promissory Purchase and Sale Agreement, contact Engel & Völkers Portimão as your partner to help you buy or sell your property. We have a wide range of residential properties in Portimão, Alvor, Ferragudo, Silves, and Monchique.