17.10.2024

The promise to sell a future property from the perspective of the developer and the buyer

The promise of sale of a future apartment is a useful tool in any real estate project, both for the developer, who ensures that his real estate project will be sold, and for the buyer, who secures his desired apartment at a firm price.

From the buyer's perspective, the promise of sale should ensure adequate protection of the right to purchase and the return of the deposit in the event of default. From the developer's point of view, the promise of sale should not hinder real estate development (land stripping, mortgaging, apartmentization).

The balance between the parties' interests will have to be negotiated and regulated contractually. In the absence of any specific clauses, however, the law contains a number of provisions on the matter from the outset.

I. Can the promise to sell a future apartment be noted in the land register?

A. How is the promise noted in the land register?

According to the Civil Code, there are three types of entry in the land register: (i) registration, (ii) provisional registration and (iii) notation.

Entries and provisional entries relate to tabular rights (i.e. rights in rem in immovable property entered in the land register).

Notation refers to the registration of other rights, deeds, facts or legal relations in relation to immovable property contained in the land register.

A promise to enter into a contract concerning the ownership of immovable property or another right in relation to immovable property may be recorded in the land register, but this is not automatic or binding and is left to the parties' discretion.

The conditions for noting are: (i) the promisor must be registered in the land register as the holder of the right which is the subject of the promise, (ii) the pre-contract must stipulate the term within which the contract is to be concluded and (iii) no more than 6 months must have elapsed since the expiry of the term stipulated in the pre-contract for its performance.

In the specific case of pre-contracts concerning the promise to transfer the ownership of an individual unit of a condominium - future property, the land is entered in the land register subject to the indication of the determined or determinable share of the ownership of the land related to the individual unit identified by apartment and floor number.

A promise to sell a future apartment may therefore be noted in the land register.

B. What is the purpose of notation?

Rights, deeds or other legal relations provided for by law become enforceable against third parties exclusively by noting, unless it is proven that they have been known in some other way.

The purpose of noting the promise of sale is therefore its enforceability against third parties.

C. What happens to the notation in the case of detachment / apartmentalization?

Detachment is the operation of materially modifying the real estate on the basis of cadastral documentation resulting in two or more lots that will be entered in separate land registers.

If the real estate is encumbered by encumbrances belonging to third parties, the agreement of these third parties is required and, in the absence of an agreement to the contrary, the entries concerning the rights in rem, together with the encumbrances and other entries encumbering the real estate, are maintained unchanged in the land registers of all the resulting real estate.

The agreement of the prospective purchaser, recorded in the land register, is therefore required for the detachment of the land, and the entry is, in principle, taken over in all newly created land registers.

The partition is the division of a condominium into several individual units.

The registration of the deed of deed of partition, which promises to transfer the ownership of the individual unit of a condominium - a future property - is only recorded in the land register of the corresponding individual unit, according to the information in the deed of partition.

Therefore, the agreement of the promising purchaser noted in the land register is not required for the partitioning, and the notation is taken over only in the promised unit.

D. How to cancel the promise from the land register?

The deletion of the notarial entry will be made ex officio if, by the expiry of the 6-month period, no application has been made for the entry of the right which was the subject of the promise, except where the person entitled has applied for the entry in the land register of the action for the delivery of a judgment in lieu of a contract.

In addition, the notarial recording of the antecontract shall be deleted on request, on the basis of (i) the agreement of the parties expressed in authentic instrument or (ii) a final judgment.

II. What happens if the promised apartment is sold to someone else?

The promise to contract is the contract by which the parties undertake to enter into a future contract and must contain all those clauses of the promised contract without which the parties could not perform the promise.

In the event of non-performance of the promise, the beneficiary is entitled to damages within 3 years of the date on which the sale was to be concluded or, if all the other conditions for validity are met, he may request a judgment in lieu of contract within 6 months of the same date.

Moreover, under the Civil Code, the inalienability clause is implied in agreements which give rise to an obligation to transfer the property in the future to a specific or determinable person.

Clauses of inalienability relating to property in respect of which a system of publicity has been established by law become enforceable against third parties only when the publicity formalities laid down by law have been completed.

Consequently, if the promise of sale is recorded in the land register and the promised apartment is sold to a third party, the contract of sale concluded with the third party may be dissolved for breach of the inalienability clause. Otherwise, only damages can be obtained.

III. What happens to the advance in the event of non-performance of the promise?

In the absence of any stipulation to the contrary, the sums paid under a promise to sell are an advance on the agreed price.

In the event of non-performance of a promise to contract in respect of a property entered in the land register, the promising purchaser benefits from a legal mortgage on the property, i.e. the repayment of the sums paid as an advance, which is entered at the request of the promising purchaser.

IV. Conclusions

The promise of sale of a future apartment may be recorded, on request, in the land register of the land on which the building will be erected and, once the building and the apartment have been completed, the promise may be recorded only in the land register of the promised apartment.

It is useful for the purchaser because it makes the promise enforceable against third parties.

For the developer, it is preferable for the promissory note to be made after the land has been cleared in accordance with the building permit and mortgaged, if necessary, otherwise the buyer's consent is required.

In the event of non-performance of the promise, the purchaser is entitled either to a judgment in lieu of contract or to repayment of the deposit and damages. If the promised apartment is sold to a third party, where the promise of sale was registered in the land register, the contract of sale with the third party can be dissolved.

An article by Marius Chelaru, Managing Associate (mchelaru@stoica-asociatii.ro), STOICA & ASOCIAȚII