AADE: Strict controls on real estate purchases and sales with cash

Real estate purchases with cash are back, according to a new circular from AADE. The measure applies to transfers made from 11 December 2023 onwards, the date on which the complete ban on the use of cash to pay a price when drawing up notarial deeds came into force.

According to the circular, any payment of a price, in whole or in part, made after that date must be made exclusively by bank means of payment, even if it relates to notarial deeds drawn up before 11 December 2023.
Contracts or private agreements that involve payment by cash are automatically considered null and void and cannot be transcribed or produce legal effects.

The penalties are severe: a fine equal to 10% of the amount not paid by bank means is imposed, with a minimum of 10,000 euros and a maximum of 500,000 euros for each violation.

Nevertheless, the circular provides for an exception for contracts drawn up after 11 December 2023, but in execution of preliminary agreements signed before that date. In such cases, payment of the price in cash is permitted, provided that the amounts were paid under the terms of the pre-contract.

Example 1: On 4/9/2023, a contract was signed with a dissolution clause whereby ownership of the property would revert to the seller if the price was not paid by 1/26/2024. At the signing, 50% of the price was paid in cash, with the balance paid on 1/26/2024 via a bank instrument. On 1/2/2024 a deed of redemption and removal of the dissolution condition was drawn up. The procedure is under the law, as the cash payment was made before 11/12/2023.

Example 2: On 2/11/2023, a cash advance was paid for the purchase of a property and a private agreement was signed. On 24/1/2024 the final contract was signed and the remaining price was paid by bank transfer. The contract is legal, as the cash advance was made before the measure came into force.

Example 3: On 20/9/2023 a contract for the sale of a property was signed with an agreed price of 40,000 euros. EUR 20,000 was paid in cash at signing, and the balance was paid in two cash installments before 31/10/2023. A repayment deed was drawn up on 22/2/2024, which is by the law as it relates to payments made before 11/12/2023.

Example 4: On 23/10/2023 a preliminary contract for the sale of a property was signed. On 6/2/2024 the final contract was signed and the price was paid in cash. The contract is valid as it is an execution of a preliminary contract that was signed before 11/12/2023.

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