Buying Property in Portugal

Once you have found your perfect Portuguese property, agreed your purchase price and Worldwide Lawyers has found your English-speaking Portuguese property lawyer you are ready to move forward with the buying process.

You will need a Portuguese tax number known as a numero de indentificacao fiscal or ‘NIF’ in order to buy property in Portugal. This can be obtained from a local Portuguese tax office. Your lawyer will be able to assist you with this.

The buying process usually starts with a preliminary contract known as a Contrato de Promessa de Compra e venda (CPCV). Under this contract the buyer agrees to buy and the seller agrees to sell the property.

The content of the contract may take various forms and your lawyer should explain the obligations of each party as a result of entering into this. It usually includes the names of the buyers and sellers, description of the property, price agreed etc. Before signing this legally binding contract your lawyer will need some time to carry out all necessary checks in relation to the property title, building use license and property tax documentation. When these have been completed this contract must be formalised and signed in the presence of a Portuguese notary (notario).

Usually a deposit in the region of 10% of the purchase price will be payable by the buyer when signing this contract.

Following the signing of this contract your lawyer will undertake various searches against the property and check for any mortgages or adverse restrictions relating to the property. If the buyer pulls out of the purchase after the CPCV has been signed, the deposit is lost. If the seller pull out they must repay double the deposit amount.

The buyer will then have time to formalise any mortgage that they may require before they enter into the completion document known as the Escritura de Compra e Venda. This is the conveyance document that transfers the legal ownership of the Portuguese property. This is also signed in the presence of the Portuguese notario.

The main function of the notario is to certify Portuguese documents and agreements ensuring that they fulfil certain legal criteria and to collect the relevant taxes. The notario does not advise or protect the interests of the buyer or seller who should both be separately  advised by an experienced and qualified Portuguese lawyer.

You can either sign the Portuguese title deeds document in person in front of the notario or arrange a Power of Attorney for someone else, usually your lawyer, to sign on your behalf. If you do sign in person your English-speaking lawyer should be present in any event to translate and explain the contents of the deeds to you. The notario will read the contents of the deeds aloud in Portuguese and may not agree to sign the deeds unless s/he is happy that either you speak Portuguese and understand the contents or your lawyer is present.

Should you require a Power of Attorney, your Portuguese lawyer should be able to prepare this for you. You can put the Power of Attorney into effect by signing this in Portugal in the presence of a Portuguese notary, through the Portuguese consulates in the UK, or through a British notary public with a Hague Apostille.

The balance of the purchase price, property transfer tax and notario fees must be in the possession of the notario before the Escritura de Compra e Venda is signed. Once the deeds are signed the transfer of the property can be registered with the Land Registry Office (Conservatoria do Registo Predial) and Local Tax Office (Repartição de Finanças). It is usually the buyer’s responsibility, to ensure taxes are paid for the property transfer is registered.

The next step is to enjoy your new property relaxed in the knowledge that your independent Portuguese lawyer has taken care of all legal formalities and your interests have been protected.

The additional costs of buying a property in Portugal is on average around 8% of the property purchase price.

The cost will include:

The property purchase price

As agreed between you and the vendor. If you are buying a new build or “off-plan” property you will usually be required to pay the purchase price in set stages.

Legal Fees

Lawyer’s fees are usually charged as a percentage of the purchase price- typically 1-2% depending on the work involved. There may be an additional cost if a Power of Attorney is required or if you have a mortgage. Your lawyer will advise you of their fees for this

Tax

When buying a new build property you have to pay 20% IVA tax (the equivalent of the UK’s VAT) to the seller. This is usually included in the asking price but you should check this.

For “second hand” properties you do not need to pay IVA but will need to pay the transfer tax Imposto Municipal sobre Transmissões (IMT) to the local authority in the region where the property is situated. This replaced the old SISA tax system in 2004.

The amount of IMT payable is based on the property purchase price and ranges from 0-8% depending on the type and value of the property. This is charged on a sliding scale and the percentage increases for the more expensive properties.

The IMT figures are slightly lower for properties in Madeira and the Azores.

Stamp Duty is payable at a fixed rate of 0.8% of the property value.

Notary Fees

Notary charges can vary depending on the office where the Escritura Pública de Compra e Venda is signed. You should allow for 2% of the property purchase price.

Land Registry Fees

The costs will depend on whether or not you require a mortgage. Fees are usually around £200- £600 depending on whether a mortgage is required.

Estate Agent Fees

The estate agents fees are usually paid by the seller.

Instructing a reliable independent English speaking Portuguese property lawyer to provide advice and reassurance that the legalities are checked on your behalf is essential.

You should protect yourself by instructing a lawyer as soon as possible and before any formal steps have been taken to make an offer to purchase a property. This will allow your lawyer to advise you properly on all aspects of the transaction to ensure your position is fully protected.

Contact us on 01244 470 339 or email info@worldwidelawyers.co.uk to obtain a free no-obligation quote from an independent, recommended, English-speaking Portuguese property lawyer to assist you with buying a property in Portugal or Madeira.