Buying a house in Portugal
Making the decision to buy a home in Portugal is very exciting, but regardless of whether this is to be a holiday home or a full-time relocation, it is important you approach every stage of the process with caution.
Real estate sales is a government licensed profession in Portugal, so you should make sure the agents have been trained and certified by the Instituto da Construcāo e do Imobiliario (INCI), and display their license (AMI) number.
The notary in Portugal became a privatised profession quite recently, and they represent the state, rather than either party. They make sure good title is attained, all the required paperwork is filed and taxes are paid. The role of a notary should not be confused with that of an independent solicitor.
There are two types of legal representation in Portugal; a solicitador and an advogado. The former, while similar in name to a UK solicitor, is more akin to a conveyancing specialist. They do not need a degree, but have to be registered with the Cāmara dos Solicitadores. An advogado is the equivalent of a UK qualified lawyer. A property specialist advogado is likely to be more expensive than a solicitador. A list of English speaking Portuguese lawyers can be found at gov.uk.
The first stage to purchasing a property in Portugal is reserving the preferred property. A reservation form is not used in all Portuguese property transactions, but it gives both parties a degree of security when the next stage, the promissory contract of sale and purchase, cannot be entered into immediately. Normally the reservation stage involves the property being taken off the market, and sets a time limit within which the promissory contract must be signed.
The promissory contract is when you would normally pay the deposit. This contains all the conditions of sale, which could include completion of any building work and the connection of utilities. If you fail to complete the purchase, then you may lose your deposit, but interestingly, if the blame can be laid at the door of the owner, then they must repay you twice the deposit amount.
Your independent legal representative will also confirm the following documentation: Certidāo de Teor, Caderneta Predial, Licença de Utilizaçao, Ficha Técnica and make sure IMT tax is paid over to the tax authorities, if you are new to Portugal you must open a bank account, your lawyer will help you obtain a fiscal number at the tax office.
Once all the documents are present and the conditions satisfied, the public deed of sale and purchase can proceed at the notary office. This is the formal record of the purchase. The transmission of ownership is then registered at the local property registrar by providing them with a certified copy of the deed.
The purchase of property in Portugal involves the payment of taxes, for that reason you will need to register with the Tax Authorities and request the corresponding tax payer identification number.
Residents abroad and Residents that leave in Portugal for more than six month`s, should appoint a fiscal representative located in Portugal for tax purposes.
If you are originally from a member state of the European Union or the European Economic Area, the appointment of a fiscal representative is merely optional.
For tax purposes, you must declare the place of your habitual residence or, in the case of citizens that are resident abroad, the place of residence corresponds to that of the tax representative.
- Title Certificate known as “Certidão do Registo Predial”
It has the information regarding the legitimacy of the seller of the property and the types of encumbrance that may affect it. For example: mortgages, collateral, etc. The Title Certificate can be requested: In person, at "Conservatória do Registo Predial” (land registry office) where they hold full descriptions of properties.
Online, you may also request a “Certidão do registo predial” (permanent land record) information through the website www.predialonline.pt.
- Land Registry known as ”Caderneta Predial”
This is the property identification document, it tells you all about where and when was registered and the composition and ownership of a certain property. It may be requested from any tax office and can be used to verify which entity is responsible for fiscal obligations related to each property. This title certificate can be obtained online from the tax authority website www.portaldasfinancas.gov.pt . A title search of an article in the land registry can be requested, with validity for a one year period.
- Usage Permite License "Licença de Utilização"
The purpose of this License is to certify that the house is suitable for its license purpose. This document must be requested at the City Council where the property is registered. In case the license is yet to be issued, a proof that the license was submitted along with the purchase contract is also accepted.
- House Technichal Data sheet "Ficha Técnica de Habitação".
This document describes all the technical and functional characteristics of a house. It may be requested in the City Council of the district where the property is registered or located.
- Contract of Purchase and Sale (CPCV)
Contract in which both parties promise to conclude at a future date, the purchase and sale agreement.
- Deed "Escritura"
This is the final contract before a notary in which the owner and buyer or their representatives transmits the property to another. Both parties need to sign the Deed. It is at this time that the seller receives the agreed amount. The payment method must be previously agreed between all parties involved.
Municipal property tax payable every year.
Municipal Tax payable in Real Estate transactions. The tax must be paid before the final deed registration and will focus on the greater amount of the following: the value declared in the deed or on the value assigned to the property by the tax authorities.
- Valor Patrimonial
This is the asset value attributed to the property by the tax authorities and used as the basis to calculate the property yearly taxes (IMI).
The most important factor is location, as this as the most impact on your home value. Once you bought a house you can´t change its location, and where you live will have an impact on every area of your life, it is important to decide whether you want a urban, sub-urban or rural life style and to determine the proximity of schools, work, friends and family. Public services should also be a major consideration.
The second most important factor is Price. The purchase price of your home will affect how much money you have for other expenses, and will determine how reliant you are on a particular job or income level, the homes total price may affect your net worth in the long run and it may affect your ability to earn a return on your investment should you decide to sell. The combination of Total Price plus down payment and interest rate may determine your monthly payment.
Type of home. Finally consider the type of home you will buy, single family detached homes provide the most freedom and privacy, but also come with the more responsibility as you may have to take care of maintenance and repairs, in a condominium you will have to pay a share of all the condominium costs, also the home owners association will have some control over the changes you can make to your unit.
If you desire for a safe foreign investment, you may want to consider a few factors:
Stability of the real estate market and the potential growth to generate rental income should come into play.
in order to keep a low risk on your investment analyze if the Tourism industry is a growing sector or not. Markets that are strong and continue to retain growth in their tourism figures have all in favor.
The overall attitude of resident people toward holiday makers, expats and investors should be a major factor when you desire a safer investment. Bigger investors seriously consider each culture and its nature when selecting countries to invest in properties abroad.
Some important questions to ask yourself that should save you time and money:
- Do you want to be inland or on the coastline?
- How isolated you want to be?
- How much outside space do you need/want?
- What is the maximum distance you want to be from shops, bars and restaurants?
- Do you need public transports, how near is it?
- How far is to get to the beach?
- How close is the nearest airport?
- How close are sports facilities like, golf, tennis, swimming, and so on?
- How close and how good are the local health services?
- Use qualified professionals to make sure the purchase of your new home is stress-free.
- Only negotiate with professionals who are officially registered.
- Make sure your lawyer is well known in the area, also that is fluent in English and in the native tongue.
- Your solicitor or Realtor will advise and assist you regarding the costs involved.
- Before purchasing a property it's important to be fully aware of the legal process and costs.
- Check your finances taking in account these additional costs. (taxes, stamp duty, fees)
- Set up a direct debit to pay for bills. If you consider to rent be aware that additional taxes on revenue will be charged from foreign authorities.
- Once you decided what you want to buy, make your offer is in writing if possible (always subject to contract), include the price and the deposit amount, when you are prepared to pay, and when you plan to complete.
- Don´t forget to mention what you understood to be included in the purchase price. Example: furniture, machinery, equipment and installations, referring that are all in normal working order.