Form requirements for a promise to sell real estate

When title cannot be transferred at the land registry right away, the parties often sign a promise to sell. This is common for homes under construction, sales awaiting mortgage approval and purchases paid in instalments.

Form requirement

Under Article 237 of the Code of Obligations, a sale of real estate must be made in official form to be valid; promises to sell, repurchase and purchase option agreements are likewise invalid unless made in official form. In practice, promises to sell are executed as notarised deeds.

A private document signed at an estate agency or between the parties is not a valid promise to sell. The buyer may then lose the right to demand transfer of title and is often left only with a claim to recover the money paid. If the property has risen in value in the meantime, that difference may be lost.

Annotation on the land register

Under Article 1009 of the Civil Code, rights arising from a promise to sell can be annotated on the land register and then asserted against anyone who later acquires rights over the property. The annotation protects the buyer against a transfer to a third party or an attachment of the property for the seller's debts.

What the contract should include

The title details, the price and payment schedule, the transfer date, handover conditions, consequences of delay and the legal nature of any deposit should be set out clearly. Whether a deposit is a withdrawal fee or an advance payment to be credited against the price can be decisive in a dispute.

Our view

Before any deposit is paid, the form of the contract, any attachments and mortgages on the property, and the seller's right to dispose of it should be checked. A few days' delay is always cheaper than years of consequences from a contract signed in the wrong form.

Related reading: Contract law; Real estate law.