The contract of sale of a property under reservation of title is a specific type of property transaction that is of particular importance to both the seller and the buyer.
It is an agreement in which both parties agree on the conditions of the sale and purchase of a property, but postpone the formalisation of the transaction until the condition set out in the reservation agreement is fulfilled.
I.- What is a reservation of title?
The reservation of title is a clause that stipulates that the purchase and sale commitment will be carried out in the future, subject to the fulfilment of a previously established condition. This condition may vary depending on what has been agreed between the parties and may relate to obtaining finance, carrying out certain alterations to the property, obtaining local authority permissions, etc.
For example, a person sells a property and reserves the right to continue to live in it (in the case of houses) or the right to continue to use it (in the case of other properties) for a period of time until, for example, they find another house to live in or another property to use.
In this case, the vendor retains possession of the property, as set out in article 430 of the Civil Code.
II.- Is there a real sale in the case of a reservation of title contract?
Since the vendor retains possession of the property, it could be interpreted that there is no sale and purchase, as the transfer of possession has not taken place.
However, article 1462 of the Civil Code states:
The thing sold shall be deemed to have been delivered when it is put into the possession of the buyer.
If the sale is made by means of a public deed, the execution of the deed shall be equivalent to the delivery of the thing that is the subject of the contract, unless the contrary clearly appears or can be deduced from the same deed’.
Therefore, with the signing of the public deed of sale, the sale is completed, without the transfer of possession of the property.
III.- Conditions for the existence of the reservation agreement in the sale and purchase of real estate
According to the doctrine established by our Supreme Court, it is necessary that:
- – The sale and purchase must be effected by means of a public deed.
- – That the deed does not contain any agreement to the contrary.
- – That the possession is held by the seller.
IV.- Advantages for the seller and the buyer
For the vendor, the reservation agreement provides greater security and confidence in the transaction. It allows him to ensure the sale of his property to an interested buyer, even if he reserves the formalisation of the contract until the agreed condition is fulfilled. This avoids potential damage if the transaction does not go ahead for reasons beyond your control.
For the buyer, the reservation agreement allows him to secure the option to purchase the desired property without having to pay the full purchase price immediately. This allows the buyer to take the time necessary to fulfil the agreed condition, whether it be obtaining finance, checking legal documents or any other requirement prior to the formalisation of the sale.
In general, the reservation agreement is a useful tool in the sale and purchase of real estate, allowing both parties to reach an agreement based on specific conditions, guaranteeing the security and protection of each party’s interests. It is essential that the terms of the reservation agreement are clearly defined in the purchase contract, including deadlines, responsibilities and consequences in the event of non-compliance.
V.- Conclusion
The sale and purchase of real estate by means of a reservation agreement is a flexible and advantageous modality that allows the seller and the buyer to formalise a real estate transaction in a secure manner, with the possibility of postponing the formalisation of the contract until the agreed conditions are fulfilled. Clarity and transparency in the definition of the terms of the reservation agreement are key to avoiding conflicts and ensuring a successful negotiation for both parties.
For all matters relating to the purchase and sale of property and in particular the Reservation of Title Agreement, please contact us and we will assist you at all stages of the purchase and sale process to protect and safeguard your interests and the transaction.
