Although it is not a requirement in a real estate transaction, the CPCV, or Contract-Promise of Purchase and Sale, is a key component for a stress free business transaction.
You should not take any chances between the time you decide and the time you execute the deed if you have located the home of your dreams and want to move forward with the purchase.
Additionally, CPCV is a contract that increases trust in the business you are about to conduct for the seller. In essence, it formalises a shared agreement to buy and sell a property.
A Promise Contract of Purchase and Sale is realised in almost all real estate transactions. Therefore, we will go into this subject in this post and clarify (especially for those who are planning to buy or sell a home for the first time) what the key considerations should be.
What is CPCV and why is it used?
Do not panic if your real estate consultant uses this phrase while you are buying a home for the first time. Prior to the deed, a buyer and a seller enter into a legally binding contract known as the CPCV. It is a relatively common procedure when purchasing a home.
We essentially refer to the formalisation of the acquisition, which occurs when there is a shared desire to finalise a real estate transaction.
The rights and obligations of both parties up until the time of the deed, the amount of deposit to pay upon signing and the method of payment, the penalties in case of non-compliance, and the deadline established for the signing of the deed are some of the most crucial components contained in a Contract-Promise of Purchase and Sale.
Despite the fact that we are discussing a contract with legal authority, the CPCV significantly lowers the likelihood that a deal will not be realised, but it does not entirely eliminate it.
It should be highlighted that only the buyers and sellers are allowed to sign the Contract-Promise of Sale to have legal significance. This means that the signature needs to match your legal identification document.
What circumstances are used to celebrate the CPCV?
The Contract-Promise of Sale is typically reached in the following circumstances:
When the buyer's housing credit has not yet been approved (although it is advised that the buyer have an understanding of the effort rate to which he will be subject and the risk associated with his customer profile prior to signing the CPCV);
When the buyer customer is still trying to sell their current property;
When the property is still under construction and has no licence to use.
What should a CPCV contain?
A contract-promise of purchase and sale should always contain a few essential components. As follows:
The description of the property and any impacted areas, if any, as well as its key characteristics (location, typology, matrix inscription, building description, etc.);
The full name, address, marital status, identification document number, and tax identification number of both parties;
The property's purchase price and the method of payment, the conveyance deadline, and any penalties for contract violations.
The permit to use or construct reference given to the property and Energy Certificate must be written within the Contracto Promise of Purchase and Sale. When using bank financing to make the purchase, the CPCV should include clause that enables the buyer to end the contract and get the deposit payment returned in the event that bank financing is not approved.
Who creates the CPCV agreement?
This is usually done by the estate agency which is advertiding the property for sale. However this may not be always the case. The CPCV should always be done by a certified solicitor. If you do not understand Portuguese you may request for the contract to also be writen in English, and you can always get na independent solicitor for read and verify the CPCV.
Are there any fees involved in signing CPCV?
The buyer's deposit payment is typically made when they have signed the Contract-Promise of Purchase and Sale.
The deposit serves as a guarantee of the agreement reached between both parties and it goes towards the final payment of the property's purchase price.
The signal's value fluctuates and is always agreed upon beforehand by the buyer and seller. However, if this is your first time purchasing a home and you want to know what to expect, you should be aware that the value of the sign often ranges between 10% and 20% of the overall cost of purchasing the property.
5 safety measures to follow before signing the CPCV
It is crucial to exercise caution before signing the CPCV in order to prevent unpleasant surprises in the future. We advise the following in order to increase your protection:
Ensure that the Contract-Promise of Purchase and Sale has a deadline for the completion of the deed. It is crucial that the date be realistic and have a little margin of safety so that, in the event of a setback, you do not lose the deposit value paid.
Add a clause that states that any debts on the property are the responsability of the seller. By doing this, the buyer reduces the possibility that they will be held accountable for any debts, mortgages, or repossession thatare are related to the property.
You might also wish to include a clause that guarantees the property has all necessary amenities for habitation, such as an uninterrupted supply of water, gas, and electricity.
Before signing the Promise Agreement, if the property is an autonomous portion (belonging to a condominium), ask the seller for the most recent minutes of the owners' meetings and check to see if there are any amounts owed as well as any current or upcoming projects that could incur extra costs.
Lastly, when using bank financing to make the purchase, request to include clause that enables the buyer to end the contract and get the deposit payment returned in the event that bank financing is not approved.
What happens if the contract is not complied with?
Buyer forfeits the full amount of the deposit paid if they breach the terms of the signed CPCV. On the other side, if the seller breaches the agreement, they must reimburse the buyer for twice the value of the deposit paid.
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