Legal Requirements for Drafting an Official Apartment Deed (Part Two)

The previous article covered legal points relevant to current transactions in immovable property, relying on the most recent applicable laws, prepared with the aim of strengthening readers' understanding when buying buildings and land — including residential, office, and commercial real estate — and how such transactions work in today's market.

In this installment, while providing a sample sale agreement that should generally serve as the basis of the contractual relationship in such transactions, we will briefly address how the legislature, by building in certain mechanisms, has on one hand ensured the security and speed of contract performance, and on the other hand, as a deterrent factor, has worked to reduce the volume of litigation arising from breaches of contract. Suppose a property buyer, under the contract drafted, undertakes that if they fail to bring the balance of the price on the day set for execution at the notary's office, they will pay the seller a specified sum called a "liquidated sum" (vajh-ol-eltezam). Here, if the buyer also faces the seller's absence on the appointed day, they must obtain a certificate issued by the notary office and go through a lengthy process before the courts to have the other party ordered to execute the official deed. The advisable point, however, is that including a sum as daily damages can, in addition to compensating for the loss caused by the breach, compel the seller — even before litigation becomes necessary — to take the steps needed to prepare for the transfer.

1. Strengthening transactions by setting a liquidated sum or daily damages

The term "liquidated sum" (vajh-ol-eltezam), in common usage and typically in a contract, means that whenever, for any reason, the final transaction is not completed at all, a sum set as a penalty — usually a very high figure — is taken from the party that refuses to go through with the transaction and given to the other party. In effect, the liquidated sum represents the damages for failing to perform the obligation of official transfer or delivery of the property that is the subject of the contract, or for the inability to receive the price, and so receiving it is treated as a substitute for performance. In other words, a person who pays the liquidated sum is, in no way, still required to perform their obligation. This method of setting damages can also be used when the damages are tied to a specific time and performance does not occur by that time.

In this regard, it is advisable for the parties to a contract, in order to strengthen their transaction against a total failure to perform an obligation, or a failure to perform by the agreed deadline — which could occur on the part of either party — to include a liquidated-sum clause or set damages. In other words, the obligations arising from a sale agreement, which include delivery of the property and transfer of the official deed by the seller and payment of the price by the buyer, may either fail entirely or be performed with delay. Regarding failure to perform obligations, a liquidated sum or damages can be considered in two ways. In the first, a fixed sum may be set as damages for a total failure to perform, or for failure to perform within the agreed deadline. In the second, damages are set on a daily basis — a specified amount for each day of delay, from the date the obligation was breached — though choosing this second method is not possible in cases where performance of the obligation fails entirely.

In any case, the latter method is recommended for its deterrent effect, strengthening the contract in the scenario where obligations are performed late, so that, in proportion to the length of the delay from the date the obligation went unperformed, the beneficiary is entitled to delay damages. For example, the sale agreement might provide that if the parties do not appear at the notary's office on the agreed date, and the seller does not bring the documents needed for the transfer — including tax and municipal clearance certificates, the subdivision report, and so on — or does not deliver the property by the agreed date, and likewise if the buyer is unable to pay the balance of the price by the set date, each must pay the other a specified daily sum as damages, and paying this sum does not relieve them of the obligation to perform.

One final point: the liquidated sum is a fixed amount that cannot increase, whereas delay damages, since they are calculated on a daily basis, increase for every day of delay — and this approach is useful in cases where time is of the essence in performing the obligation. In such cases, the damages can be calculated based on the number of days of delay, and the petition filed can request that the judgment apply up until the date of actual performance. Although judicial practice does not generally allow damages for non-performance to be claimed alongside an order compelling performance, under the applicable laws, claiming damages or a penalty for delay in payment of a debt does not bar an order compelling performance of the contract, and the two can be claimed together.

To explain further: Article 515 of the Code of Civil Procedure draws no distinction between delay damages and a liquidated sum arising from non-performance, and treats both as claimable. In addition, Article 221 of the Civil Code provides: if a person undertakes to do something, or undertakes to refrain from doing something, then upon breach, they are liable for the other party's damages, provided that compensation for the damages has been expressly stated, or the obligation customarily amounts to an express statement to that effect, or liability arises under the law. Therefore, where payment of damages has been expressly stated in the contract, the breaching party is liable for the damages caused to the other party.

2. The official transfer deed

If the seller refuses to appear at the notary office to transfer the deed of ownership of the property in question, the buyer can, by depositing the balance of the price with the notary, obtain a certificate confirming the seller's non-appearance at the office before the end of business hours. Following this, they will be able to request from the court an order compelling execution of the official transfer deed, and after the judgment becomes final, request issuance of a writ of execution. In addition, if the preliminary steps for transfer — such as obtaining a violations clearance, a municipal completion certificate, or a subdivision report from the relevant registry office — have not been completed, these matters can also be included in the claim, so that if the other party to the transaction refuses to appear at the notary's office, all necessary arrangements can be made for the signature of a representative from the enforcement of judgments office.