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Property Buying Process in Portugal

The first and perhaps the most important suggestion is to always deal with a Government-licensed agent. Every licensed agent must display their ‘AMI’ licence in their office and on all advertising. Direct Villas is officially licensed under the following number: AMI 13363. Therefore we always advise to work with professionals, and you will have rest in mind of how easy it is in purchasing a property in Portugal.

We are always here for you to help with any questions. We are not a standard 09h-17h office, we are here for you, when you the client have the questions! A simple WhatsApp message, a quick email or a call, our clients say we are known for helping and give the advise you need. Our friendly personal dynamic team is here to help you.

Lets start, you now have found the property of your dreams… in the sunny Algarve in Portugal!

First of all:

Place your offer and very important provide us with much information as possible to the vendor to help bringing your offer inn.

Please bare in mind:

  • How quickly you wish to complete the purchase;
  • If you need any mortgage;
  • How much deposit you are prepared to pay;
  • If you wish to buy any of the items, fixtures or fittings.

Your offer should be discussed with us first – we usually know the owner very well and can help you to negotiate a good price which both parties will be agreeing. The vendor and the purchaser.

Second – a very important part:

We recommend that you seek the services of a registered and qualified Lawyer. We can suggest various lawyers who will re assure you of your choice.

You can raise any issues that need to be addressed immediately plus (if necessary) recommend additional guarantees that should be inserted into contracts.

A lawyer is the person who will advise exactly what you are buying. She or him will advise you and stand by you during the whole process, they will advise to take a survey of the property and help you with any doubts. Helping with the translations as the purchase laws are differently.

We have very reliable English-German-Dutch speaking lawyers, long based lawyer firms with a solid professional service at a reasonable cost.

You can give your lawyer a power of attorney, hereby you save time and travelling back and forwards to Portugal to sign documents in person.

Your lawyer will ensure that:

  • The property is fully registered in the Vendor’s name;
  • There are no changes, mortgages or encumbrances registered on the property;
  • There are no fiscal debts, like Predial tax / Contribuição Autárquica;
  • The property was built in accordance with Portuguese regulations and that planning permission was granted by means of a document known as a habitation licence.

They will also help with changing the connection / re-connection of services such as gas, electric etc in your name or the company name.

The Promissory Contract

The promissory contract is a preliminary contract drawn-up to cover the purchase of any property.

It is ‘promissory’ because both parties effectively promise to enter into a final contract to buy / sell the property – known as the escritura (final deed) – which is done at a later stage, drawn up and signed before a public notary.

This is the vital binding document signed by both parties. It identifies the parties, regulates the terms & conditions agreed (such as ‘subject to mortgage’), the price, the completion date, and any other relevant conditions.

A deposit is also required upon signing the promissory contract. The amount may vary, but be prepared to pay a minimum of 10% of the agreed purchase price. It is advisable that this amount should never exceed 20-30%. This deposit is released / paid upon signing the promissory contract. In individual circumstances – and with most new-build properties – a separate payment structure will be advised and agreed.

If all the above formalities are fulfilled but the vendor then decides he/she no longer wishes to sell the property (i.e. breach of contract) you have two options:

  • Demand compensation equal to twice the amount of the deposit you paid;
  • Force him to sell it to you by seeking an order of ‘specific performance’ of the contract.

This is obtained by taking out legal proceedings against the vendor in court and involves a considerable amount of time, money and patience.

If, on the other hand, it is you who no longer wish to proceed with the purchase, then your deposit is lost to the vendor, who can also try and force you to buy through the same system of ‘specific performance’.

A promissory contract is not obligatory but, once signed, it becomes fully binding and must be fulfilled.

After the promissory contract, we then enter the notarial deed of purchase and sale.

The Deed

The deed is known in Portugal as: ‘Escritura Pública de Compra e Venda’, the process through which ownership of the property is transferred to you.

All the property documents must be submitted to the notary, together with proof of payment of tax on the transfer of the property known as ‘IMT’. The escritura is signed at a notary’s office on the same date it was agreed to finalize the purchase, and the balance of the purchase price is paid to the vendor at this time.

Even though you have become the owner of the property by signing the escritura, it is only by final registration of the property in your name which grants you full security of ownership, and protects you against the actions of any third parties.

The connection of water, electricity and telephone follows the acquisition of your house. You will be required to fill out new application contracts for the supply of these services to your property.

Your lawyer will ensure that there are no debts left by the previous owner before the signing of the escritura, as otherwise  you will be liable for any outstanding payments.

Important Documents

Fiscal Number – Número de Contribuinte – A fiscal number is required for many transactions, such as opening a Portuguese bank account, purchasing a property etc. Non-resident individuals must empower a Portuguese tax resident person or company to carry out their fiscal representation before purchasing a property. Fiscal representation basically means that they will act in respect of your tax affairs with Portuguese revenue.

Land Registry – Registo Predial – A search will be made to check the land registry title at the local municipality. Where appropriate, checks on licences and permissions will be made.

Tax department document – Repartição de Finanças – A search will be made to ensure tax registration on the property; also that there are no charges which may adversely affect the property.

Habitation Licence – Licença da Habitação/Utilização – Properties for habitation must have a habitation licence, confirming the property has been constructed in accordance with the plans submitted to the Camara (local council). Properties built before 1951 are exempt from this requirement. Properties for other uses (e.g. storage) will have a utilization licence, not a habitation licence.

House Passport – Ficha Técnica – This is a relatively recent requirement, which came into effect on 16th August 2004.
All houses completed after 30th March 2004 must have a ‘ficha técnica’ which gives technical details of the construction type, all materials etc. The builder of the property provides this document.

Taxes and additional costs

IMT Property Purchase Tax – Prior to completion of the transaction the purchaser is required to pay a property transfer tax called IMT to the Finanças (similar to paying Stamp Duty in the UK).

On properties for habitation the tax rate varies according to the acquisition price of the property (a sliding scale based on the value of the property ) and can go up to a max of 6%. On land on which one cannot build the applicable rate is 5%.

For building land or other types of properties the applicable rate is 6.5% (08.2016). The minimum amount of IMT to be paid is based on the Finanças valuation of the property (property ratable value), even if the final sale price was actually lower.

Stamp Duty – In addition, a so-called ‘Stamp Duty’ of approximately 0.8% must also be paid.

Notary Fees – Notary fees and registration fees should not exceed €1.000,00 (One thousand euros).

Disclaimer: The information above is to give buyers an indication of the costs involved in purchasing property in Portugal. This information can change without prior warning. Therefore strongly urges all buyers to appoint a lawyer to act on their behalf.

If you need more information, or you have a query regarding anything to do with purchasing property in Portugal, please contact us by email, and we’ll be happy to assist.

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