PREPAID HOUSING SALES AGREEMENT

In a pre-paid housing sales contract, the buyer undertakes to pay for a property that does not yet exist physically; either in cash or in installments, while the seller undertakes to transfer or deliver the property to the buyer upon receipt of full or partial payment of the property's value. Furthermore, the principles regarding the failure to fulfill the parties' commitments are regulated under Law No. 6502 on Consumer Protection, effective May 28, 2014. Generally, the party that fails to fulfill its commitment may face penalties such as paying compensation to the other party for the resulting costs. However, there are some exceptions. In such cases, seeking support from an experienced real estate lawyercan be beneficial to avoid further complications.

Scope and validity conditions of real estate contracts 

• Real estate sales contracts are subject to formal requirements. These can be done at a notary public or at the land registry office.
• A pre-paid housing sales contract is established either as a written agreement or a sales promise agreement drawn up at a notary public, upon the registration of the condominium ownership transfer in favor of the consumer in the land registry. Otherwise, the contract is invalid.
• The seller cannot subsequently claim the contract is invalid in a way that is detrimental to the consumer.
• Pre-paid housing sales contracts cannot be made with consumers without obtaining a building permit.
• For prepaid housing sales, registration in the land registry and the sales promise agreement must be drawn up at a notary public. Otherwise, the seller cannot later claim the invalidity of the contract to the detriment of the consumer.
• Unless a valid contract has been concluded, the seller may not request payment from the consumer under any name or require the consumer to provide any document that would create a debt obligation for the consumer.
• For projects exceeding a certain size determined by the Ministry based on the number of housing units or the total cost of the project, the seller is required to obtain building completion insurance, the scope, conditions, and implementation principles of which are determined by the Undersecretariat of Treasury, or to provide other guarantees and conditions determined by the Ministry before commencing pre-paid housing sales.
• Compensation, guarantees, and similar securities provided under building completion insurance cannot be included in bankruptcy or liquidation proceedings, seized, or subject to precautionary measures or attachments.

Right of withdrawal from a prepaid housing sales contract

The buyer's right of withdrawal in pre-paid housing sales contracts is examined in Articles 43 and 45 of the Law No. 6502 on Consumer Protection, which entered into force on May 28, 2014. Accordingly, in the event of withdrawal from a pre-paid housing sales contract, the seller is entitled to demand compensation from the buyer for the expenses incurred in relation to the resulting obligations. In other words, if the buyer withdraws from the pre-paid housing sales contract, they are obliged to pay compensation to the seller for the expenses incurred. It may be advantageous for the parties to seek advice from a specialist real estate lawyer on this matter.

According to the Law on Consumer Protection, there are conditions under which the buyer has the right to withdraw from the contract without paying any penalty. These conditions are as follows:

• If the buyer terminates the contract because the seller has not fulfilled their obligations at all or has not fulfilled them properly, the buyer will not be subject to any penalty for termination.
• If the buyer dies before the transfer and delivery of the property, their heirs may withdraw from the contract.
• The buyer also has the right to withdraw from the contract without compensation if they become unable to make advance payments due to a sustained lack of income.

This is the situation where the seller rejects the buyer's proposal to replace the contract with a standard installment sales contract

For more information on this matter and for any other questions, you can consult real estate lawyerswith our experienced