Is it necessary to have a Lawyer present in a sales contract?
As of January 1st, 2014 the presence of a Lawyer when drafting and executing a contract for the transfer of real estate property is optional, both for the seller and for the buyer.
Given that the law does not require the presence of a Lawyer, why should I seek a Lawyer and thus pay the cost for his/her fee?
This legal reality has triggered strong reactions among all Bar Associations of the country that stress the risks entailed in concluding a contract without the actual and effective presence of a lawyer, both for the seller and for the buyer. In fact, lately we have seen in the press many cases of contracts that have actually been suspended because of mistakes that could have been avoided with the presence and the legal audit of a lawyer.
Can you give us an example of the risks you are referring to?
The most important risk is to buy a property encumbered with tangible liens and charges (mortgages, seizure and repossession rights). In such case, after the transcription of the agreement, the buyer will be required to pay the seller’s loans and overdue obligations.
An equally important risk is that the seller fails to secure the price of the transaction. The lawyer will provide those safeguards that will protect the client and will ensure that the price will be paid in due time (cases of amounts credited for the payment of a loan product or cases where payment of the price depends on a future event or action).
These are only a few examples of the risks involved when we do not seek the help of an experienced Lawyer in a sales agreement.
What exactly are the steps that a lawyer will take in the context of a sales contract that will prevent the aforesaid risks?
Before the execution of a sales contract, a Lawyer experienced in the area of real estate will proceed to the following steps that will protect the concerns of his/her client:
- Legal Study of the documents produced (contracts, topographic plans, valuations etc);
- Legal Audit of the property – Check of encumbrances attached to the property in the last two years (before the execution of the contract);
- Legal Audit of previous property titles;
- Search of documents that strike out or lift liens, charges and other encumbrances where existent;
- Search of decisions in case of repossession claims;
- Investigation regarding urban planning and use of land schemes, check of special legal restrictions (environmental commitments, forest areas, check of forest maps, archaeological sites, monuments, traditional settlements, shoreline or beach areas, floor area ratios);
- Negotiation of the terms and conditions of the sales contract;
- Drafting of a Private Agreement, a down payment contract or a Preliminary Agreement where deemed appropriate;
- Check of the thoroughness of contract documents;
- Drafting of the Contract in cooperation with a notary.
What does a legal audit for a real estate include?
When making a legal audit, the lawyer checks among others whether the seller’s and his or her licensors’ property titles are in order. In other words, the lawyer checks whether ownership is based on an uninterrupted succession of property titles and whether the seller has the right of ownership, possession and usufruct of the property.
Then, the lawyer makes an investigation whether the real estate being sold includes any tangible liens (mortgages, rights of seizure) or whether a third person has any right on the real estate and whether this right is the subject of any kind of claim.
Is the preliminary agreement also a contract? Is it necessary to sign one before signing a contract?
The preliminary agreement is a legal document, a commitment to sell a real estate, in which the buyer promises to sell the property, be present and sign the final sales contract in the presence of a notary, and the buyer promises to pay the agreed price to the seller. It is not always necessary to sign a preliminary agreement.
We have to point out here that a preliminary agreement is not a final sales agreement that transfers the ownership and you that will not be required to pay tax. It is not a property title. Instead, it is a mere promise that a final agreement will be drafted that does not change the legal status of the real estate property.
Usually, if there is no specific reason to draft a preliminary agreement, the parties prefer to sign a down-payment contract in the form of a private deed.
Our experienced legal team and our network of associates (notaries, engineers, realtors) with their know-how and hands-on experience in the area of Real Estate, can be a valuable consultant if you are in the process of buying or selling a property and you want to complete this process rapidly, with a high degree of legal security.