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Promise of sale problems (part 2) - Daniel Buttigieg

In each promise of sale, the parties agree to a specific time-frame within which the parties are obliged to appear on the final deed of sale. Photo: Shutterstock

In each promise of sale, the parties agree to a specific time-frame within which the parties are obliged to appear on the final deed of sale. Photo: Shutterstock

A promise of sale agreement is not valid for eternity. In each promise of sale, the parties agree to a specific time-frame within which the parties are obliged to appear on the final deed of sale. This time-frame can start from the date of signing or else from the date that an agreed event occurs. This agreed time-frame is what keeps the pro­mise and consequently the obligation or right to buy or sell in existence.

It is therefore imperative to keep the pro­mise of sale alive and enforceable before the lapse of the time-frame agreed in a promise of sale agreement. This is done either by agreeing to an extension between the parties, or alternatively, in case of disagreement, by adopting the procedures stipulated at law.

Before the validity of the promise of sale expires, the party wanting to go ahead with the sale or acquisition is bound to follow rigorously the procedure stipulated under Article 1357 of the Civil Code. Irrespective of whose fault it is, or the reason why any one party might not want to appear, or how morally right one feels he is, once a pro­mise of sale expires, any obligation therein agreed is extinguished, and the parties have to revert to the status quo ante, which is literally translated from Latin as ‘the way things were before’.

In practice this means that the seller is, from the expiration of the promise of sale, no longer bound to sell the property to the buyer and will be in a position to negotiate and sell the property to third parties. The buyer, on the other hand, will have the right to demand the restitution of the deposit paid and held on account by the seller or the notary and to also claim any expenses made and associated with the sale. In this way, the parties return to the way they were before the agreement.

However, both the buyer and the seller have a redress at law in order to ensure that the validity of the promise of sale agreement does not just lapse. Article 1357 of the Civil Code sets down the procedure needed in order to protect the validity of a promise of sale agreement. Initially, the buyer/ seller must file a judicial letter before the expiration of the term, calling on the other party to appear for the publication of the final deed of sale, under those terms and conditions therein stipulated. This judicial letter automatically extends the validity of the promise of sale agreement by 30 days.

When signing a promise of sale agreement the parties grant to each other rights and obligations that remain in force for the period agreed only

However, should the other party still refuse to appear on the final deed without a valid reason at law, the next step is to file a court case against the defaulter asking the court to force the sale under those terms and conditions agreed to. It is essential, however, that the case is filed before the 30-day extension granted by law after filing of the judicial letter expires.

The procedure laid down in Article 1357 of the Civil Code has to be respected to the letter since it is the only procedure that keeps alive any rights and obligations agreed to in a promise of sale agreement. Failure to abide by it will eradicate the promise of sale agreement, and consequently the principle of status quo ante applies, irrespective of whether the defaulting party had a valid reason at law to not abide by the agreement.

When signing a promise of sale agreement the parties grant to each other rights and obligations that remain in force for the period agreed only. The parties therefore agree that the promise to buy and sell will only remain so should the time-frame agreed be respected. If there is no agreement following the expiration of the term, then there is no longer a promise, and consequently no obligation.

Therefore, in order to enforce such rights and obligations, the agreement must obviously be valid and operating. Hence, any judicial proceedings enforcing the sale agreed may only be filed if the procedure stipulated in Article 1357 of Chapter 16 of the Laws of Malta is respected, since this is the procedure that keeps the promise of sale alive. 

The term of a promise of sale agreement is one of its most important features and any party interested in moving forward with the acquisition or sale of a property must ensure that the term is always respected. Failure to do so will result in the loss of one’s rights, and consequently, the loss of judicial redress. It is for this reason that the parties should start discussing any extension of the promise of sale agreement before its validity lapses, and this in order to give ample time to both parties to weigh their options in case of disagreement.

Daniel Buttigieg is a senior associate specialising in property law and dispute resolution at Fenech & Fenech Advocates.

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