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Buying Property in Portugal

Buying a property requires careful preparation of the necessary documents and the completion of a number of procedures to ensure a successful transaction. This article describes the main documents that must be provided and the key steps in the purchase of a property in Portugal by a foreign investor.

The purchase process may be divided into four distinct steps:

Step 1 – Obtaining and analysing the property documentation

After choosing a property to purchase, it is advisable to seek legal advice from a lawyer who will advise on the property documents that are necessary and visit the official offices to obtain them:

i) At the Tax Office:

- Checking ownership, i.e. that the property is properly registered in the vendor’s name, and is free of any tax debts;
- Checking the solvency of the vendor;
- Obtaining an updated title certificate (caderneta predial), stating the number of the cadastral article, address of the property to be purchased, identification of the boundaries (north, south, east, west), description of the property, total area including floor area and built area, the current taxable value and the valuation date;
- The taxable value of properties is determined by a valuation made under the IMI (Municipal Property Tax) Code and is of crucial importance since it serves as the basis for the calculation of the Municipal Property Tax payable which the actual applicable rates are:

a) Rural properties: 0.8%;
b) Urban properties: 0.3% to 0.5%;
c) In the case of mixed properties (with a rural part and an urban part), the relevant tax rate is levied on the taxable value of each part;
d) Properties owned by companies with their tax domicile in a country, territory or region subject to a clearly more favourable tax regime (“tax haven”) included in the list adopted by Administrative Order 292/2011 of 8 November, commonly described as offshore companies, are taxed at a rate of 7.5% regardless of the type of property. This higher rate does not apply, however, to properties owned by individuals.

ii) At the Land Registry:

- Obtaining an up-to-date land registry certificate (certidão predial) for the property. This is arguably the most important document because it not only confirms the ownership of the property, but also the existence of any charges or encumbrances that may have been registered in favour of third parties, in particular whether the property is subject to any mortgages, usufructs, easements, liens, lawsuits and preference or other rights. It also confirms the address of the property, its areas and whether they correspond to those on the title certificate. It may also be possible to obtain the legal history of the property, including the details of previous owners and dates of purchase and sale and any other registrations.

iii) At the Municipal Council Offices:

- Checking that the property was properly licensed for its intended use (residential, commercial, services or other use);
- Obtaining the habitation license identifying the holder of the license, the file number and building license which was the basis for issue of the habitation license, and the identification of the architects and engineers involved in and responsible for construction;
- At the Municipal Council Offices the lawyer will also check the location of the building and any legal restrictions on building, obtain the architectural plans of the building (“As Built” plans) approved by the local Municipal Council or certified copies, which will confirm whether the existing building is consistent with the submitted plans.


Step 2 – Preparation of the promissory contract of purchase and sale (contrato-promessa de compra e venda)

After examination of all the property documents and analysis of the preconditions and restrictions associated with the purchase of the property, the promissory contract of purchase and sale is drawn up. This is the contract by which the parties undertake, by mutual agreement or unilaterally, to sign a future definitive contract. Consequently, the promissory contract must set out all the conditions and obligations underlying the transaction, namely essential and ancillary clauses, any resolutory or precedent conditions that may have been established, the price and payment terms and agreed payment dates, the date for the signature of the definitive contract, the applicable guarantees and penalties and all other conditions safeguarding the interests of both parties on the transaction.


Step 3 – Finalising the sale and purchase of the property

The definitive contract of purchase and sale is often executed at a notary’s office by public deed (escritura pública) but can also be executed by certified private document (documento particular). This is the contract which allows the transfer of ownership of the property against payment of the price and has the effect of (i) transferring ownership, (ii) establishing the obligation to hand over the property, and (iii) establishing the obligation to pay the price.

The responsibility for completing the formalities and meeting the expenses of the definitive contract of purchase and sale falls on the person nominated as such in the promissory contract. In the absence of such a clause, the vendor is responsible for obtaining all the documentation necessary for signature of the deed, except those which by its nature are of the buyer´s responsibility, such as, identity documents, powers of attorney and proof of payment of IMT (Municipal Property Transfer Tax) and Stamp Duty issued by the relevant tax authority. The person responsible for arranging the date for signature of the deed must inform the other party of the date, time and place by the agreed means or by any means that provides proof of receipt.

The usual documents required for signature of the definitive contract of purchase and sale of an urban property include (i) the land registry certificate containing the description of the property and proof of the vendor’s right to sell, (ii) proof of the property’s cadastral situation (entry in or omission from the property cadastre), Municipal Property Transfer Tax and Stamp Duty declarations together with proof of payment, (iv) habitation license (habitability or occupation) or proof of exemption, (v) Building Technical Document (Ficha Técnica de Habitação) where applicable, (vi) Building Energy Certificate (Certificado Energético de edifícios), and (vii) documents certifying the identities of the parties.


Step 4 – Registration of the purchase of the property

Following the purchase of the property, it is necessary to inform the local Tax Office of the purchase in order to be registered as responsible for the property taxes. Such notice must be accompanied by a copy of the deed of purchase and sale. It is also necessary to register the purchase of the property or convert into definitive any provisional registrations at the Land Registry Office.

This entire process invariably requires legal advice from a lawyer specialist in real estate law since his involvement is essential for advising on and completing the transaction.


Information provided by Tiago Felizardo - Lawyer at Almancil