GUIDE TO BUYING A PROPERTY
This is a guide to help you understand the basic steps to buying a property in Portugal. It is by no means a comprehensive document and legal advice should always be sought from an English speaking Lawyer, ideally based in the area that you are buying in and the other professional bodies involved. McCarrick & O’Donnell Estate Agents aim is to help all of their clients make informed decisions based on sound advice.
Only use a Government licensed real estate agent. This is a license granted by the state after required qualifications are gained. The agent is also bonded by the State by way of an Insurance Cover in the case of proven disputes.
Always use a Lawyer when purchasing a property in Portugal. Most Lawyers speak English and will give you a break down of costs involved. Their fee is normally between 1.5% - 2% of the sale price.
It is the role of the estate agent to collect the necessary legal paperwork from the vendor relating to the property before offering the property for sale on the market. It is the Lawyers role to check that the documents are up to date and that the information within the documents about the construction of the property corresponds with the information lodged in the Town Hall and Tax Office.
All residential property must have the following documents:
a) Habitation License for property constructed after 1951 or a certificate to prove that the property was built prior to 1951
b) Certidão de Teor registered from the Land Registry Office
c) Caderneta Predial from the Tax Office
d) Ficha Tecnica for all properties completed after March 2004 (This is a document detailing the construction of the property and the materials used)
If buying a rural property it is necessary that the property have a Caderneta Rustica. This is a detailed and an up-to-date description of the property. This document is issued by the local Tax Office.
In the past many properties were purchased through an Offshore Company. This is where the property is owned by a Company registered outside of Portugal through a Share Purchase Agreement. This type of ownership presents added annual costs and most lawyers are conversant with this style of transaction. Buyers should make themselves aware of the advantages and disadvantages prior to deciding whether to buy the property or not. Your estate agent or Lawyer should be able to help you with this.
If buying a property with the aid of a mortgage, get financial advice first. You may be able to borrow more than you first thought as the interest rates in Portugal are very reasonable. Consider getting a mortgage agreement in principle as this puts you in a stronger bargaining position with a vendor than someone who has not already done so.
The Vendor and Purchaser will agree a Promissory Contract detailing the conditions of Sale - "Contrato de Promessa de Compra e Venda". The Contract is then legalized by registering it in the local Notary Office. It is legally binding on both sides and the law states that the vendor must repay twice the deposit should he/she withdraw from the sale. If the buyer fails to complete he/she forfeits the total deposit. The Lawyer will explain this.
A document named "Procuração Publica" is prepared with the necessary details and this document is signed and registered by the Notary. This official document can also be created in the Portuguese language outside Portugal in a Portuguese Consul in a foreign country, or, in a Notary in the language of the country concerned. In the case of the latter the document must have the Seal of the Notary and an Apostil attached. An official translation into the Portuguese language will later be necessary.
Every buyer must obtain a Fiscal Number from the local Tax Office (Finanças). (Your Estate Agent or Lawyer can assist you with this).
Prior to the completion of the sale, the purchase will usually be subject to IMT tax. ‘Imposto Munipal Sobre Transmissões’ This Tax is paid in the local Tax Office nearest to the location of the property being purchased. The amount charged is dependent upon the type of property and the sale price. In certain cases the buyer may be exempt from paying the Tax if the sale price is below € 85,500.00; however, this is a very rare occurrence these days.
Below is a table of the IMT tax payable on all urban purchases. All Rural properties are subject to a flat 5% Tax based on the sale price. Any Offshore Company purchase is subject to a Tax of 15% applied to the sale price.
When all the above requirements have been completed the act of sale can proceed in any Notary Office. This act is known as the "Escritura de Compra e Venda" which takes place in front of the selected Notary and is recorded in the official books. The Notary will check prior to the completion of the sale that all the necessary documents are correct to ensure that the sale can complete according to the facts provided. It is then that payment is normally given to the seller, and when applicable, the balance of purchase has to be made according to the signed Contract in Point 2 above. After the act is recorded the Notary Office will issue a photocopy of the entry which is the proof to the buyer that the act has officially taken place. The photocopy will carry the seal of the Notary but as further official copies can be requested at any time this document should not be mistaken for a "Title Deed"- as known in the UK.
After completion the property is registered in the new owners name in the Land Registry Office. (Conservatória do Registo Predial). This registration is not obligatory until the owner wishes to sell the property. However, it is strongly recommend that the registration be done immediately after the Notary act to prevent and protect against possible financial abuse by the previous owner.
If you have any questions about buying a property in Portugal please contact us for more information.
THE BUYING PROCESS
Buying a property in Portugal can be a smooth and easy transaction but equally it can be a nightmare experience, so choosing the right professionals to work with and guide you through the purchasing process is another important decision that you have to make. We at McCarrick & ODonnell Estate Agents aim to help our clients make informed buying decisions based on sound advice. This document is aimed at informing the purchasers of the different stages involved in purchasing a property in Portugal, step by step.
From an offer being accepted to Promissory Contract can take anything from 7 days to 60 days depending on whether the purchaser needs a mortgage or not and if all of the vendor documents are in order. Promissory contract to Escritura can take as little as 7 days but normally takes between 30 and 60 days. The average mortgage assisted sale time is approximately 3 months. These are the same average time scales as in the UK.
What the purchaser should do;
- Prospective purchaser views property
- Tenders offer to Estate Agent
- Estate Agent informs vendor
If the offer is accepted
- Purchaser should receive a confirmation of sale letter from the agent
- Instruct a lawyer
- Pay reservation deposit to lawyer (optional)
- Appoint a Power of Attorney (if not going to be present for the signings.)
- Obtain a fiscal (Contribuinte) number (We or lawyer can help with this)
- Set up bank account with mortgagor (We can help with this)
- Apply for a mortgage
- Purchaser receives mortgage offer
- Purchaser and vendor agree a date for signing the Promissory contract and the Escritura. (Exchange of contracts and completion)
- Purchaser pays 10% - 30% deposit to Lawyer
- Promissory Contract signed
- Purchaser pays IMT tax via Lawyer
- Purchaser pays Portuguese Stamp Duty (levied on any documents, books, papers, acts, deeds and products) (0.8% of the purchase price) via Lawyer
- Purchaser and Vendor sign Escritura (Deed)
- Registration of the sale with Conservatória do Registo Predial (Land Registry) at a Notary office and grants full security of ownership)
The Banks Role;
In order to purchase a property in Portugal, you will be required to open a bank account first
The bank will require from you:
- Fiscal number
- Certified copy of ID card or passport
If you require a mortgage the bank will need from you:
- 3 months payslips (Originals)
- Last 3 years P60 (Check if 3 or 1 yrs P60)
- Last 6 months personal bank statements
- Bank references
- 3 years audited accounts (check if 2 yrs)
- 6 months bank statements
- Latest mortgage statement from UK if applicable
- Copy of the signed Contrato Promessa de Compra e Venda? (Sales Contract)
- Plans/drawings of the site and/or plans of the property
- If constructing/renovating the property copies of Planning Permission and Building Licenses
- Credit report on mortgagee
- Detailed address of property to be purchased
- Contact details of key holder to the property for the evaluation
The Mortgage Process:
- Mortgage request received by bank
- Life assurance and building insurance arranged
- Formal mortgage approval subject to valuation and life
- insurance Bank instructs surveyor to value property
- Bank receives results from surveyor
- Medical examination if required
- Subject to the results - a mortgage offer is made
- Bank supplies lawyer with provisional mortgage registration documents
- Lawyer provisionally registers the purchase on behalf of the purchaser and the mortgage and returns documents to the bank
- Date agreed for funds to be released (Bank drafts final deed for mortgage)
- Funds released
- Insurances and life assurance in place
The Taxes IMT tax due (UK equivalent of Stamp Duty) (Paid at any Finanças) (Tax office)
- Habitation property: between 0% if purchase price is below Euros € 81.600,00 and 6% if above € 510.000,00
- Rustic property at a flat rate of 5%
- Commercial property or land for construction at a flat rate of 6.5%.
- Offshore companies domiciled in one of the 83 blacklisted jurisdiction at a flat rate of 15%
- Offshore companies domiciled in other jurisdictions at normal rate as described above.
- IMI tax (Property Rates) taxed at a rate between 0.5% - 0.8% of the property? s tax value on properties which tax value hasn? t been reassessed according to the new IMI, and between 0,2% and 0,5% on properties which tax value has been determined according to the new IMI Law.
- Portuguese Stamp Duty levied on any documents, books, papers, acts, deeds and products. Currently (0.8% of the purchase price).
The Lawyers Role
The Lawyers Fee
- This normally works out to be approximately 1.5% - 2% of the agreed sale price.
Buying, selling and financing a property in the Algarve can be a very straightforward process as is in the UK, however there are some differences that a buyer should be aware of. There is information on the various pages on our website about buying, selling and financing a property. This information is for guidance only and is not a difinitive document. The laws and regulations do change and a Lawyer should always be consulted in the process. All information is correct at the time of insertion onto the website.
If you have any questions please do not hesitate to 'contact us' and our friendly, professional staff will be happy to help you or refer you to the correct person to answer your questions. We have agreed protocols with professionals in all aspects of the real estate industry to ensure that our cleints are given the best advice and excellent client care.