Promise of Purchase and Sale: When It Has Legal Force

This page is a translation of the original Portuguese text, provided for convenience. It deals with Brazilian law. If there is any discrepancy, the Portuguese version prevails. Read the original in Portuguese

Signing a promise of purchase and sale for real estate creates immediate obligations for both parties, long before the final deed. Knowing when this document binds you, and when it can still be undone, helps you avoid losing both your money and the deal itself.

What a promise of purchase and sale is

A promise of purchase and sale, also called a purchase and sale commitment, is a contract in which one person agrees to sell and another agrees to buy a specific property on terms already settled. It sets the price, the payment method, the deadline for the deed, and who is responsible for debts tied to the property. The Brazilian Civil Code treats it as a preliminary contract, meaning an agreement whose purpose is to lead to a second contract: the public deed of purchase and sale.

In Brazilian real estate practice, this promise is rarely a mere rehearsal. It usually pins down the money, the schedule, and the handover of the keys. The buyer pays a down payment, takes on installments, and sometimes receives possession of the property months or years before ever visiting a notary’s office. That is why calling the document a “drawer contract” and treating it as informal is the first mistake people make when buying property in Brazil.

Ownership, on the other hand, changes hands only when the transfer deed is recorded in the property’s registration record (matrícula) at the Real Estate Registry Office. Until then, a person who signed the promise has strong contractual rights, and may even have a real right to acquire the property, but is not yet the owner in the eyes of the registry. This distinction explains nearly all the confusion that reaches law offices.

When the promise starts to bind the parties

The promise binds the parties from the moment of signing, with the signatures of two witnesses when the document is a private instrument. The Civil Code provides that once a preliminary contract is concluded, and as long as it contains no withdrawal clause, either party may demand that the final contract be executed. If the party called upon refuses, a judge can supply the missing declaration of intent and give the transaction its final effect.

The withdrawal clause is the dividing line. When it exists and is clearly written, one party, or both, may back out within the agreed period, returning or forfeiting the down payment as the contract provides. When it does not exist, a unilateral withdrawal becomes a breach of contract, with penalties, interest, and the possibility of a court order for specific performance.

A promise with no withdrawal clause obligates both parties to the final deed, and a seller’s refusal can be overridden by a court decision.

A promise with no withdrawal clause obligates both parties to the final deed, and a seller’s refusal can be overridden by a court decision.

There are also situations in which the law makes the promise irrevocable. In urban subdivisions governed by the land-parceling legislation, purchase and sale commitments for lots are irrevocable by force of law and give the buyer the right to demand the transfer. The same reasoning protects the buyer of a unit in a real estate development, who signs with the builder before the building even exists.

Form matters as well. For properties worth more than thirty times the highest minimum wage in the country, a public deed is required to transfer ownership. The promise, however, can be made by private instrument without losing its binding force, and that is exactly what happens in most financed purchases and direct sales between private parties.

Registration and the real right to acquire

Recording the promise in the property’s registration record raises the level of protection. When the commitment is irrevocable and is recorded, the buyer gains a real right to acquire the property, enforceable against third parties. This means that if the seller tries to sell the same property to someone else, the second buyer cannot claim ignorance: the recorded promise is visible to anyone who requests the property certificate.

This recording also shields the buyer from some of the debts the seller incurs later. Subsequent attachments find the registration record already marked by the promise, which lowers the risk of fraud against creditors and fraud against enforcement. Without recording, the dispute moves to the realm of evidence, and the buyer must prove good faith, possession, and payment to protect the deal.

Bank financing follows a similar logic. The financing contract with a fiduciary lien (alienação fiduciária, a security interest in which the bank holds title as collateral) is recorded and creates a guarantee in the bank’s favor until the debt is paid off. The buyer appears in the registration record as the fiduciary debtor, with direct possession of the property and defeasible ownership, and full title is consolidated only when the debt is paid and the release of the guarantee is noted in the record.

A buyer who has paid in full under the promise and faces a seller’s refusal can seek compulsory adjudication (adjudicação compulsória), the remedy that replaces the deed by a judge’s decision or, today, by a procedure before the real estate registry itself. The registry legislation now allows this out-of-court route, with a petition supported by proof of full payment and notarized signatures, which shortens the path considerably.

The detail many buyers overlook is cost. Registration fees, the transfer tax, and notary and registry fees all apply to the transaction, and leaving them out when you calculate the final price leads to unpleasant surprises. A careful reading of the clauses on the effectiveness and risks of the purchase and sale commitment helps you gauge these amounts before you sign.

Termination, refunds, and common risks

Not every deal reaches the finish line. When someone buying off-plan backs out or cannot keep paying, the specific legislation on developments and subdivisions governs how much the builder may keep. The maximum retention varies depending on whether the project is subject to the segregated estate regime (patrimônio de afetação), and the remainder must be returned to the buyer within a period set by law.

In purchases between private parties, the contract controls. A clause providing for forfeiture of everything paid is usually reduced by the courts, because the penalty must be proportional to the actual loss and cannot result in unjust enrichment. When the seller is a company and the buyer is a consumer, the contractual protection rules against clauses that place the consumer at an excessive disadvantage also come into play.

On the other side, a buyer who receives the keys and stops paying is not immune. The seller can seek termination of the contract, recovery of possession, and rent for the period of occupation, in addition to damages. Well-drafted contracts provide for prior notice and a period to cure the default, a step that avoids litigation and usually resolves an isolated missed payment.

The death of one of the parties before the deed is signed also raises a recurring question. The obligation assumed in the promise does not disappear: it passes to the heirs, who answer within the limits of the inheritance and may be called upon to execute the final deed. The process runs through probate, and a recorded promise makes it easier to have the buyer’s right recognized in that proceeding.

Another frequent risk shows up in the certificates. A property with an attachment, a usufruct, an open probate, unpaid condominium dues, or construction irregularities can turn an apparently good promise into a long lawsuit. Searching the updated registration record and the seller’s personal certificates in advance costs little and reveals almost everything that matters.

What to check before you sign

A well-written promise of purchase and sale anticipates conflicts and defines who answers for each obligation. These points deserve specific attention when you read the contract:

• Full identification of the parties and a description of the property identical to the one in the registration record, including the registration number and area.
• Price, payment method, inflation adjustment, and what happens if any installment is late.
• Whether or not there is a withdrawal clause, with a defined deadline and financial consequence.
• Deadline for executing the final deed and who bears the transfer tax, notary and registry fees, and certificates.
• Date the keys will be delivered and responsibility for condominium dues, taxes, and utilities before and after possession.
• Penalty for breach, a prior-notice clause, and the method of communication between the parties.
• Express authorization to record the promise in the registration record, stating who pays for the filing.

Signing with two witnesses, notarizing signatures, and keeping receipts for every payment completes your protection. Organized documents shorten any future dispute, whether at the registry office or in court.

Frequently Asked Questions

Does a promise of purchase and sale transfer ownership of the property?

No. Ownership passes to the buyer only when the transfer deed is recorded in the property’s registration record. The promise creates the obligation to sell and to buy and secures the price and the deadline. When it is recorded and has no withdrawal clause, it also creates a real right to acquire that is enforceable against third parties.

Can the seller back out after signing the promise?

Only if the contract has a valid withdrawal clause and its period is still open. Without that provision, backing out is a breach of contract, exposes the seller to penalties and damages, and allows the buyer to demand the final deed or the adjudication of the property.

Is it worth recording the promise at the real estate registry office?

Yes, whenever the value of the deal justifies the cost of the filing. Recording makes the promise known to any interested party, makes it harder to sell the same property to someone else, protects the buyer against later attachments, and makes it easier to obtain the final deed if the seller refuses.

As informações deste artigo são de caráter informativo e não substituem consulta jurídica individualizada. Cada caso possui particularidades que exigem análise específica.