In general, in order to conclude a property sale, the seller and the buyer first draw up a private agreement recording the essential conditions of the sale, commonly known as a "compromis de vente" (or "promesse synallagmatique de vente"). But what is the value of the sales agreement?

Claudia THIRION, a lawyer specialising in real estate law, answered our questions on the subject. 

See the complete file on the sales agreement

What is the value of the sales agreement?

It should be noted that the preliminary sales agreement is not obligatory, unlike the notarial deed which formalises the property transaction.

The private deed is a preliminary contract in which both parties have already agreed to the sale: the promisor agrees to sell a property for a certain price to another person who accepts it.

In the private deed, the parties provide that a notarial deed documenting the sale will be drawn up within a certain period of time by a notary appointed by them.

The preliminary sales agreement is not obligatory, unlike the notarial deed.

At what point is the sale actually concluded?  

Many people ask why they should sign such a compromise if the notarial deed is the final commitment and one can freely withdraw from a compromise sale. However, this common idea is incorrect.

Indeed, Article 1589 of the Civil Code provides that: " The promise to sell is equivalent to a sale, when there is mutual consent of the two parties on the thing and on the price ". This is the true value of the sales agreement in Luxembourg.

The question has also been clarified in case law (in particular by a judgment of the Tribunal d'arrondissement de Luxembourg of 31 May 1961) which decides that :

" the sale of an immovable property, agreed by private deed, is perfected, as soon as this deed states the agreement of the parties on the property and the price. It follows that the statement in such a writing that a notarial deed will subsequently be drawn up is, in principle, only a term of the contract of sale that has been finally formed. This is not the case unless it is clear, either from the terms of the agreement or from the circumstances, that the parties intended to subordinate the formation and effectiveness of the contract to the completion of this formality ".

In principle, and unless otherwise stated in it, the preliminary sales agreement is equivalent to a sale and the sale is completed by the signing of the private deed (compromis) by the buyer and the seller of the property, insofar as this deed marks the agreement of the parties on the identity of the property sold and the sale price to be paid.

The signing of the preliminary sales agreement concludes the actual sale of the property; the preliminary sales agreement is a legally binding contract that sets out all the rights and obligations of the buyer and seller. The value of a provisional sale agreement is therefore that of a contract that commits both parties almost definitively.

It is a commitment that can only be revoked under certain conditions which must be clearly stated in the document.

What if one of the parties refuses to sign the notarial deed provided for in the compromise?

This happens regularly, especially when the buyer regrets the purchase of the building.

The seller of the property has an interest in taking action: the parties are bound by the agreement and the seller has certain means of coercion against the recalcitrant buyer.

He may, in the first instance, send a summons to the buyer by way of a bailiff's deed to execute the deed on such and such a day and at such and such a time at the designated notary's office.

If the other party does not appear at the notary's office on the appointed date, the notary will draw up an acte de carence, documenting the buyer's non-appearance.

The seller then has two options:

• or he can ask the court to terminate the sale for the buyer's failure to comply with his commitments and to award damages (through the application of a penalty clause generally provided for in the agreement);
• or he asks the court to replace the non-executed notarial deed by a judgment officially recording this sale and which will take the place of a notarial deed of sale.

In order to avoid the constraint of having to request judicial termination of the private sale contract, it is possible to stipulate in the compromis that it is deemed not to have been concluded if, within a period of time to be determined, the notarised deed of sale is not signed.

Of course, it is also possible that the buyer is in the situation where the seller no longer wants to sell him the property and the solutions remain the same.

Why is such a notarial act required if the sale is already perfected by the signing of the compromis?

This is an excellent question: if the value of a compromis de vente lies in its binding aspect, why do we need a deed of sale from the notary?

Each party to the sale has an interest in its perfection, not only with regard to the contracting parties, but also with regard to third parties.

In Luxembourg, the deed of sale is registered with the Mortgage Office to be enforceable against third parties. Only authentic deeds, i.e. notarial deeds and judgments, are eligible for transcription, so that private deeds are not eligible for transcription.

This is provided for in Article 1 of the amended Act of 25 September 1905 on the transcription of real property rights.

It should be noted that it is through the private contract itself that ownership passes from the seller to the buyer, even if the buyer's entry into possession is to take place later. This is the principle of the instantaneous transfer of ownership (Article 1138 of the Civil Code).

What are the conditions for the validity of the preliminary sales agreement?

The substantive requirements for the validity of a provisional sale agreement are :

• capacity: the selling party must have the capacity to sell the property and the acquiring party must have the capacity to acquire it.

Capacity is the ability defined by the law to enter into a valid legal act, which results in the liability of the person entering into it in the event that he or she does not fulfil the obligations set out in the contract and which, as a consequence, commits his or her assets.

• the determination of the thing sold (the property acquired) and its price.

In view of the legal consequences of a preliminary sales agreement, as explained above, before entering into such a contract, the buyer must ensure that he has the information he needs to make an informed commitment (particularly concerning the technical qualities and urban planning status of the building).

Both the seller and the buyer can contact the municipality (e.g. to obtain plans of the building), the notary or directly the Administration du Cadastre et de la Topographie in order to obtain the information necessary for the drafting of the preliminary sales agreement.

The buyer must ensure that he has the information to make an informed commitment.

The purchaser would be well advised, if he or she has the possibility, to be accompanied by a real estate expert to visit the property and thus be properly informed about the technical characteristics of the property purchased (in particular to avoid the risk of hidden defects). 

Attorney Claudia Thirion
Lawyer at the court
claudia.thirion@barreau.lu