Step-by-Step buying guide.
When buying a property abroad it is essentail to understand the process and what is invloved, so you feel comfortable each step of the way. The following outlines what happens from seeing a property that you wiah to buy, through to completion and receiving the keys to your place in the sun.
The process of property purchase in Portugal is quite straight forward
- Before you start your search, the first step is to make sure your finances are in place or you have a decision in principle, if you are looking to borrow money in the form of a mortgage. Make sure you have accounted for the fees associated with buying a property and any costs in realtion to furnishing the properrty etc.
- Find the property of your choice and make a formal offer.
- Once your offer has been accepted, the next step is to hire the services of a lawyer, who will guide and assist you through the process.
A lawyer’s task usually involve drawing up contracts and initiating the process of inspecting the property’s title insuring that no legal snarls will come up after the transfer. A search will be made to check the land registry (Conservatoria de Registo Predial) title at the local municipality and another search at the Inland Revenue (Repartição de Finanças) to ensure the tax registration on the property and that there are no unpaid charges. A fiscal number (Numero de Contribuinte) will be acquired for you through the local tax office as this will be necessary for most transactions in Portugal.
- If you are satisfied with the property searches and your lawyer feels confident for you to proceed, a promissory contract (Contrato de Promessa de Compra e Venda), details of the conditions of sale and other agreements regarding the transfer will then be drawn. Once this has been signed and notarized, both parties become legally bound to see the transfer through. A deposit 10% to 30% of the purchase price is usually lodged at this stage and the parties will agree with the notary to record a date for the completion of the purchase. The buyer’s next task is to pay the municipal property tax or Imposto Municipal Sobre Transamissões-IMT.
- The transaction ends with the execution of the Deed of Purchase and Sale (Escritura Publica de Compra e Venda) which is signed before a notary and officially recorded. At the same time the balance of the purchase price is paid according to the provisions of the Promissory Contract. The property will next be registered in your name at the Conservatoria de Registo Predial. After which the transfer is complete and the property is yours.
Legal Procedures in more detail
Property searches and due diligence:
When purchasing a property ensure that all searches and due diligence are carried out by a registered solicitor or lawyer.
The due diligence and searches should verify the following:
- all property documentation is in good legal order
- that the vendors have good title to the property
- if the property is leasehold or freehold
- if right of first option must be given by the vendors
- that there are no onus, charges, mortgages, loans or third party rights which affect the property
- that the property has got valid planning permission.
Documents needed for a purchase and sale of a urban property:
- Updated and valid certificate of register
- Updated and valid tax registry certificate “caderneta predial”
- Habitation License for properties built after the 7th August 1951
- Town Hall Certificate of Habitation License exemption, if property was built before the 7th August 1951
- Technical File of Habitation (for habitational properties built after the end of March 2004)
- Certified plans for the property
- Energy Efficiency Certificate
- IMT (purchase tax) payment
- IS (stamp duty) payment
- Other documents may be required depending on the particular case or property, namely location, loans, mortgages, etc.
Once initial searches and due diligence is completed and satisfactory, a promissory contract is usually drafted and signed. This contract sets out all the transaction conditions (price, deposit, date of completion, amongst other conditions agreed by the parties) and it is the only binding document for both parties from the time the purchase is agreed until the completion date.
Usually upon signing of the said contract a deposit is paid. Although the parties may agree upon the value of the deposit, the most common is 10% of the price. The rest of the price will be due upon signing of the title deed.
The deposit is a very important factor to consider as it has relevance in case of breach of contract. In Portugal if the purchasers default on the terms of the contract and do not complete the purchase, they will lose the deposit paid in favor of the vendors. If the vendors default on the terms of the contract and do not complete the sale they will have to refund the purchasers for the amount of the deposit received plus the same amount in compensation.
Final searches to confirm the initial due diligence should be carried out prior to the completion date.
The final title deed of transfer of the property can be executed before a Notary Public, a lawyer or solicitor who do not represent either of the parties or at the Casa Pronta office (land registry office).
Following the title deed, the records in the tax office and the land registry office must be updated to show the new owners. This is extremely important as the registration update is the proof of ownership and advertises the position of the new owners to third parties.