Auction deposit (caução): how much, how to pay, when you get it back

What the deposit is

The deposit (caução) is a sum handed over with an offer to show that the offer is serious. If the bidder wins and pays, the deposit counts towards the price. If they win and do not pay, they may lose it.

Not every sale requires a deposit. It depends on who is selling and on the sale method.

Which sales have a deposit

How much: 5% of the announced value

In court sales by sealed bid, article 824 of the Code of Civil Procedure (Código de Processo Civil, CPC) requires a deposit of 5% of the announced value to be attached to the offer.

The announced value is not the base value (valor base). It is 85% of the base value (article 816(2)). And the deposit is calculated on the announced value, not on the price each bidder offers.

Illustrative example.

How to pay it

The law allows two forms (article 824(1)):

• A bank-certified cheque (cheque visado), payable to the enforcement agent (agente de execução) or, when the case is run by a court officer, to the court registry. A cheque visado is a cheque whose payment the bank certifies.
• A bank guarantee for the same amount.

The cheque or guarantee goes with the offer, in the same envelope. The sale notice states to whom the cheque must be made payable.

When it counts towards the price

If the offer is accepted, the bidder is notified to deposit, within 15 days, "the whole or the missing part of the price" (article 824(2)). In other words, the deposit already delivered is deducted from what remains to be paid.

The same deposit rule applies to anyone exercising a pre-emption right at the opening of the offers (article 823(3)).

When you lose it

If the 15 days end without the price being deposited, the enforcement agent, after hearing the interested parties, may choose one of three routes (CPC, article 825):

1. Set the sale aside and accept the next highest offer. The defaulting bidder loses the deposit.
2. Set the sale aside and sell the asset by the most suitable method. The defaulting bidder loses the deposit and cannot buy the same asset again.
3. Claim the missing price. In this case the judge is asked to freeze assets of the bidder (arresto) to secure the missing amount, plus costs and expenses. The bidder is pursued in the same case, without prejudice to criminal proceedings.

When you get it back

• Offer not accepted. The deposit of a bidder who did not win is returned.

• Redemption after payment. The debtor's spouse, descendants or ascendants may take the asset at the same price: this is the redemption right (direito de remição). If they exercise it after the bidder has already deposited the price, they pay an extra 5% as compensation to the bidder (CPC, article 843(2)).
• Pre-emption or sale set aside. When a pre-emption holder or a redeeming relative takes the asset after the sale, they replace the buyer and pay the price and the costs of the purchase. When the sale is set aside because the enforcement or the sale itself is annulled, the buyer must be reimbursed for the price and the purchase costs before returning the asset (CPC, article 839).

No deposit on e-Leilões, but liability

On e-Leilões you bid without handing over a deposit: the platform rules do not provide for one and the FAQ states that bidders bear no cost for using the platform.

On the other hand:

• bids cannot be withdrawn;
• whoever has the highest bid above the minimum value is bound to deposit the price;
• if they do not, article 825 of the CPC applies: assets frozen to secure the missing amount, plus costs and expenses, and enforcement in the same case. The warning the platform shows before a user's first bid says exactly this (annex I of the rules).

In Tax Authority sales

The CPPT (the tax procedure code) does not provide for a deposit in Tax Authority sales. The buyer deposits the full price within 15 days of the award decision (CPPT, article 256).

Anyone who does not pay on time is barred from bidding in any tax sale for two years, apart from other penalties set by law (article 256(4)).

For purchases above 500 units of account (unidades de conta), the buyer may ask, within 5 days of the award, to deposit at least one fifth of the price and pay the rest within 12 months (article 256(1)(f)). This is not a deposit: it is payment in stages, and it depends on authorisation.

In insolvencies

The insolvency administrator chooses the sale method (CIRE, article 164). The conditions, including whether there is a deposit and how much, are in the notice of each sale.

The law fixes only one case: when a creditor with security over the asset offers to buy it, the offer is only valid if it comes with a certified cheque for 10% of the amount offered, payable to the insolvency estate (article 164(4)).

With banks and private auction houses

In sales of bank-owned property and in auctions run by private auction houses, the CPC deposit does not apply. Each seller sets its own conditions: it may ask for a down payment, a cheque at the auction or a commission payable by the buyer. Read the sale terms before bidding and check what is returned if the sale does not go through.

Before handing over a deposit, check

• What the announced value is and what 5% of it comes to.
• To whom the cheque must be payable.
• By when and where the offer is delivered.
• Whether you can pay the rest in 15 days. If you depend on a bank, see mortgages for auction property.
• How much you will pay in taxes and registration on top of the price.