Buying Property

Buying Property

Process of buying a Portuguese property

In Portugal the purchase of a Portuguese property is a regulated process. To ensure that the Portuguese property you wish to buy is free of debts and restrictive clauses, it is essential to employ an English-speaking lawyer or solicitor to protect your own interests. We also recommend that you deal with Portuguese estate agents who are government licensed; they must be identified by an AMI number.

Banking in Portugal

Opening a bank account in Portugal is not required, but it is recommended. Many foreign banks have branches in Portugal, and they can help in transferring funds and setting up regular payments for utilities so you won't have to worry about keeping a close eye on bills when you are out of the country. Property management companies can work directly with banks to set up these payments, and they can also arrange to have your Portuguese property rented out. However, you will need a tourist licence if you wish to rent short term.

Personal Fiscal Number (Numero fiscal de contribuinte)

As a future owner of a Portuguese property you need to have Personal Fiscal Number, which can be obtained at the Local Tax Office in Portugal. If you are not resident in Portugal you will need a tax representative.

Legal process for buying a Portuguese property

The legal side falls into two parts, the preliminary "promissory buying and selling" contract (Contrato de Promessa de Compra e Venda) and the Final Deed (escritura).

Stage 1: Preliminary "promissory buying and selling" contract

Once a price has been agreed upon with the vendor both parties will sign a preliminary "promissory buying and selling" contract, called a Contrato de Promessa de Compra e Venda and the buyer will make a deposit of 10%-30% of the purchase price (except in the case of new constructions where this deposit will be considerably less). The deposit can vary depending on the price, location and the real estate agency you work with. Many purchasers also hire a lawyer to help to negotiate a 10% percent deposit, opposed to paying a larger deposit. The "promissory" contract, similar to an exchange of contracts in the UK, legally secures the purchase, and is subject to satisfactory searches having been returned. The Portuguese law protects both parties involved. The deposit is forfeited if the purchaser does not proceed, and if the vendor withdraws double the deposit is paid to the purchaser by the vendor. This contract can be signed in the presence of the Notary.

Before signing a preliminary "promissory buying and selling" contract, you or your legal representative will need to obtain the following legal documents:

Property Registration Certificate (Certidão de Teor)

At the local Land Registry (Conservatória do Registo Perdial), this is to check if the seller has the ownership of the property and no one else has those rights and also if it is free of charges and mortgages. A Registration Certificate should be issued with a time limit. The Registration Certificate describes the property's legal history and proof of ownership. The Registration Certificate is required to perform the completion process at the Notary's office.

Property Tax document (Caderneta Perdial)

At the local tax office obtain an official tax document. The official tax document certifies the inscription of the property for fiscal purposes, the current owner and their fiscal number, a description of the property, and the property's unique fiscal number. The official tax document mentions the patrimonial value which forms the basis for how much the owner will pay in local yearly taxes. If the property is new then the official tax document will not exist in and a temporary certificate will be issued by the building developer.

License of Use (Licença de Utilização)

Obtain a copy of the usage license from the Local Town Hall. In this document you can check if the property is approved for the purposes of the original building permission. For residential property it is necessary to have a habitation license. For non residential it is necessary to have a commercial or industrial license. This usage license document needs to be presented at the stage of signing the "promissory buying and selling" contract.

Energy Certificate

Stage 2: Completion (escritura de compra e venda)

The completion of the purchase should occur anywhere between approximately 3 - 4 weeks after signing the "promissory buying and selling" contract, unless decided otherwise between the parties, when the "escritura" deed, called a escritura de compra e venda is ready to be signed by both the vendor and purchaser. The signing of the "escritura" can be carried out on your behalf by granting your lawyer Power of Attorney.

Prior to the signing of the deed the transfer tax (IMT) and stamp duty (Imposto de Selo) must be paid in order for the deed to take place. The IMT Tax is variable depending on the value of the property and whether the property is for permanent residence, second home, commercial or industrial.

At this stage the purchaser must pay the remaining balance of the purchase price (purchase price minus the deposit), plus notarial fees to the notary. The "escritura" is the equivalent to the Deeds of the property. From the signing of the "escritura" contract the purchaser is responsible for the insurance of all the buildings on the property. It is recommended that the policy includes cover for fire, flood, storm damage and earthquake damage.

The signing of the "escritura" ends with the transfer and new registration of the property in the presence of the official notary. Once this has been done and the property is registered at the Land Registry Office and Local Tax Office, and is legally yours. You should make sure that the registration document (Registo) is in your name and is lodged with the Land office and also in the Local Tax Office as soon as possible after the signing of the "escritura". There are strict time limits imposed.

Fees and Commission

The purchaser is liable for transfer tax (known as IMT), stamp duty (known as IS) and notarial / registration / lawyer fees.

Transfer Tax (IMT)

Transfer tax and stamp duty on that tax must be paid just before the "escritura" is signed. The transfer tax plus stamp duty is Portugal's equivalent of the UK's Stamp Duty. Once the transfer tax has been paid a Transfer Tax and Stamp duty (IMT + IS) documents are then issued by the tax office, which proves the payment has been made. The transfer tax to pay depends of the value of the property that is declared.

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