Navigating the Ecuadorian 'Promesa de Compraventa': A Clause-by-Clause Legal Safeguard for Expats

The 'Promesa de Compraventa' (Promise to Buy and Sell) is a preliminary contract that legally binds both the buyer and the seller to proceed with the final sale ('Escritura de Compraventa') under agreed-upon terms and conditions. It is a legally enforceable document, and understanding its nuances is paramount for your financial security and peace of mind.

Clause-by-Clause Breakdown

Clause 1: Identification of Parties

This clause identifies the buyer(s) and seller(s).

For Sellers: Verify legal ownership by scrutinizing identification (cedula or passport) and cross-referencing with the property's title deed ('Certificado de Tradición y Libertad' or 'Gravamenes'). For companies, ensure the legal representative provides proof of authority and corporate registration.
For Buyers: Ensure all involved parties are correctly listed and their identifying documents are accurate.
Legal Safeguard: Request copies of identification for all parties. For sellers, cross-reference with the property title.

Clause 2: Description of the Property

This section details the property.

Required Information: Full address, property registration number ('número de catastro'), Property Registry inscription ('Registro de la Propiedad'), exact measurements and boundaries, and a clear list of included items.
Legal Safeguard: The description must precisely match the property's registered title deed. Discrepancies can lead to title issues. Compare this against the official 'Certificado de Tradición y Libertad'. Unregistered additions are a red flag.

Clause 3: Purchase Price and Payment Terms

This is a critical clause for financial protection.

Key Elements: Total purchase price in USD, earnest money deposit ('Aporte Inicial' or 'Señal') percentage (typically 5% to 15%), payment schedule, and method of payment.
Legal Safeguard:
- Escrow Account: Strongly advise using an independent escrow service for significant transactions.
- Conditional Payment: Payments should be contingent on clear title and the absence of encumbrances.
- Currency: Always state the price in USD.
- Proof of Funds: Ensure verifiable proof of funds.

Clause 4: Earnest Money and its Consequences ('arras')

This clause defines the consequences of default.

Buyer Default: Typically, the seller keeps the earnest money.
Seller Default: Typically, the seller returns double the earnest money.
Legal Safeguard: Ensure the specifics of this clause are carefully negotiated, proportionate, and clearly defined.

Clause 5: Conditions Precedent ('Condiciones Suspensivas')

These are contingencies that must be met before the final sale.

Common Conditions: Financing approval, satisfactory property inspection, clear title verification, and municipal clearance (property taxes paid).
Legal Safeguard: Each condition must be specific, measurable, achievable, relevant, and time-bound (SMART).

Clause 6: Closing Date and Location

This clause specifies the target date and location for signing the final 'Escritura de Compraventa'.

Legal Safeguard: Ensure the closing date is realistic. Recommend a reputable notary for efficiency and integrity.

Clause 7: Possession of the Property

This defines when the buyer takes physical possession.

Legal Safeguard: Possession should typically transfer upon final signing and full payment. Clearly outline departure dates for any occupants if applicable.

Clause 8: Governing Law and Dispute Resolution

This clause designates the jurisdiction and dispute resolution method.

Legal Safeguard: The governing law will be Ecuadorian. Advocate for communication and negotiation first, with legal action through the Ecuadorian court system as a last resort.

Clause 9: Force Majeure

This clause addresses unforeseen events beyond either party's control.

Legal Safeguard: This typically allows for deadline extensions or contract termination without penalty.

Clause 10: Confidentiality

This clause may stipulate that the agreement's terms remain confidential.

Legal Safeguard: Be aware that essential information will need to be shared with relevant parties for due diligence.

Clause 11: Entire Agreement ('Acuerdo Completo')

This clause states that the 'Promesa de Compraventa' is the complete understanding between parties.

Legal Safeguard: Emphasizes the importance of having all terms explicitly written into the document.

Real Estate Due Diligence Checklist

A thorough due diligence is non-negotiable before signing any 'Promesa de Compraventa'.

Title Search and Verification: Review the 'Certificado de Tradición y Libertad' for ownership, liens, mortgages, easements, or legal disputes.
Municipal Records Review: Verify property tax payments and ensure no outstanding municipal debts or permit issues.
Property Inspection: Engage a qualified inspector for structural, electrical, plumbing, and overall condition assessment.
Boundary Verification: Confirm property boundaries align with official records.
Legal Status Check: Ensure the property is not subject to ongoing legal proceedings.
HOA/Community Fees: Verify the status of any applicable fees.

⚠️ Broker's Legal Warning: The Property Risk You Must Veto.

The most significant risks for expats often involve unverified municipal debt and unregistered construction. Hidden debts can attach to the property, and unpermitted construction can lead to demolition orders. Never proceed without definitive municipal clearance confirming zero outstanding debts and legally recognized construction.

Conclusion

The 'Promesa de Compraventa' is a vital stepping stone. By understanding each clause and performing comprehensive due diligence, you can navigate property acquisition with confidence and security.

Ready to secure your Cuenca dream home with absolute legal and financial safety?

Schedule your free, property-risk consultation today.