Buying a Property in Portugal

The Letter of Intent and Appointing a Local Lawyer

Once you have found the property you would like to buy, and we have successfully negotiated a deal on your behalf, we shall prepare a 'letter of intent'. This document clearly states the agreed price, exchange and completion dates, and what is to be included. At the same time, we recommend that you instruct a local lawyer to represent you in the purchase. We can help in this regard if you wish. Your signed letter of intent will be sent to your lawyer as a reference to the agreed terms.

There are a couple of ways to “own” a property in Portugal.

1. Private Property Ownership

Exchange of contracts

Your lawyer will begin all the necessary legal searches on the property. These include ensuring the seller has clear title to sell and that there are no outstanding charges or mortgages on the property. They will then prepare the Promissory Contract (Contrato Promessa de Compra e Venda) which is a legally binding agreement between buyer and seller and is signed by both parties in the presence of a Notary. The Promissory Contract will state the buyer's and seller’s details, as well as those of the property, the schedule of payments, completion date and any special terms agreed by both parties. Upon signature, it is normal procedure for the buyer to pay the vendor a 10% deposit, usually via the lawyer's client account. Under Portuguese law, if the vendor does not fulfil his contractual obligations, he is liable to pay double the deposit to the buyer. If the buyer is in breach of contract, the deposit is non-refundable.

Completion

The Final Deed (Escritura) is the official deed of transfer of ownership from the seller to the buyer. It will be signed on the agreed date at the notary's office, either by you or by your lawyer if you have opted to give them power of attorney. The balance of the purchase price is now paid and the notary records the transaction in the official record. Once the deed and all other associated transactions are completed, you are then registered as the new owner by your lawyer in the Land Registry (Registo Predial). You are entitled to have a copy of this registration.

Fiscal number

To purchase a property in Portugal you will need a Portuguese fiscal number. This fiscal number will be for you as a non-resident and therefore has no tax implications in Portugal. Your lawyer will normally advise and help to obtain one.

2. Property Ownership via a Corporate Structure

Exchange of contract

Many “more expensive” properties are owned in a corporate structure. The property itself is an asset of the company and buyers purchase the company's shares. These structures are usually domiciled in Malta or Delaware; however, there are several other white-listed jurisdictions around the world. If the property you choose is in one of these structures, your lawyer will carry out the normal legal searches on the property and undertake a due diligence on the corporate structure through a request to the management company that binds them in accordance to their regulations. This will clarify the fees, warranties, representation, history and legal procedures of the company.

A Share Purchase Agreement will then be prepared and, upon signature by both parties, all the conditions of the transaction are secured, and a usual 10% deposit will be paid to the seller, via the lawyers' clients' account. This transaction takes place under the jurisdiction of the company's domicile but can also take place under Portuguese or other jurisdiction connected with the parties, safeguarding the formalities applicable to the transfer of the shares/rights in the jurisdiction of the company's domicile.

Completion

The process is simply completed by both parties fulfilling the terms described in the Share Purchase Agreement and the buyers transferring the balance of the purchase price to the vendors, again usually via the lawyers' clients' account. Afterwards, the respective management company will transfer the share ownership from vendor to purchaser. This process is quick, simple and in English.

The Buying Costs

For a more detailed look at costs (link to Calculating Purchase Costs in Portugal)

Legal expenses

Lawyers' fees normally vary from 1% to 2% of the purchase price.

Private ownership

IMT & IS – Property Purchase Tax & Stamp Duty.

These are the Portuguese Property Transfer Taxes which are payable by the purchaser prior to completion. The rate is variable and is based on a sliding scale according to the price of the property. Up to 6% on residential properties and 6.5% on other properties, including plots of land for construction. The stamp duty is a flat

rate of 0.8% of the property price. Your lawyer will always advise you of these costs at an early stage. The transfer tax, stamp duty and registration fees are payable by the purchaser upon signature of the deeds at the public notary and at the Land Registry, when the transfer of property ownership is registered.

Corporate ownership

In the case of a share transfer process, the IMT, notary, stamp duty and registration fees are not applicable. The cost to register the new beneficial owner is from GBP 1,000 to1,500 payable to the management company.