Earnest money, or down payment, in the purchase of real property: a court decision encourages a conscious purchase with regard to the burdens in the event of withdrawal from the transaction.
The amount given as a guarantee of the transaction may be retained in full on account of contractual default, even in cases where it exceeds 50% of the total value of the contract.
The Third Panel of the Superior Court of Justice (STJ) upheld a decision of the Court of Justice of Rio de Janeiro (TJRJ) that allowed the retention of R$ 48 thousand paid as a down payment in the negotiation of a property that, at the time, was to be purchased for R$ 90 thousand.
Default – The justice reporting the appeal at the STJ pointed out that the purchase and sale contract was rescinded due to the buyers’ default, a reason that supports the decision to retain in full the amount paid as earnest money, in accordance with the rules of the Civil Code.
The appellant sought to limit the amount to be retained, alleging that the amount exceeding 50% of the property was exorbitant and would be a source of unjust enrichment for the seller. The justice, however, recalled that, in the case, there was no exercise of the right to withdraw, but rather contractual default, a situation provided for in the legislation that justifies the full retention of the amounts.
“From the rules contained in articles 417 to 420 of the Civil Code (see here), it is found that the indemnifying function of earnest money is present not only when there is a lawful withdrawal from the transaction, but mainly when there is non-performance of the contract,” she stressed.
Reasonable amounts – The justice stated that it is possible to equitably reduce the amounts paid as earnest money, since it is a way of restoring the contractual balance. However, in the case analyzed, there is no way to limit the retention of the amounts paid, since the sellers suffered hindrances as a result of the breach of the contract.
“It is observed that the full loss of the down payment amount by the prospective assignees does not appear unreasonable, in view of the losses suffered by the prospective assignors, who were deprived of the possession and enjoyment of the property since October 2009, without any consideration,” the reporting justice stated.
In the event of default, according to the justice, earnest money functions as a compensatory penalty clause, indemnifying the non-culpable party for the non-performance of the contract.
In the view of the justices who make up the Third Panel, there is no excess in the amount retained, in view of the particularities of the case, such as the need for repossession arising from the breach of contract, which demonstrates the unavailability of the asset for a significant period.
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