Author: Vera de Benito

Source: Idealista

Buying a home is one of the most important decisions a person will make in their lifetime. Therefore, it is extremely important to understand the legal concepts, obligations, and rights involved in acquiring a property, as well as the steps to follow.

Although there are differences between the types of regimes governing property ownership, in this case, we will focus on the pre-contract of sale, addressing the most common questions about this term when buying a home.

Pre-Contract of Sale: What it is and What it is For

The pre-contract of sale is the document that guarantees the fulfillment of the agreement between buyer and seller with legal validity. It must be signed once it is verified that the property to be acquired has the legal or technical guarantees.

Its purpose is to secure the sale operation by agreeing between the parties on the payment of a deposit towards the total value of the property. Furthermore, failure to comply will have financial consequences, whether it is the seller or the buyer who defaults.

The Promise to Purchase in Spain

Although the term pre-contract is not regulated by Spanish law, we find the concept of “promise to purchase” regulated by Article 1451 of the Civil Code, which states that “the promise to sell or buy, having agreement on the thing and the price, gives the parties the right to mutually claim the fulfillment of the contract.”

It also warns that “whenever the promise to purchase and sale cannot be fulfilled, the provisions regarding obligations and contracts in this book (Civil Code) shall apply to the seller and buyer, depending on the cases.”

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. In contrast, in the case of the pre-contract, the parties do not want or cannot finalize the definitive contract at that moment and commit to doing so within a specified time.

Types of Pre-Contracts for Property Sale

Although there are as many types as agreements that can be reached between the parties, the most common are:

• Reciprocal Promise of Sale: It is a preliminary contract aimed at the future execution of the property sale contract. It is similar to the earnest money contract, but without a monetary deposit. However, it does grant the parties the right to demand compliance with the agreed terms and to claim damages if not.

• Contract with Purchase Option: This contract allows acquiring 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 execute the contract under pre-established conditions, giving the buyer the right to decide whether to exercise the purchase or not.

• Earnest Money Contract: The property sale reservation is formalized in writing. The buyer pays a sum of money as a deposit and commits to signing the contract in the future, with consequences for breach. This contract must specify the final agreed purchase price of the property and the deposit amount.

What is Needed to Formalize a Pre-Contract of Sale?

Before signing the pre-contract at a notary, the parties involved must collect and verify all documentation related to the property. They must then agree on drafting this pre-contract.

This document will detail, among other things, the reservation agreements, the amount to be paid as a deposit, the data that will appear in the public deed, and the deadline for formalizing the purchase before a notary.

Breach of the Pre-Contract of Sale

If, for any reason, the pre-contract of sale is breached, the party that has complied has the right to claim compensation for damages. The pre-contract will set out the terms and conditions deemed appropriate by the parties involved.

If no peaceful solution is reached and the contract’s terms are not fulfilled, there are several ways to claim:

• Extrajudicially Urging the Defaulting Party: Request compliance with each obligation signed in the contract. If intending to start legal proceedings, it is essential to prove that extrajudicial compliance was claimed before the lawsuit.

• Mediation between Parties: Through mediation, the parties present their positions to a third party (mediator) and try to find an effective solution for all involved. It should be noted that mediation is voluntary for the parties.

• Going to Court: File a verbal or ordinary procedure lawsuit in the competent court.

A typical case of contract breach with a claim for damages is the seller delivering the house with hidden defects, understood as those not visible at first glance and manifesting shortly after the house’s delivery, such as leaks in the roof.