Promoting transparency in the real estate market

On May 25 2013, Law Nº 7/2013 was published in the Macau Official Gazette to regulate the promissory agreements for the transfer and/or encumbrance of buildings under construction, which are defined in the Law as follows: any real estate in the design phase, under construction or with the construction works completed, for which no using licence has been issued, and, in case of buildings constructed under the horizontal ownership scheme, any real estate assets, including respective autonomous units, of which the title deed has not been definitively registered.

The Law is meant to serve the purposes of regulating the function of the real estate market, reinforcing the transparency of the transactions and protecting the rights and interests of the interested parties. Thus, the Law not only establishes several requirements that have to be fulfilled when entering into transactions involving buildings under construction, but also severe consequences for their infringement by the involved parties, while recognising the competence of the Land, Public Works and Transport Bureau (DSSOPT) to supervise such matters.

Pursuant to this Law, every legal transaction regarding the transfer or encumbrance of buildings under construction must be preceded by an authorisation granted by the DSSOPT, otherwise the transaction is considered null and void.

Authorisation

To obtain this authorisation, the DSSOPT must verify the fulfilment of the following cumulative requirements: the previous issuance of the construction works licence; the conclusion of the building's foundations and, when applicable, the basement and ground floor works; the annotation in the description of the building of the status “under construction” or, in case of horizontal ownership building, the provisional register of the horizontal property title deed.

The legal transactions subject to this Law, both for the transfer and the encumbrance, must be executed on a private document. The promises to transfer the ownership of buildings under construction, however, can only be titled by a sale and purchase promissory agreement or a contractual position assignment agreement.

The Law further extends its object by establishing its application, mutatis mutandis, to the transfer or encumbrance of buildings under construction irrespective of the title that supports the agreement, being therefore applicable to any agreement that contains a promise to transfer or encumber buildings under construction, such as leasing agreements.

The sale and purchase promissory agreement, further to the obligation of being executed on a private document signed by the parties, must contain all the elements set out in the Annex attached to the Law. A particular mention is due to the mandatory reference to the land concession term, the area, the purchase conditions and the tax implications of the transaction for both parties.

Otherwise, failing the reference to any of the elements described in the Annex, the promissory purchaser is entitled to claim for the invalidity of the agreement within a one year period.

Procedure

All private documents, either for the transfer of property or to encumber it, must have the respective signatures certified by a notary, subject to, failing to do so, being considered null and void. In order to certify the signatures, the notary must verify the fulfilment of the following requirements: the presentation of the building's land register certificate; the inexistence of any previous provisional registry for the purchase in favour of a person different than the promisor-seller, assignor or promisor-encumbrer; and, in case of sale and purchase promissory agreement, a declaration of an attorney stating that the agreement complies with the requirements of this Law and further applicable Laws, with an express mention stating that the agreement contains all elements set out in the Annex of the Law and that the remaining contents of the agreement does not contravene with the same.

The legal transactions regarding the promise to transfer or encumber buildings under construction is, according to the Law, subject to mandatory registration, which shall be submitted within 30 days counting from the date of the above mentioned notarisation, being the registration made afterwards subject to the payment of fees in triple.

Like all agreements, these legal transactions have only effectiveness inter partes. However, the parties can, under Section 407 of the Civil Code, ascribe effectiveness vis-à-vis third parties to the promissory agreement if they expressly state that purpose and register it in the Land Registrar. In case the parties intend to ascribe this effect to the agreement the same must be executed by notarised document.

The real estate agents can only execute real estate intermediary agreements with the promoter of the project after the issuance of the above mentioned previous authorization by DSSOPT, having the legal obligation to submit the agreement, as well as its amendments, to DSSOPT within five days of the execution of the same.

Whenever requested by DSSOPT, both private and public entities, namely, the promoter, the real estate intermediary and the promissory purchaser are obliged to cooperate with DDSOPT, when acting in their supervision functions, providing its employees with all the information and relevant documents requested. Furthermore, banks, and other financial institutions, as well as attorneys and other entities specified in the Law, are subject to a legal duty of collaboration with the Bureau, being excluded from duty of professional privilege. The Law Nº 7/2013 entered in force on June 1 2013.