PROPERTIES IN: ALGARVE - EAST, CENTRAL & WEST • LISBON • CASCAIS AND ESTORIL RIVIERA • SILVER COAST
I – GENERAL PRINCIPLES
The main principles of buying a property in your country apply here, in Portugal, but the most important is that you cannot forget that you are in a foreign country, with very specific laws different from your own country. So, after deciding on a property and before committing yourself to a binding contract, use the services of a reputable lawyer, preferably a lawyer who speaks English. He will act on your behalf carrying out searches to check ownership, title, description of the property, mortgages, charges and any interests. Never sign any contract without first consulting your lawyer. The price of a property depends on various factors. Those relevant are: conditions, location, transport, shopping, sports and leisure facilities. If you are not buying directly from a developer, use the service of a Government Licensed Real Estate Agent – Mediador Autorizado. The expected amount of commission would be anywhere from 5% to 10%. If you are buying directly from a developer, check very carefully his reputation and financial standing.
II – THE LEGAL PROCEDURE
The following is a list of authorities and professions which you are likely to come across when deciding to purchase a property in this country.
A – AUTHORITIES AND PROFESSIONS INVOLVED
Advogados (Lawyers) – They graduate from the University after 5 years which is then followed by a period of practical training of 18 months with a senior lawyer who must have at least five years experience. A Lawyer will carry out the functions executed by solicitors and barristers in the U.K. and countries of similar systems. To be able to act in his profession the “Advogado” should be inscribed at the “Ordem dos Advogados” which is equivalent to the “Law Society”. In their profession they are frequently helped by “Solicitadores”, who are not qualified in Law and are equivalent to that of legal executives or solicitors clerks.
Notário (Notary) – Like the Advogado, the Notary is graduated in Law, but with a period of training in a Notary’s Office, Civil, Land and Company Registration Offices- It is the Notary that governs the Department called “Cartório Notarial”. He prepares all types of deeds from purchase and sale, donations and gifts, mortgages, loans, Wills, he also recognises and certifies signatures on documents to be presented to other departments, certifying photocopies of documentation, etc... As a Civil Servant representing the State, the Notary must also verify the legality of documents and make sure that tax and administrative laws are carried out.
Conservador do Registo Predial (Land Registrar) - Has the same qualifications as the Notary and governs the “Conservatória do Registo Predial”, the departments where Registrations regarding the property’s ownership, encumbrances, etc, and similarly related business takes place.
Mediador de Propriedades (Government Licenced Real Estate) – Has a special licence called an Alvará, to act as an intermediary receiving a commission. No particular type of academic qualifications are required, although the Portuguese law requires that such professionals fulfil certain requirements in order to practice
Repartição de Finanças (Tax Department) – This is a Public Department where taxes are paid, etc.
Câmara Municipal (Town Hall) – This body governs the life of the district. It is here that all projects are submitted for approval of construction for every building or development, the supply of all basic services, such as water supply, garbage collection, construction of town roads, issue of licences for habitation and commercial establishments, etc. The head of this elected body is the Presidente da Câmara who is the leader of the political party that received the majority of votes at the local elections.
B - THE PROMISSORY CONTRACT OF PURCHASE AND SALE Formalities
This is a preliminary contract drawn up to cover the purchase of any property. It is known as “promissory” because both parties effectively promise to enter into a final contract to buy and sell the property and this is called the “escritura” (final deed) which is done at a later stage and signed and drawn up before the Notary. The promissory contract of purchase and sale is the vital binding document signed by both parties. It identifies the property, the parties, regulates the terms and conditions agreed, the price, the completion date and all the other relevant conditions. The promissory contract of purchase and sale related to an urban property (house or an apartment) is only valid if signed by both parties in front of a Notary who certifies that a valid licence of habitation or building licence has been issued and is still in force. If what you are buying is a piece of land this rule does not apply
A deposit is required upon signature of the contract. There is no limit for this but experience shows that usually buyers are not prepared to put up front a substantial deposit. It may vary but be prepared to pay a minimum of 10%. It is advisable that this amount should never exceed 50%.
Breach of Contract
If all the formalities mentioned above are fulfilled and the seller then decides he no longer wishes to sell the property, you have two options:
demand compensation equal to twice the amount of the deposit you paid; or
force him to sell it to you seeking for an order of “specific performance” of the contract. This is obtained by taking out legal proceedings against the seller in the Court and involves quite a considerable amount of time, patience and money. On the other hand, if you decide you 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 using the above system of “specific performance”.
C – COMPLETION (ESCRITURA) Escritura means “deed” and is, in fact, the conveyance of a property. This document is prepared and signed before a Notary by you or your lawyer using a power of attorney, and the vendor. At the same time the balance of the price is then paid. An appointment with the Notary has to be organised for signing the “escritura”. This is subsequently drawn up in the notary book and he/she will then proceed to read this to you, after the reading you are required to sign this same document, and state whether or not you have paid the price in full. For the preparation of the “escritura” the Notary will require evidence that everything is legally correct and in perfect order. The following are the main documents required for this purpose:
Certidão de teor da descrição predial (Certificate of land registration) – which proves the description and inscription numbers of the property at the local land registry office, as well as the current owners and any legal charges or encumbrances over the property;
Certificate of Habitation;
Cadernetal Predial – booklet issued by the Tax Department confirming that the property has been registered for tax purposes and identifying the property’s owners and official valuation by the tax department;
A receipt from the Tax Department showing that the IMT (Transfer Tax) has been paid.
D – REGISTRATION
The whole transaction is completed when the application has been filled out for the registration of the property in your name. This is done at the Land Registry Office. For this purpose a notarised copy of the Escritura will be required.
E – TAXES
Relating to your property two taxes must be considered: IMT, a transfer tax equivalent to your Stamp Duty, which is calculated according to a sliding scale that varies from year to year.
Up to € 87.500 - 1%
Superior to € 521.700 - 6%
Between € 87.500 and 521.700 there is a sliding scale increasing with the value of the property.
Plots for urban construction – flat rate of 6,5%
Rustic (mainly agricultural) plots – flat rate of 5%
IMI (Local tax )
Every year you will be asked to pay a tax called IMI, (local tax) if you own a property in Portugal, through your local council. This tax is charged at a rate of 0.4% to 0.8% for urban properties (“villas”, apartments and plots ), which is then charged on the rateable value of the property as assessed by the local Tax Department.
F – SERVICES
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. Make sure that there are no debts left by the previous owner before the signing of the “escritura”. Although a good promissory contract will expressly state that the original owner is responsible for any outstanding debts even if claimed after the “escritura”, the creditors may try to bring the debt to the current owner if for some reason the previous owner does not pay or cannot be found.
G – WILLS
It is advisable to have a Will in Portugal if you own a house here. This is a very simple procedure. It is signed in front of a Notary, but is prepared in advance by your Portuguese lawyer. If you decide to draw one up, then it would be advisable to exclude your Portuguese property from any Will that may have drawn up in your homeland.