Promissory Agreement for the Sale and Purchase of Real Estate: the Effect of Real Effectiveness Versus Real Estate Registration
On 26 June 2018, Decree-Law No. 2/2018 of 23 August 2018 was approved by the Council of Ministers, revoking the Real Estate Registration Code, approved by Decree-Law No. 47.611 of 28 March 1967 (hereinafter the "CRP"), which came into force on 21 November 2018. The CRP brought with it some changes that deserve analysis and further study. However, this article focuses on the analysis of real effectiveness (eficácia real) versus real estate registration in relation to the promissory agreement for the sale and purchase of real estate, both rural and urban tenements.
As a general note, the Mozambican Civil Code ("CC"), does not formulate the concept of immovable property, however it does list the things that are considered immovable, among which are rural and urban tenements. A rural tenement is understood to be a delimited part of the ground and the constructions thereon that are not economically autonomous, and an urban tenement is understood to be any building on the ground, with the land that serves as its backyard (see Article 204, par. 1 and 2 of the CC). It should be noted that the Land Law Regulation and the Urban Land Regulation add to this definition the indication of the main source of income of the tenement.
The sale and purchase of real estate is only valid if executed by public deed, that is, the form to be respected for the transfer of ownership of real estate is through public deed. If the legally established form is not observed, the sale of the real estate is null and void (see articles 220 and 875 of the CC). It should also be noted that the purchase and sale of real estate mentioned herein is subject to real estate registration (see article 2(b) of the CRP) for publicity purposes.
The Promissory Agreement for the Sale and Purchase of real estate ("CPCV") is not subject to the above-mentioned obligation of form (see Article 410(1) of the CC), since the promissory agreement only creates the obligation to contract, in other words, the obligation to issue the declaration of will corresponding to the promised agreement. It is important to briefly mention that the CPCV is subject to specific performance, i.e., if one of the parties to the CPCV fails to comply with the promise, the other party may obtain a judgment that produces the effects of the defaulting party's negotiating statement (see article 830(1) of the CC). Nevertheless, the parties, wishing to attribute real effectiveness to the CPCV of real estate, may execute the referred promissory agreement through public deed (see article 413 of the CC and paragraph k of article 85 of the Notary Code). However, the same Article 413 of the CC determines that for the CPCV with real effectiveness to produce effects in relation to third parties it must be registered at the competent Real Estate Registry ("Registry"). Therefore, taking into consideration these aspects, it becomes necessary to comply with the following requirements to ensure the CPCV's enforceability in relation to third parties, namely: (i) the CPCV must be executed through public deed; (ii) the parties must expressly attribute real effectiveness to the CPCV; and (iii) the CPCV must be registered at the Registry.
The CRP brought with it an exception to the obligation to register the CPCV with real effectiveness (see article 10(1)(a)(iv) of the CRP), whereby the registration of the CPCV public deed is no longer compulsory. Although this reform aims to reduce inherent costs and make the promissory transaction more flexible, the question arises whether the CPCV with real effectiveness guarantees the same level of security to the legal transaction that the real estate registration provides. Let us briefly look at some aspects that the law, doctrine and jurisprudence establish regarding this matter:
- Article 413 of the CC already mentioned above, lists the requirements that must be cumulatively fulfilled in order to ensure that the CPCV has real effectiveness and is enforceable against third parties (i.e., the CPCV produces effects against third parties): (i) the CPCV must be executed through public deed; (ii) the parties must expressly attribute real effectiveness to the CPCV; and (iii) the CPCV must be registered at the Registry.
- Article 1 of the CRP states that the purpose of registration is to give publicity to the legal status of real estate, aiming at the security of the legal commerce, this being the condition for the effectiveness of acts subject to registration before third parties.
- Article 6(1) of the CRP states that facts subject to registration only produce effects against third parties after the date of the respective registration. Third parties, for the purposes of registration, are all those who, having obtained registration of a right over a given real estate, would see this right overridden by any previous legal fact not registered or registered subsequently (Ministry of Justice Constitutional and Religious Affairs, CRP annotated and commented: 2022:34).
- According to Lima and Varela (1987:386 - 387), it is admitted, however, that the promise of alienation or encumbrance of real estate, (...), may produce effects in relation to third parties as long as the following assumptions are verified: a) the promise is in a public deed; b) the parties intend to attribute real effectiveness to it; c) the rights arising from the promise are registered in the Registry. Fulfilled these conditions, (...) it is equivalent to say that it becomes a real right (real right of acquisition) – translated from Portuguese.
Considering the points discussed above, and although the CPCV with real effectiveness, exceptionally, under the terms of the CRP is not subject to compulsory registration, we understand that this act should continue to be carried out by the promissory purchaser of the respective real estate to ensure greater security to the legal transaction, so that all interested parties are aware and can assess the encumbrances registered on it in relation to their own interests.