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Portugal > Articles

Portugal

A Brief Guide To Buying Property In Portugal

Tuesday August 02, 2016 (12:02:07)

(c) Husond on Wikipedia

Europe’s southern-most and oldest nation state, Portugal, lies on a part of the western littoral of the Iberian Peninsula. It shares its borders with Spain to the east and north as well as the Atlantic Ocean to the south and west.

Characterized by its golden beaches, captivating cities, medieval castles and cobblestone villages, Portugal has a lot to offer all its tourists as well as its residents.

This country’s climate, infrastructure, healthcare, cost of living and pace of life attract expats from all over the world.

In fact, for decades now, Portugal has been a very popular holiday, retirement and second-home destination for many Europeans, especially people from the United Kingdom.

Expats who move to this country for professional purposes usually settle down in Lisbon, the capital, as it is the commercial, industrial and financial hub. Porto, the second largest city around 300 kilometers north of Lisbon, is also home to a huge number of working foreigners. However, a majority of senior expats have settled down in the fishing villages of the Silver Coast. The Green Coast is also a favorite with older foreigners as it offers the best value for real estate in the country.

Making the decision to purchase property overseas can be quite exciting; however, whether it is a holiday home, an investment, or a full-time relocation option, you need to proceed with caution at every step of the way. The procedure for buying a house in Portugal is quite similar to any other foreign country. Yet, several outsiders have been caught up in red tape for months, mainly because they aren’t aware of all the relevant policies and procedures.

Being an expatriate, there are a few considerations that you will need to keep in mind before making any kind of investment in a different nation. Below is a brief guide to buying property in Portugal as an outsider.

Hire a local to advise and represent you

It isn’t really necessary for you to know Portuguese, but enlisting the help of some who does speak the language can be highly advantageous when it comes to dealing with various government authorities as well as vendors. Ideally, foreigners are advised to hire a local lawyer or solicitor who is very well versed in not only the local language but also the property laws.

Legal representation in this country can be of two types: a solicitor (solicitador) and a lawyer (advogado). Solicitors are more like specialists who don’t need a degree in law but have to be registered with the Camara dos Solicitadors. As a general rule of the thumb, the solicitor only performs the basic functions of the sale.

On the other hand, the advogados are equivalent to licensed and qualified attorneys in the UK or US. They perform detailed investigations and validate all the paperwork when involved in a real estate deal. Of course, the service of a legal expert comes at an additional cost, which can be quite high.

Real estate agents often advise their foreign clients against hiring a lawyer and offer to perform the same service for a nominal fee. In such instances, you may just end up with one common solicitor acting on behalf of you as well as the owner. Before engaging the services of any agent, make sure that they are certified by the Instituto da Construcāo e do Imobiliario (INCI) and ask for their License or AMI number.

Many expats ask their local friends and acquaintances to assist them through the procedure. Do bear in mind that all the paperwork is in Portuguese and you will therefore be completely dependent on the person you involve to understand what is happening. Make sure that you engage the services of someone you know well and can rely on completely.

Obtain a fiscal number

In order to purchase any kind of property in Portugal, it is important for people to have a fiscal Nnumber, locally known as Numero De Identificação Fiscal or NIF. This is like a Portuguese Tax Identification or VAT number and you can get this from the Financas department at the office council (camara municipal).

To initiate the procedure, make a trip to the taxation office or the Citizens’ Bureau in the area where you will be buying the property. Carry your valid passport (or citizen card), along with photocopies, a filled-in form and a declaration of the Fiscal Representative (if applicable). You can apply for this number through a lawyer or an agent. In this case, you also have to submit a Power of Attorney, which gives your representative permission to apply for the NIF on your behalf.

Do bear in mind that if the property is in the name of more than one person, each one will need to have their own local fiscal number. Getting the NIF is mandatory even if you do not plan on becoming a resident of Portugal. Once you have the number, you need to provide an address within the country.

The NIF is an important document and you will require it not just for buying your property, but also opening a bank account or undertaking any type of official matter within the country. For more information on the registration formalities log on to www.nif.pt. The website is in Portuguese but you should be able to translate it to English or any other language.

Formalize the sale

Property prices in some of the areas of Portugal may seem relatively affordable if you are from the UK, North America or certain European nations. Yet, it is important to bargain or negotiate with the seller before agreeing to final price of the sale.

Do bear in mind that it is a common practice for Portuguese homeowners to list their properties with several real estate agents in order to improve their chances of finding a buyer quickly. Hence, it takes a while to get the property off the market, in spite of a verbal agreement between the buyer and seller. Many of the owners continue getting offers from other interested parties, even after they agree to sell their property to a potential buyer for a certain amount. Deals often fall through because of this problem.

However, once a deposit has been put down and a formal agreement is signed, the seller is less likely to go back on their word. It is therefore best to get into a contract as soon as possible if you really are interested. Make sure that you conduct a thorough inspection of the premises and check that all the property papers are in place before paying a deposit.

Check the documents

Any seller should be able to produce certain documents to prove that a house is ready for sale. These are –

- Tax Registration Document (Caderneta Predial) from the tax office, which shows the taxation status of the property, including its inscription for fiscal purposes. This paper should bear the name of the current owner as well as his fiscal number.
- Land Registry Document (Certidão de Teor), which shows whose name the property is in, who has the right to the property and if there are any outstanding mortgages, charges or encumbrances registered against it.
- Habitation License (Licença de Habitabilidade), which is mandatory for any property that has been built after 1951. This document mainly proves that at some point the property was certified as being fit for human habitation.
- The Technical Report (Ficha Técnica de Habitação), containing the builder’s details like the material used for construction as well as other relevant technical information.
- Energy Rating Certificate, to show that the property is in accordance with the environmental laws. Since January 1st 2009, all properties in Portugal are rated on a scale from A to G (A being the most environmentally friendly).
Property Plans, which should be checked carefully by a lawyer.

Previously, people just knew where the boundary of one’s property started and ended. At times, people marked the boundaries with rocks or trees. However, the land registry authorities now require an accurate picture of the land when they update their records with the details of the purchase. Make sure that a topographical survey is conducted and documented.

Do not proceed with the transaction unless the seller can show you the original copies of all the documents mentioned above. Once the deal is completed both the parties sign the final contract or escritura and the ownership is transferred to the buyer.

Rule out the involvement of other parties

A majority of the older properties in Portugal have been passed down through several generations over the years and because of this, several people from extended families may claim a share in it. Unfortunately, all the stakeholders have to agree to the transaction, no matter how small their share is. If even one of the owners is not in favor of the sale, the entire deal can fall through completely.

It is therefore important for your lawyer to conduct a thorough investigation into the ownership status of the property and ensure that no unknown parties can get involved in the deal at a later stage. If you are dealing with more than one owner, make sure that none of them have any objections to the sale.

Prepare the Promissory Contract

After all the preliminary checks are complete and both the parties decide to proceed with the sale, a Promissory Contract (Contrato De Promessa De Compra E Venda) is made. At this point, the seller usually asks for a deposit of around 10% or more.

After this contract is signed, penalties have to be paid in case either of the parties decides to back out of the deal. Generally, if the buyer can’t proceed with the sale, they have to forfeit the deposit and if the seller decides to cancel the transaction, they are legally obliged to return double the deposit amount.

Some of the details that should be included in this contract are:

- Identification information of the buyers and sellers
- Property identification number, registration number and tax number
- Confirmation of clear title
- Sale and deposit amounts agreed upon
- Deadline (date) for signing the final contract
- Use of property in the interim, if required

Almost any lawyer can help draw up the Promissory Contract.

Draw up the deed

After signing the Promissory Contract, your lawyer will have to start working on the Deed of Purchase and Sale or Escitura Publica de Compra e Venda. In the interim, certain checks should be conducted, such as:

- Planning restrictions that could restrict future plans
- Payments of utility bills and taxes (all outstanding debts on property are inherited by the new owner)
- Compliance of the property with the habitation license
- Inclusion of any fixtures or furniture

The Escitura has to be signed in the presence of a Notary and the rest of the payment is made at the same time. You will receive a stamped copy of the contract, signed by the Notary. Do not confuse this with the Title Deed.

Register

Legally, you aren’t the owner of the property unless you register the property and transaction with the Land Registry (Conservatoria do Registo Predial). There is a charge for this and the deadline for submission is 30 days. Make sure that this is completed on time or you will be liable to pay a penalty. Registration with the tax office is also important.

While it isn’t mandatory, you may also want to get your property registered under your name, with utility service providers for water, gas, electricity, the telephone and internet.

Have you bought property in Portugal? Share your experiences in the comments!


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