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Buying property in Portugal involves more than just choosing the right home — it also requires navigating important legal steps. One of the most crucial is the Promissory Contract (Contrato-Promessa de Compra e Venda), which protects both buyers and sellers before the final deed is signed.
The CPCV agreement secures the terms of the deal, outlines responsibilities, and reduces risks for both parties.
In this guide, we’ll explain how the promissory contract works, why it’s essential, and what every buyer and seller should know before signing.
What is the Promissory Contract of Purchase and Sale (CPCV)?
The promissory contract of purchase and sale, often refer to as a “Contrato Promessa de Compra e Venda” (CPCV) in Portugal, is a legally binding agreement between a buyer and a seller in a real estate transaction.
This contract outlines the terms and conditions of the property sale and serves as a preliminary or pre-contractual agreement before the final deed of sale (Escritura) is execute.
Key Features of the Promissory Contract of Purchase and Sale in Portugal
1. Deposit
In Portugal’s real estate market, the property deposit — known locally as the “sinal” — is a key element in the buying process. It represents the buyer’s serious commitment to purchasing the property and forms an essential part of the promissory contract (Contrato de Promessa de Compra e Venda).
Typically, the sinal is around 10% of the purchase price, although the exact amount may vary depending on the agreement between buyer and seller.
From a real estate expert’s perspective, the sinal serves several important purposes. First, it confirms the buyer’s genuine intention to proceed, giving the seller confidence that the sale is secure. Second, it acts as financial protection for both parties.
If the buyer withdraws after signing the promissory contract, the seller is usually entitled to keep the deposit. On the other hand, if the seller fails to meet their obligations or cancels the sale without valid cause, they must return the deposit to the buyer, often with additional compensation.
2. Conditions and Obligations
In Portugal, the promissory contract acts as a clear roadmap for the property purchase, outlining all conditions that must be met before the final deed of sale (Escritura) is completed. This legally binding document creates a structured and transparent framework, helping reduce risks for both the buyer and the seller.
One of the most important elements of the promissory contract is the list of conditions precedent. These conditions ensure that essential steps are fulfilled before the sale moves forward.
A common example is the requirement for the buyer to secure financing. Since many property purchases rely on mortgage loans, the contract typically sets a specific deadline for the buyer to obtain loan approval from a bank or financial institution.
Another key condition involves property inspections. The contract may specify that the buyer must carry out structural checks, pest inspections, or environmental assessments to confirm that the property is in suitable condition.
3. Penalties
The penalty clause of a promissory contract plays a critical role in ensuring fairness and protecting both parties during a property transaction. These clauses outline what happens if either the buyer or the seller fails to meet their obligations before the final deed (Escritura) is signed.
Penalties for the Buyer
If the buyer is unable or unwilling to proceed with the purchase, the contract typically outlines specific consequences. In most cases, this means the buyer forfeits the deposit (“sinal”) paid at the time the promissory contract was signed. This serves as compensation to the seller for the failed transaction.
Penalties for the Seller
If the seller fails to fulfil their obligations—whether by withdrawing from the sale or not meeting agreed conditions—they are usually required to return the buyer’s deposit. However, Portuguese law often goes further: the seller may also need to pay additional compensation, commonly returning double the amount of the deposit, to cover the buyer’s losses and safeguard the integrity of the deal.
4. Completion Date
The promissory agreement in Portugal must clearly state the completion date — the moment when the commitments outlined in the contract are finalized through the official property deed of purchase and sale (Escritura).
The public deed is usually executed at a notary office, or alternatively through an experienced real estate lawyer who can prepare and formalise the documentation. After signing, the lawyer or notary is responsible for registering the deed with the appropriate authorities, ensuring full legal ownership transfer to the buyer.
5. Payment
One of the first financial steps is the payment of the deposit (“sinal”), which confirms the buyer’s commitment to the purchase. In Portugal, this deposit is typically paid through bank transfer or certified check, offering a safe and traceable method for both parties.
Unlike some countries, escrow accounts are not commonly used in Portugal. Instead, real estate payments rely on the security of the national banking system and the legal framework provided by notaries and real estate lawyers.
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Is the Promissory Contract Mandatory in Portugal?
The Promissory Contract (Contrato-Promessa de Compra e Venda) is not a legal requirement in Portugal, but it is widely used and strongly recommended.
The CPCV serves as a safeguard for both buyers and sellers by setting out the conditions of the sale, deadlines, and agreed price before the final deed is signed.
While it is possible to proceed directly to the final Deed of Purchase and Sale (Escritura Pública) without signing a promissory contract, this approach is less common and carries more risk.
Who Should Prepare the CPCV in Portugal?
In Portugal, the CPCV (Contrato de Promessa de Compra e Venda) should be prepared by a qualified legal professional. The most reliable option is a real estate lawyer, who can verify property records, confirm ownership, ensure all legal requirements are met, and include clauses that safeguard the buyer or seller throughout the transaction.
Solicitors may also assist with drafting and handling the necessary paperwork, while notaries typically step in closer to the final deed but can be hired to oversee the contract if needed.
What’s important to note is that real estate agents should not draft the CPCV, as they are not licensed to provide legal advice. For international and local buyers alike, relying on a legal expert is the safest way to ensure a smooth purchase in Portugal.
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Frequently Asked Questions
What is a Promissory Contract of Purchase and Sale?
A Promissory Contract (Contrato Promessa de Compra e Venda) is a legally binding agreement between a property buyer and seller in Portugal. It outlines the terms and conditions of the property sale and acts as a preliminary or pre-contractual agreement before the final deed of sale (Escritura) is executed.
What is the purpose of the Promissory Contract?
The primary purpose of the Promissory Contract is to establish a clear and legally binding agreement between the parties involve, defining the conditions, obligations, and timelines for the property sale. It offers legal protection and security for both buyers and sellers.
Is the Promissory Contract of Purchase and Sale mandatory in Portugal?
The Promissory Contract is not mandatory, but it is a common and recommend practice in property transactions in Portugal. It provides legal security and clarity for both parties, reducing the risk of disputes and misunderstandings.
What is the typical deposit amount in a Promissory Contract?
The deposit, often referred to as “sinal,” is usually around 10% of the property’s purchase price. However, this amount can vary base on mutual agreement between the buyer and seller.
What happens if the buyer breaches the Promissory Contract?
The contract typically includes clauses outlining penalties and consequences for non-compliance. If the buyer fails to complete the purchase, they may forfeit the deposit.
Can the terms of the Promissory Contract be negotiated and customized?
Yes, the terms and conditions of the Promissory Contract can negotiate and customizes to suit the specific requirements of the transaction. It’s common for buyers and sellers to work with legal professionals to ensure the contract aligns with their needs.
What happens if the seller breaches the Promissory Contract?
If the seller cannot fulfill their obligations, they may need to return the deposit in double.
When does the formal transfer of property ownership occur in Portugal?
The formal transfer of property ownership occurs on the completion date, often at a notary’s office, when the final deed of sale (Escritura) is executed.
Can the Promissory Contract be modified after it is signed?
The Promissory Contract can be modifying or amend, but any changes should make with the mutual agreement of both the buyer and the seller and should document in writing to ensure transparency and legality.
What is the CPCV in Portugal?
In the context of real estate and property transactions in Portugal, CPCV stands for “Contrato de Promessa de Compra e Venda,” which translates to “Promise of Purchase and Sale Agreement.” This is essentially the same as the Promissory Contract (Contrato Promessa de Compra e Venda) mention earlier. The CPCV outlines the terms and conditions of a property sale, serving as a legally binding preliminary agreement between the buyer and the seller before the final deed of sale (Escritura) is executed.
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