Purchasing Property in Portugal

The Portuguese property purchasing process is fairly straightforward and offers good protection for both buyer and seller. The information below will help to guide you through the stages.

Extra costs you will need to consider:
You should allow 3-10% on top of the purchase price to cover things like:

• Purchase Tax (IMT) which is based on a sliding scale from 0% to 6.5% of the declared value.
• Notary charges
• Stamp Duty
• Legal charges usually around 700-1,000 euros. Find out how much your lawyer will charge before you instruct them to do any work!

Buying Property in Portugal – by Gabrielle Collison

Buying a place in Portugal should be easy yet far too many people have fallen foul of the hidden dangers that can bring your property dreams crashing down around you.

In this straightforward guide Gabrielle Collison shares her tips on how to minimise the risks and enjoy a trouble free purchase.

Written in plain English, with none of the hype, this guide contains:

• how to find reputable Portuguese real estate agents
• case studies from home buyers in Portugal like you
• how to get good legal advice for your Portuguese property purchase
• off-plan vs new-build vs resale vs self-build
• how to carry out your own checks on properties in Portugal
• step-by-step Portugal house buying flow charts
• tips for renting a property in Portugal
• advice on selling your Portuguese property
• how to decide where in Portugal to buy your home
• advice on relocating to Portugal and becoming a Portuguese resident
• and much, much more….

Fiscal Number

Numero Fiscal de Contribuinte

Firstly, to purchase property in Portugal, you will need a fiscal (tax) number (Numero Fiscal de Contribuinte). Applying for a fiscal number is a simple procedure and you will be issued with your number immediately. The cost of applying for a fiscal number is about 5 euros.

Go in person to your local tax office (Repartição de Finanças), as well as proof of identity (your residency card, identity card or passport), you will need an address in Portugal to which the tax office can send your fiscal card (Cartão de Contribuinte). If you do not yet have a Portuguese address you will normally be able to use that of a solicitor, estate agent, or a friend. If/when you change address you must report to your new tax office or Taxpayers Advice Office (Serviço de Apoio ao Contribuinte). Most towns have a tax office.

Promessory Contract

Promessa de Compra e Venda

Once you see a property you like, and have your offer accepted, you will normally sign a promessory contract (Promessa de Compra e Venda) with the owner (in which you promise to buy the property, and the owner promises to sell it to you, at an agreed price and within an agreed timescale). At this point you will pay a deposit (normally 10% of the purchase price) and agree on a date (normally anything up to 6 months) by which to complete the purchase. Other conditions may also be specified in the promessory contract, such as completion of any building work, connection of electricity, etc. If you fail to complete the purchase you will lose your deposit, and if the owner fails to complete the sale they must repay you twice the amount of your deposit. It is not necessary to have the Promessa de Compra e Venda drawn up by a solicitor, but we would recommend that you do.

If you want to speed up the purchase of the property, and pay the total purchase price at once, it is not always necessary to complete a promessory contract. If you choose this option, we would highly recommend that you consult a solicitor.

Necessary Documents

Certidão de Teor showing if there are any outstanding mortgages on the property and if the property is registered in the owner’s name.

• Caderneta Predial, from the Fiscal Department (Finanças), detailing the size of the property, its location and boundaries, and a brief description. In the case of land there may also be a drawing of the plot.
• Confirmation from the Tax Department (Finanças) confirming that all the rates bills (IMI) are paid. This is important as any outstanding IMI tax will stay with the property and be the responsibility of the new owners.
• Proof of payment of IMT.
• Houses built or altered after 31 December 2003 should have a “Ficha tecnica de habitação”, containing information about the property such as builder’s details, type of materials used and suppliers, etc.
• Identification documents and tax numbers of the owners and buyers.
• Power of attorney and the representative’s identification document and tax number (if applicable).

If the seller is a company, you will also need to provide:

• Certidão Comercial, issued by the Conservatória do Registo Predial which identifies the partners as well as what powers they have in the company.
• Identification documents and tax numbers of the company partners/owner.
• Power of attorney from the other partner to the one signing the Deeds (if applicable).

Professional Legal Advice

Foreigners, unable to speak Portuguese, or speak it to only a limited degree, often decide to rely on using some form of legal advice when buying property in Portugal.

Types of Representative

The two types of representatives you might approach are either a solicitador(a) or an advogado(a).

A solicitador(a), despite the similarity of the name to the English solicitor, is not the same. In Portugal, a solicitador(a) is more akin to someone who does conveyancing. They do not have to study for a degree and are regulated by the Câmara dos Solicitadores. You can check whether a solicitador(a) is registered with the Câmara dos Solicitadores by going to www.solicitador.net. Go to the bottom left hand corner, where it says Pesquisa Solicitador and put in whatever information you have about the solicitador(a) you are searching for, such as: surname (Apelido), first name (Nome), town/area (Comarca), postal code (Código Postal) and then click on Pesquisar.

A list of solicitadores with that surname in that area should then appear with their registered numbers (Cédula Nunbers). To check for firms of solicitadores, click on Pesquisar sociedades underneath the individual search boxes and put in the name (Nome) and the area/town (Localidade) and then click on Pesquisar.

An advogado(a), is the equivalent of a lawyer, barrister or solicitor in the UK. In general an advogado(a) does not specialise, so you could find a lawyer dealing with a property purchase one day, a divorce the day after that and in court defending a criminal the day after that. However, if you want to find a specialist property lawyer, it may well be worth any extra expense. Lawyers study for 7 years at university and gain the title Dr(a) if they graduate. They are regulated by the Ordem dos Advogados. To check that an advogado(a) is qualified, their principal practising address and registered no (cédula number) go to www.oa.pt and click on Pesquisa de Advogados on the left hand side. Put their name in the box marked Nome Profissional and click on Procurar. Their address, telephone/fax numbers, e-mail address and registered number should be listed.

Surprisingly, advogado(a)s are not obliged to register all their practising addresses, but only a principal office. Lawyers have been found to have one address listed with the Ordem dos Advogados and a completely different one in the yellow pages (páginas amarelas). The Portuguese yellow pages can be found in both Portuguese and English at www.pai.pt. Many lawyers work together as a firm and you should check on this when employing an individual lawyer. The Ordem dos Advogados web site is currently not listing details of firms, but should you wish to check on this, you can contact them via telephone, as they usually have an English speaking operative on their switchboard. Click on contactos on the left hand side on the home page of their site for the contact details.

Doing Your Own Checks

In an ideal world using a legal representative should mean that you are protected and that you receive honest and good advice. However, just because someone has a degree and a few initials after their name, it does not guarantee that they will behave in a moral and ethical manner. It is strongly recommended that you also do your own checks alongside those of your legal representative. If you don’t speak Portuguese yourself, take an independent Portuguese translator, or reliable Portuguese speaking friend, to do these checks. Don’t cut corners on this because of the extra time or expense. It could cost you considerably more later.

Selecting Your Legal Representative

Many real estate agents, builders and developers will recommend a lawyer or solicitador(a) to you. This will more often than not be their lawyer or solicitador(a). It is much better to choose your own independent legal representation and preferably from an area well away from the real estate agent, builder or developer. If you don’t, you can never be sure that they will be acting in your best interests and not those of the vendor. It has also been known for a lawyer to act for both vendor and purchaser. This is not permitted and totally unethical. Another practise is to sometimes get a lawyer “friend” (often working from the same office) to deal with the other party. In effect, the purchase and sale is then still very much “under one roof.” Use your common sense when selecting your legal advice and keep a close eye on proceedings. Ask for quotations from a few lawyers/solicitadores. On average they charge 1 to 2.5% of the property purchase value for their legal fees. However, going for the cheapest lawyer, in order to try to save money isn’t necessarily a good idea.

Many thanks to Gabrielle Collison for kindly allowing us to use the above extract from her book
Buying Property in Portugal.

Power of Attorney

Procuração

If it is not possible for you to be present to sign the escritura, you may grant someone power of attorney (Procuração) to act on your behalf.

The easiest way to grant a power of attorney is whilst you are in Portugal, at the Notary’s Office. Otherwise, the power of attorney can be prepared by the Portuguese Consulate in your country of residence, or by a local notary – but in this case it must be accompanied by a Notary Certificate of Apostille of the Hague Convention and translated into Portuguese.

Neighbours’ Right to Buy (Exercício de Direito de Preferência)

When a vendor has a purchaser for a rustic article (prédio rustico – land ) or a mixed article (prédio misto – an urban article inside a rustic article), and a price and date for completion is agreed, the vendor must inform all their neighbours (whose property borders the article for sale) by letter, sent by registered post. The letter must state the article number/s of the property for sale, the name/s, address/es, and fiscal number/s of the purchaser/s, the place and date of the escritura, and the agreed price. The property’s paperwork must be enclosed with the letter. By law, the vendor must wait 8 days for an answer. If no answer is forthcoming, the law assumes that no one wants to buy the property.

If a neighbour wants to purchase the property, they must be able to complete on the day that is already scheduled, and pay the price already agreed. If more than one neighbour would like to purchase the property, then there are some cases which give preference to one of them (for example if they gave up some land to build a street, or other access to the property that is for sale). If no-one has legal preference then the vendor can offer it up for auction between the interested parties and it goes to the highest bidder.

When purchasing a property you must ensure that this has been done and none of the neighbours want to purchase the property (your lawyer should check for you). If this is not done then the neighbours may still have the right to buy, at the agreed price, years into the future!

Purchase Tax

Imposto Municipal Sobre Transmissão Onerosa de Imóveis (IMT)

You must pay any purchase tax (IMT) before you complete the sale and proof of payment must be shown to the notary.

There are 2 different scales for IMT, one applies to permanent residences and one for second homes, see below:

IMT for land only (prédio rustico) is 5%.
IMT for construction & urban properties not for habitation (eg Armazens) is 6.5%.
For mixed land (predios mistos) the rustic part attracts the flat rate of 5%, with the urban part rated either as the chart below or 6.5%.

IMT on other properties is on a sliding scale based on the value of the property:

These figures are correct for 2011.

Paying for your property

You may find it beneficial to open a Portuguese bank account to pay for the purchase of property, taxes, solicitors, etc. and utility bills, rates, etc. that you will need to pay when owing a property in Portugal.

There are a number of companies specialising in foreign currency exchange, especially for the purchase of property abroad, who often offer a much more favourable rate than banks. We work with one such company, Foreign Currency Exchange:

• www.foreign-currency-uk.com/?node=pureportugal

Completion of Sale

Escritura Publica de Compra e Venda

To complete, you (or the owner, or your/their solicitor) must make an appointment with the Notary. All parties involved in the purchase/sale must attend at the Notary’s office, unless you have granted someone power of attorney to act on your behalf (see below). If you don’t speak portuguese you must have a translator present, and you must take with you all the relevant documents (your solicitor will normally organise this). You and the sellers will be read the Deed of Purchase and Sale (Escritura Publica de Compra e Venda) which you will then all sign. You must now pay the balance of the purchase price.

The property is now yours, but you must still take an official copy of the escritura (which you get from the notary) to the land registry (Conservatória do Registo Predial) to have the property registered in your name. If the property is to be your main residence you will normally be able to claim the first 6 years free of rates (IMI), as long as you take up residence within the first six months after registering the property in your name.

Exemption from IMI (Annual Rates / Council Tax)

Isenção de Imposto Municipal sobre Imóveis

First-time buyers may apply for exemption from paying IMI. The request should be made, within 60 days from the signing of the escritura, at the Finanças for the area where the property is located. Exemption is only granted on main residences (not on second homes or holiday homes). The period of acquisition is counted either from the date of acquisition (for a property which is not new) or emission of the municipal license of use (for a newly-built property).