The option to purchase: how long it lasts and what it must say

It is Chapter II of Title VIII of Book Three of the Civil Code of 2020, Articles 1029 to 1032, plus Article 1039 of Chapter IV, which sets how preferential acquisition rights are extinguished. It is one of the three preferential acquisition rights, alongside tanteo and retracto.

It may fall on immovables and on movables capable of identification. To have real nature it must be configured as such in the title, appear in a public deed and be recorded in the corresponding registry.

• That the title contain the right’s duration and, where applicable, the period to exercise it.Verified against the official source
• That it contain the price or consideration, or the criteria for fixing it; with stabilization clauses, objective criteria letting it be fixed by a simple arithmetic operation.Verified against the official source
• That it contain the premium agreed for its constitution, where the right is granted for value.Verified against the official source
• To record it, that it meet those requirements and appear in a public deed.Verified against the official source
• To exercise an option to an onerous acquisition, prior or simultaneous payment of the fixed price.Verified against the official source

• The public deed containing the constituting title, without which the option contract cannot be recorded.
• The domicile for the required notifications, which Article 1030 asks to appear in the title.

1. 1

   Step 1: What it is: a closed deal with the decision left open

   Article 1029 defines it as the right empowering its holder to decide, within a determined period and by declaring their acceptance, the perfection of a sale contract already agreed in all its fundamental and secondary aspects, and to whose performance the grantor remains committed for the prefixed period. The sale is fully negotiated: what is missing is the holder saying yes.

2. 2

   Step 2: The four things the title must say

   Article 1030 sets the minimum, besides the stipulations, the domicile for notifications and whatever else the parties want: the right’s duration and, where applicable, the period to exercise it; where applicable, the will to configure the right as a real one; the price or consideration, or the criteria for fixing it, stating the price stipulated; and the premium agreed for its constitution, where it is granted for value, stating the price agreed.

3. 3

   Step 3: If there is a stabilization clause, it must be arithmetic

   The same Article 1030 sets a concrete and little-known requirement: where stabilization clauses are provided, they must contain objective criteria and the price must be fixable by a simple arithmetic operation. A formula depending on one party’s judgement does not meet it.

4. 4

   Step 4: How long it can last

   Article 1031 sets the caps: a real option may be constituted for a maximum of five years if it falls on immovables, or two years for movables. There may be successive extensions by agreement, but each is subject to those same maxima.

5. 5

   Step 5: What happens once it is recorded

   The same article explains it in three beats. The option’s recording in the Property Registry lapses once the exercise period runs out, or five years after the date it was recorded. It may be recorded again for that same term, if the contractual term to exercise has not expired. And the consequence that matters: a recorded option has the status of an encumbrance and binds subsequent acquirers on its terms. Whoever buys later takes it on.

6. 6

   Step 6: The option inside a lease

   Article 1031 closes with a specific rule worth reading before signing: an option to purchase contained in a lease is recordable solely and exclusively for the lease’s duration, not including its extension. And it adds a general rule for options agreed inside another transaction: their duration may be that of that transaction, with its corresponding extensions.

7. 7

   Step 7: How it is exercised

   Article 1032 conditions it on the money: exercising an option to an onerous acquisition requires prior or simultaneous payment of the fixed price, determined by the established criteria, or the price resulting from the stabilization clauses if provided. Declaring acceptance without paying is not enough.

8. 8

   Step 8: How it is extinguished

   Article 1039, in Chapter IV, holds for all three preferential acquisition rights: they are extinguished once exercised, or on fulfilment of their duration and — for tanteo — of their exercise period, or by the holder’s renunciation.

Before a notary for the public deed, and before the Property Registry if it is to be recorded, which is what turns the option into an encumbrance against subsequent acquirers.

• Leaving the title without a duration: Article 1030 requires it as minimum content.
• Agreeing a real option on an immovable for more than five years, or on a movable for more than two.
• Writing a stabilization clause that does not let the price be fixed by a simple arithmetic operation.
• Believing an option inside a lease is recorded for the extension too: only for the lease’s duration.
• Exercising the option without paying the price beforehand or simultaneously.
• Not recording it and assuming it binds later buyers: only a recorded option has the status of an encumbrance.
• Forgetting that the recording lapses at five years even if the contractual term is still alive, and must be recorded again.

These are the government pages this guide is based on.

• Poder Judicial de Puerto Rico

  Poder Judicial

  bvirtualogp.pr.gov