SALE FROM PARENTS TO CHILDREN AND GRANDPARENTS TO GRANDCHILDREN

In Portugal, the principle of contractual freedom is in force [art. º 405º of the Civil Code (CC)], although with exceptions, as is the case of art. º 877º of the CC, which limits it, since the choice of the party with whom we want to contract is substantially reduced.

Now, in the article 877º of the CC, we have in mind that grandparents cannot sell to their grandchildren, in the same way that parents cannot sell to their children, when the remaining grandchildren or children do not consent to that specific sale.

This ban only applies to two family ties: parents to children, and grandparents to grandchildren. And under the pretext of non-compliance with the principle of equity and justice, due to the increased possibility of simulations.

In order to apply this article, some assumptions must be met. The first is the degree of relationship between the parties, as if this did not exist, we would be facing a regular purchase and sale contract, with Article 405 of the CC prevailing. The second is the existence of a legitimate heir of the 1st line of succession who can challenge the sale, which does not happen in the case of there being only one child, for example. Finally, the third is the damage it may cause to descendants, reinforcing the idea of ​​the second criterion.

Although this article is understandable on the surface, as we go deeper, we find irregularities. For example, if there is a loss for the son or grandson who sees his parents or grandparents selling a good to a brother or cousin, why would they not also have it if they sold it to an uncle or another member of the family community (reinforcing the idea that for application of article 877 of the CC the degree of relationship is imperative)? Do they suffer any damage or not? They certainly will! But is it also protected by the same Article? Or are we facing a gap?!

The truth is that the son who does not receive the asset from the father because he simulated to his brother is just as harmed, as in the case if the sale would occur at a low price, for example, or donated it to a nephew. The final objective of this article, to protect the assets of the child or grandchild, is not fulfilled in either case, leaving its provisions without effect, even if dully implemented.

Another question that needs an answer, although apparently it is clear, is the sale of great-grandparents to great-grandchildren. Reading Article 877 of the CC, no reference to this relationship can be inferred, therefore, as it is not regulated, the sale is not prohibited. There are authors who consider it that way, since the relationship between great-grandparents and grandchildren is not as closed as that between parents and children or grandparents and grandchildren, therefore, the danger of simulating a sale is not as high. Another thesis that seems quite acceptable to us is exactly the opposite: the affective bond existing between great-grandparents and great-grandchildren is not necessarily smaller than that existing between parents and children or between grandparents and grandchildren, which is why the prohibition should also apply to them.

Having said that, and considering that article 877 of the CC leaves us with more questions than answers, the ideal would be to reformulate it and adapt it to the new realities, which could take one of two directions: or regulate even more the contractual relationship of sale between subjects with family ties, or, on the other hand, fully liberate any and all business performed by and between individuals, whether or not they have a family link, be it a child, grandchild, great-grandchild or other. Remembering that the latter is the solution in force in several European countries, such as France or Germany, for example.

In short, although in other countries it is possible to dispose of your assets as you see fit, in Portugal this is not the case, which makes it advisable to draw up a will, whether by Portuguese nationals or, in particular, by foreign citizens and also be extra careful whenever you want to sell or donate one of your assets to one of your heirs.

Our Team of experienced Lawyers will be pleased to assist you.

Dr Lucia Costa

Trainee Lawyer (Martinez-Echevarría & Ferreira – Vilamoura)