Buying Property in Portugal

The reservation is a simple document prepared by a solicitor which briefly sets out the terms of the offer to purchase made by the buyer to the seller. Terms will normally include the purchase price being offered, the method of payment and the period in which the transaction will be completed. Should the seller accept the offer, it is normally secured with a small reservation payment of good faith, in which the seller in exchange removes the property from the market for a period. This allows the buyer’s solicitor sufficient time to prepare the contract of purchase and sale (CPCV), as well as time for the buyer to free up funds or secure a mortgage where necessary. These reservations are generally made for a period of 14 days but can be agreed with the seller, for longer periods where necessary. Should the transaction proceed to completion the reservation paid will be considered part payment in the purchase of the property.

The solicitor will then begin with the due diligence process, to confirm that the title and the rights as disclosed by the seller are correct, which includes:

◦ Legal title and ownership
◦ Mortgages or leans on the property
◦ Any other charges registered against the title of the property
◦ Servitudes which may impact on the buyers use of this property
◦ Habitation or usage rights and license
◦ Planning permission and rights in the case of land for construction

The solicitor will prepare the promissory contract of purchase and sale which will include the rights and obligations of both parties. The CPCV will set out in more detail the terms negotiated with the seller agreed to in the reservation document. There is no standard template for the CPCV but generally the promissory contract identifies the parties with their full names, legal identity (passport or ID) and physical address. The contract lists the address of the property which may include the physical address and the property description as set out in the land registry. It also covers the payment terms which may include the purchase price, reservation fee, deposit and final payment. The date of the payments and the period in which the transaction must be completed will also be reflected in the contract. The contract may also include specific terms negotiated with the seller which are unique to the purchase and sale. Solicitors will also include reference to the civil code which protects the rights of the buyer. These rights are secured in Portuguese civil code regardless of whether they are mentioned in the contract or not.

Should both parties agree to the terms as set out in the contract of purchase and sale, they will both sign the contract and the payment of the deposit to the seller will flow. The Portuguese civil code states that should the seller default on it’s obligation to complete the sale, the seller will be liable for a compensation to the buyer in the amount of double the deposit received. It is at the stage that the solicitor or an accountant will approach the local tax office to request a Portuguese number for the buyer. The Portuguese tax number is necessary for the registration of property, opening of Portuguese bank accounts and often required for the connection of services. The category of tax number requested will depend on the status of the applicant, in other words resident or non-resident status. Foreigners who wish to relocate to Portugal to work or retire, may apply under a third category referred to in the Non Habitual Residence (NHR) programme.

The completion is the formal document or deed that is signed in the presence of a notary, registrar or solicitor licensed for that purpose. The notary will confirm the details of the property, the identities of the parties to the transaction and the form of payment. The notary will furthermore confirm that the property is being transferred free of any leans or charges, outstanding taxes relating to the property have been paid and in exchange payment has been received by the seller. This will effectively mean that the property has been transferred to the buyer who officially becomes the new owner.

The transaction is then subject to registration at the land registry and the local tax department. The original title deed or “escritura”, will be submitted to the land registry and the parties will receive a certified copy thereof. The proof of registration or certificate of registration should follow within a couple of days.

Note: Whilst the process of registering property in Portugal is simple and transparent, there are nuances in the law and in the language which the buyer may not clearly understand. Therefore it makes good sense that foreign buyers appoint a Portuguese solicitor to represent their interests.

With a copy of the deed in hand the new owner may now proceed with the connection of utilities. Owners can attend to the connection of utilities themselves or solicitors will often offer this utility connection service for a small fee. New owners will be reminded that the connection of utilities needs to be done for both new build and resale properties.