What is the real right to purchase the property? When does the prospective buyer have a real right to acquire the property committed to sale? Does the registration of the promise of purchase and sale of property interest the contracting parties?
Promise to buy and sell property is a preliminary contract. And, as a rule, it requires the future realization of the definitive legal transaction of property acquisition. This is because, if the parties do not agree on the right of repentance in the contract, it will be irrevocable and irreversible.
However, if the promise has not been recorded, these rights and duties are personal and not real. This means that they can only be opposed against the contracting parties and not against third parties.
On the other hand, the promise of purchase and sale of registered real estate may be opposed against third parties. This is because it generates a real acquisition right for the acquirer.
For more information, continue reading the article.
What is the real right to purchase in the purchase and sale promise?
The promissory purchase and sale agreement
To understand the real right to purchase the property in the purchase and sale promise, we will deal with two issues. First, what is the buy and sell promise. And, secondly, what is the difference between personal and real rights. Let’s get to the first subject!
What is the promissory purchase and sale contract we have already dealt with in another article, so we recommend reading it? Access the following link: purchase and sale promise – which contract is this? In this opportunity, in fact, we will only briefly talk about the promise to buy and sell real estate.
In short, the promise to buy and sell property:
“It is a preliminary contract that, under certain conditions and term, aims to grant the definitive contract for the purchase and sale of property.”
Thus, through the promise of purchase and sale of property, the owner undertakes to enter into the definitive contract – public deed of purchase and sale. And, the transfer of ownership of the property occurs with the registration of the acquisitive title in the property registration. In return, the prospective buyer must comply with the conditions of the preliminary contract, with the payment of the price being the main obligation.
It is possible to enter into a purchase and sale promise by public or private instrument. However, regardless of whether it is signed by a public or private instrument, the purchasing right of the prospective buyer will remain personal and not real. But what difference does it make?
The right of personal acquisition and the real in the purchase and sale promise.
One of the best ways to understand the real acquisition right is to understand it in relation to the personal acquisition right.
Article 1417 of the Civil Code establishes the following:
By means of a purchase and sale promise, in which repentance has not been agreed, entered into by public or private instrument, and registered at the Real Estate Registry Office, the prospective buyer acquires the real right to acquire the property.
The text of the law announces that the prospective buyer acquires the real right to acquire the property if it meets certain requirements.
What are the requirements?
- enter into the promise by public or private instrument;
- not having agreed to the promise of buy and sell repentance;
- Register the promise at the Real Estate Registry Office.
So, if the person made a promise to buy and sell, but did not fulfill the aforementioned requirements, will he not be entitled to purchase the property? Will have, but not a real right. The right she will have is personal. And what difference does it make? Several! Let’s talk about a few.
Personal right, as the name implies, is between people and not on the property.
But, the real right is already a power directly over the property.
Personal right is required of the person who is bound to award the definitive contract and transfer ownership. However, the right in rem may be opposed against third parties that put the acquisition of real estate at risk. Here they could say that, regardless of registration, they would also have third-party embargoes from the promising buyer.
However, in third-party embargoes, the basis of defense is not the contractual right of the prospective buyer, but prior possession. The real acquisition right already gives the right to repossess the property from anyone who unfairly owns or holds it. And, this, without the need for proof of ownership.
The real right to acquire the property and security in the transfer of property
These are some of the differences between personal and real acquisition rights. Now, there are two great advantages of real law in relation to personal law.
The first advantage is the “erga omnes” effect – the wide publicity of the record that reaches everyone. The second, the right of sequel – the right to repossess the property from those who unfairly own or detain it.
If the owner tries to sell the property to another, he will hardly be able to grant a deed, as one of the mandatory certificates is that of encumbrance. Thus, before drawing up the deed, the notary public will verify in the encumbrance certificate the registration of the real right to acquisition in favor of the promising buyer.
Another situation is the invasion of the property without the promising buyer having exercised possession of the property. As mentioned above, if the prospective buyer has a personal right, but without possession, he cannot handle third-party embargoes or possessory action. However, if you are a holder of real rights, your defense does not depend on proof of ownership.
Finally, once the contractual conditions are fulfilled, the promissory buyer and the promissory seller can demand the conclusion of the deal from each other.
Although rarer, there are cases where the prospective buyer pays off, but refuses to receive the deed and transfer the property to his name. In such cases, the promissory seller has the right to free himself from the obligation to grant the deed and transfer the property. In this sense, the security for closing the deal is on both sides.
Thus, registering the promise of purchase and sale in the property registration increases security in the execution of the definitive contract (purchase and sale). What may be required when the conditions of the preliminary legal transaction (purchase and sale agreement) are fulfilled?
The real right to acquire the property and the promising seller’s creditors
We will return to one of the points already addressed above, since it is considered one of the great benefits of the real right to acquire the property. The “erga omnes” effect in cases where the promising seller starts to incur debts. And, as a result of this fact, its creditors file lawsuits and seek to satisfy their claims with the promised property.
To illustrate the advantage of the right in rem over personnel in these cases, we are going to bring a decision from the Superior Court of Justice – STJ.
Bidder’s right versus the promising buyer’s personal right
The Third Panel of the STJ judged on 09/25/2018 the Special Appeal (REsp.) 1724716/MS. The Rapporteur was Minister NANCY ANDRIGHI. In this resource, the central issue was summarized as follows:
“The appeal purpose is, (…), to define which right must prevail: the personal right of the defendants, based on a purchase and sale promise entered into by private instrument with the previous prospective buyers of the property, without annotation in the real estate registry; or the property right of the applicants, bidders of the property in a judicial public auction, and who promoted the registration of the auction letter at the Real Estate Registry.”
Note that in this case the STJ had to decide which right should prevail. The personal right of the prospective buyer who did not register the purchase and sale promise or the right of the bidders who registered the Letter of Bidding.
It is also important to highlight that the promise of purchase and sale, in the illustrative case, already existed long before the property was auctioned. How did the STJ decide the issue?
First, he talked about the difference between personal and real rights in the purchase and sale promise, in the following words:
” Before the title’s real estate registration, there is only a personal or obligatory right between the parties that signed the legal transaction , (…) with the registration effective, an enforceable right is created before third parties (erga omnes effect) in relation to the transfer the domain of the property. ”
Finally, the following was decided:
“Under this approach, absent the formality considered essential by law to the business carried out , it cannot be accepted that the title is enforceable against the third party in good faith who legally auctions the property and promotes, in the strict terms of the law, the registration of the letter of auction .”
Therefore, it is evident that this risk can be avoided with the registration of the purchase and sale promise under the legislation.
Condominium expenses and payment liability
But, the advantages are not only for the promising buyer.
In the promises of purchase and sale of property in a condominium (apartment, house in a closed complex, etc.) registration in the registration excludes the liability of the promising seller. Thus, after registration, the prospective buyer will be responsible for the condominium expenses, regardless of the effective delivery of possession. And, the condominium cannot charge the promising seller.
However, if they did not register the purchase and sale commitment, the story is different.
The Superior Court of Justice has already signed the following understanding:
“(…) If there is a purchase and sale commitment that has not been registered, the responsibility for condominium expenses may lie with both the promising seller and the promissory buyer, depending on the circumstances of each specific case . Application of Precedent 83/STJ. (…)”
(STJ – 4th Panel, Min. Rel. Maria Isabel Galotti, AgInt at AREsp n. 1495002/SP, DJ. 06/26/2020. Emphasis added).
Therefore, the STJ understands that the promising seller will be liable for condominium expenses if the promise was not registered.
One alternative that would be left for the promising seller to evade responsibility would be to prove that:
- the promising buyer has taken ownership of the property and,
- the condominium has been made aware of the transaction “
However, otherwise the liability will remain with the promising seller and in the best case there will remain a right of recourse to the promissory buyer contract.
Finally, we know that from the celebration of the purchase and sale promise, the effects and consequences can be different. This is because the preliminary contract may involve different legal transactions that do not always evolve into the definitive acquisition of the asset.
Thus, in some cases it may not be the best strategy to register, but to make this decision it is necessary to study the negotiation and its purpose. For this reason, we recommend hiring a legal consultancy or consultancy specializing in real estate law.
However, as shown, obtaining the real right to acquire the property has its advantages, as it increases the security of the business and removes various risk situations.
- The real right to acquire the property is more privileged than the aforementioned personal right.
- Obtaining this real right to purchase the property depends on fulfilling the legal requirements.
- The real right to acquire the property generates a duty for everyone to respect their right and allows the use of judicial procedures that the staff does not have.
Apart from these situations, there are others. However, with this article we hope to have helped to better understand the real right to acquire the property in the purchase and sale promise.