Buying or selling a property in a foreign country can be an intimidating process as the legal regulations and procedures may differ significantly from your local practices and have drastic implications on your overall financial and tax positions.
Sunpropertiesalgarve will guide you through the process but it is fundamental that before committing yourself to a binding contract you also engage the services of an accredited lawyer, to make sure you have the adequate professional legal assistance. Your lawyer will act on your behalf to check property ownership, title, any encumbrances, charges or any third party interests.
Below you will find the various steps to have in consideration when buying a property in Portugal:
1. Select the investment structure to purchase the property
The first step after choosing your property will be to select the investment structure to purchase the property, depending on the current status of the property ownership and on the type of structure you wish to use:
Private ownership:
The property is owned by an individual. The buyer, purchases the property, and goes through all legal and fiscal procedures in Portugal: sign purchase agreement and deed, pay stamp duty (IMT), update registrations at Land registry, etc.
Corporate ownership:
The property is in fact an asset of a Portuguese or foreign company and you can still buy the property or alternatively the company shares. On the latter a share purchase agreement is drawn up with the transaction taking place in the company’s jurisdiction and therefore no registrations are required in Portugal.
2. Check the legal and tax situation of the property:
Once the property is selected and the investment structure to use is pre-analyzed you will need to agree the final price and the purchase terms with the seller. Your lawyer will be essential to provide advice before signing any agreement or contract and will be part of the negotiations, analyzing every detail and making sure your interests are protected. The main aspects of the property to be checked are the Land registry office records, the tax office registrations and debts, the licenses at the Town Hall, the Energy certificate and the “Ficha Técnica de Habitação – FTH ” (Building’s technical record), compulsory for properties built since 2004.
3. Signing a Promissory contract OR a Share purchase agreement
After completing all the necessary researches and agreeing on the terms for the deal, it is advisable to sign a supporting document, which will rule procedures until completion. However, never sign a contract without first consulting your lawyer.
| A Promissory contract: is applicable when the property is purchased. The contract will state who the buyers and vendors are, a description of the property, and the terms of payment and completion. A down payment, usually of ten percent, is normally paid by the buyer to the seller to reserve the property until completion. Once the contract is signed, and under Portuguese legislation, if the buyer backs out of the contract, he loses the deposit, if the seller backs out, he has to pay double. |
A Share purchase agreement: is applicable when the transaction occurs by purchase of the company shares. This agreement will indicate the price and conditions established, and usually a completion date is also indicated. As in the promissory contract of purchase, a deposit is also paid by the buyer to the seller when the signing takes place. |
If you are buying ‘off-plan’ from a new development under construction, you are normally required to pay in stages.
4. Completing the purchase
Before completion some requirements will have to be fulfilled. When purchasing the property, the IMT (Property transfer tax), must be paid. In case 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 purchase of the property is formally completed when the public title deeds of purchase are signed, whereby the final payment is done thus giving the possession to the buyer. If there is a contract of finance it is usually signed simultaneously. You may attend the signing of the deed in the presence of the Notary or give a Power of Attorney to the Lawyer to a act on your behalf.
To complete the process, the lawyer will arrange the necessary registrations at the Tax Office and Land registry office.
The purchase of the shares of a property holding company will require a contract according to the legislation where the company is incorporated. As soon as all the requirements stated in the share purchase agreement are met, the completion can take place. This is normally a simple procedure, which consists in the exchange, between the parties’ lawyers, of the company shares and documents, after what you became the rightful holder of the shares, and therefore of the property.