BUYING A PROPERTY IN PORTUGAL

 

Over the last decade there have been a number of changes in Portugal regarding property purchase. Unlike many other countries, there are no restrictions in Portugal for foreigners who want to buy property, and buyers can choose whether to buy in their own name or through a Portuguese company.

The Land Registry is now very reliable, so a local lawyer can quickly and easily verify the credentials and essential details of the property in question, to ensure you buy what you see.

 

The most important point when deciding to buy a holiday home is to ensure that the developer or estate agent is serious, financially sound and has a good reputation. Because the Algarve is in many ways a small community, a good local lawyer will be able to identify the most reputable developers or estate agents for you - and those to watch out for!

New building regulations are up to European standards and set strict criteria for insulation, double glazing and so on. Local authorities are now much stricter on all aspects of construction, ensuring that regulations are met.

Prices and areas differ greatly along the Algarve. If you already know the area and type of property you want you can heavily reduce the amount of time required when viewing.

Once you have found the property of your dreams, request an inspection by an independent surveyor, which is meant to define the structural and mechanical condition of it.

Once you have agreed on the price and the purchase terms with the vendor, it is essential you appoint a lawyer to legally represent you and provide advice before signing any agreement or contract. If you wish, we can provide a list of approved English speaking lawyers. Please take note that it can lead to major complications if you decline to use a lawyer. Also you should not use the same lawyer who is representing the vendor.

 

Your Lawyer will conduct the appropriate search and investigation regarding the property at the Town Hall, to verify the property has a valid habitation license or construction license, the Tax office to make sure there are no debts and the Land Registry office to confirm the person selling the property is the actual owner and whether there are any charges on the property and will confirm all registrations match.

A promissory contract of purchase and sale will be prepared, including all terms and conditions negotiated. The promissory contract shall ensure that, at the date of transfer of the title to your name, the property is properly registered and free of any liens. At this stage, a down payment of 10% on the sales price is usually paid to the vendor, in order to reserve the property until completion. This deposit is non-refundable if the purchase is not completed.

 

Non-resident individuals are obliged to appoint a Portuguese tax resident accountant company to carry out their fiscal representation before purchasing a property. The appointment of a fiscal representative is relatively straightforward, requiring only a letter of appointment, nominating the fiscal representative, and the payment of the required fee. The fiscal representative will apply for and obtain a fiscal number, which is required for buying a property, opening a bank account, contracting electricity, water and so forth. Several taxes such as the IMT (the property transfer tax) cannot be paid by the purchaser of a property, without the previous registration of a fiscal representative at the local tax office. Also the IMI (the municipal property tax) bills will only he handed over to the fiscal representative. Portugal operates a system of self-assessment for the collection of the income tax. As a consequence, non-residents with a rental income or a capital gain in Portugal are under an obligation to file tax returns. The fiscal representative will acquire the necessary forms, complete them and pay the taxes due, all within a required period of time. All communications from the tax office will be sent to the fiscal representative.
 

The property transfer tax (stamp duty), called IMT, has to be paid before completion.

If you have requested a mortgage loan, a first legal charge must be provisionally registered in favor of the lender at the local Land Registry office.

The sale is formally completed when the public title deeds (Escritura, the title document which specifies the name of the owner and includes a detailed description of the property and its price) of purchase are signed in front of a Notary, the final payment has been made, and possession is given to the buyer.

The purchaser may attend the signing of the deed in the presence of the Notary or give a power of attorney to the lawyer to attend on his behalf.

Any contract of finance is usually signed concurrently. Finally, your lawyer is obliged to obtain all necessary registrations at the Tax office and Land Registry office. You become the proud owner of your second home in the Algarve!

 
 

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