Real Estate Settlement Agreement (Peace Contract)
One of the most widely used contracts under civil law is the settlement agreement, which offers greater flexibility than many other types of contracts. In certain contracts, failure to comply with specific legal requirements may render the contract invalid.
In contrast, settlement agreements offer greater legal flexibility, affording parties greater autonomy. Settlement agreements may be used either to resolve disputes and effect reconciliation or to effect transactions and transfers.
Essential Elements and Legal Requirements of a Real Estate Settlement Agreement
The Concept of Settlement as a Contract
A settlement contract is generally regarded as a substitute for other contracts, such as sale agreements. Through settlement, the parties agree to create, transfer, or extinguish rights. For example, if a person intends to transfer ownership of a property to their child, the transfer may be effected by a settlement contract. Such a transfer produces proprietary effects similar to a sale, while certain specific rules applicable to sales do not apply.
A settlement contract may also be concluded to resolve disputes by mutual agreement. This form of settlement arises when the parties have an existing dispute and elect to resolve it through reconciliation. For instance, if one party claims a debt of one million tomans while the other acknowledges only five hundred thousand tomans, the parties may agree to settle the matter for eight hundred thousand tomans.
In some cases, a settlement contract is entered into to prevent future disputes. Although no dispute exists at present, the likelihood of future disagreement leads the parties to enter into a settlement agreement at the outset.
Applications of the Settlement Contract
In certain situations, individuals prefer to structure agreements as settlement contracts rather than sale agreements. By doing so, the right of rescission is generally eliminated, and the parties are prevented from claiming loss or damages in the future.
Where the parties do not wish the legal rules governing lease agreements to apply, they may instead enter into a settlement agreement.
Deposit arrangements and monthly interest agreements between banks and individuals may also be structured as settlement contracts. In such cases, the depositor typically retains the right to withdraw the deposit at will. With the depositor’s consent, this right may be limited through a settlement agreement.
Certain agreements between individuals and municipalities may also be concluded as settlement contracts, such as those between holders of commercial goodwill and municipal authorities.
Individuals may transfer their property to another person through a lifetime settlement agreement. Under this arrangement, the right to use and benefit from the property remains with the transferor or a designated third party until the end of the transferor’s lifetime.
Legal Limitations Applicable to Settlement Agreements
The parties must have legal authority and capacity to dispose of their property and must not be subject to legal restrictions, such as bankruptcy.
The settlement agreement must not be concluded for the purpose of evading debt. If it is established that the agreement was intended to defraud creditors, it shall be deemed invalid.
Registration of Settlement Agreements
Settlement agreements may be registered at notary offices and registration authorities. However, informal or handwritten settlement agreements are also legally valid and may be relied upon before courts.
Enforcement of Settlement Agreements
If one party fails to perform its obligations under a settlement agreement, the other party may seek judicial enforcement and request compulsory performance in court. Such obligations may include the transfer of property, the delivery of assets, or the performance of a specific act.
If a settlement agreement is concluded before a court to resolve a dispute, enforcement falls within the jurisdiction of the judicial enforcement unit. If the settlement agreement is executed before a notary public, enforcement is carried out by the relevant jurisdiction’s registration enforcement authority.
Real Estate Settlement Agreements
Real estate settlement agreements are widely used in property transactions and may serve as alternatives to lease agreements or sale contracts. For example, ownership of a property may be transferred to another person without executing a sale.
In certain cases, a real estate settlement agreement serves to resolve disputes between parties, in which they grant concessions to one another before judicial or quasi-judicial authorities to reach reconciliation.
Types of Settlement Agreements
- Settlement agreements for the purchase and sale of real estate.
- Settlement agreements are used in place of lease contracts.
- Settlement agreements for the transfer of property benefits, including commercial goodwill.
- Settlement agreements involving waiver of ownership or debt.
Frequently Asked Questions Regarding Real Estate Settlement Agreements
A real estate settlement agreement is a contract through which the parties reach an agreement on dispute resolution, transfer of ownership, lease arrangements, or other property-related rights. It may serve as a substitute for sale or lease contracts.
Settlement contracts may be used to resolve existing disputes, prevent future disputes, transfer ownership or benefits, regulate deposits, or establish lifetime settlement arrangements while preserving usage rights.
Yes. The parties must have legal authority over the property, the agreement must not be concluded to evade debts, and individuals subject to legal restrictions may not enter into such contracts.
Registration is not mandatory, although official registration increases evidentiary strength. Informal settlement agreements are also valid and enforceable in court.
If a party fails to fulfill its obligations, the other party may seek judicial enforcement. The court concluded that settlement agreements are enforced by judicial enforcement units, while notarized agreements are enforced by registration authorities.
They include settlement agreements for property sales, lease substitutes, transfers of property benefits, such as goodwill, and agreements involving the waiver of ownership or debt. What is a real estate settlement agreement?
What are the applications of a settlement contract?
Are there legal limitations on settlement agreements?
Is registration of a settlement agreement mandatory?
How are settlement agreements enforced?
What types of real estate settlement agreements exist?
