Private property contract
How does the PRIVATE CONTRACT work?
(Option to purchase contract or private contract)
Signing a private contract is legally binding for both parties. This private document contains all the relevant information concerning the property, agreements and conditions of the deal: house price, date of completion, property details, parties, etc.
Normally after signing the contract a fee of 10% of the purchase price is committed to be paid as an option rate, although the percentage or quantity of the option rate may be set between the parties, based on the temporary reservation established in the contract. The most common period of time to exercise the option is between one and three months.
Land Registry Office
The contract is written based on the information obtained from the Land Registry office, which provide the name of the current owner, description of the property and its boundaries, details of any liens, encumbrances if there are and date of the last transmission. Basically, the "Nota Simple" is a document from the Land Register proving that the person you are buying from is the registered and legal owner of the property and is useful to check if there are any mortgages or encumbrances on the property from any third part.
Option to Purchase
Exercising the option means in practice, that the purchaser notifies the vendor that he wishes to buy and grant the public deed of purchase, giving a day and time to meet at the notary to sign the public deed of purchase. In the option contract the consequences of failure to fulfill the contract are agreed, in case the vendor or the buyer finally does not appear to grant the public deed of purchase at the notary.
Failure to appear
In the case of the purchaser failing to appear, usually the parties agree that the option rate will be withheld by the vendor and the contract is considered null and void. If it is the vendor who fails, the buyer is allowed to choose between requiring the vendor to grant the public deed of purchase, or that he refunds the received funds and deposited option rate plus another amount of the same quantity.