Buying procedure – making a plan
You can put yourself ahead of the game by researching and organising these things in advance …
- the approximate location you wish to purchase property in
- the type/style/age of property you prefer and the facilities needed
- the exact budget you have available
- having mortgage and financial arrangements already in place
- identify a lawyer in your chosen area in whom you have some professional confidence
- been to the finances department and obtained your Portuguese Tax number (NIF) one per person if you are buying as a couple.
With all those things done – Now is the time to start looking !
With help from the right people and a little luck we feel sure you will find the ideal property for your needs.
So what happens next ?
1) For a new property being purchased from a developer you may be asked to lodge a reservation deposit with your selected lawyer within a stipulated time period, normally €2,000 to €5,000. This deposit is will be held in escrow until the Promissory Contract (Contrato de Promessa de Compra e Venda) is prepared and signed. The deposit will be returned if the buyer does not wish to proceed within a specified time limit.
2) To make an offer on an older property you only have to instruct your lawyer to begin work and prepare provisional contract and let him know the details of the vendors lawyer. You will need to make an advance payment at this point for lawyers fees and searches.
3) This is a good moment to consider a survey or at least an informal consultation with a professional builder to get some feelings for likely costs of any works required and an independent view on the property. There may for example be things you want see corrected prior to purchase. These must be listed and passed to your lawyer.
Notes on finding a Lawyer
There is no substitute for the services of a qualified property lawyer or solicitor. We never recommend but we are able to suggest and we will be happy to provide you with a list of reputable lawyers our company has previously worked with. All are bilingual.
If you do not intend to be present for all the stages of the buying process then you will need to arrange to give Power of Attorney (Procuração Pública) stating the terms of the deal and signed by all parties involved. This document is then registered at a Notary.
This power of attorney document will save you having to travel backwards and forward each time it is required to sign a document. If essential it can also be created in a country outside of Portugal by using the services of the Portuguese Embassy, but this will add significantly to the cost.
4) Lawyers fees, vary and can often be negotiated but reckon on a figure between 1% to 2% of the overall purchase price of the property.
5) Prior to the signing of Promissory Contract the lawyer will undertake checks to ensure that the property you wish to purchase is free of debt, restrictive clauses and in the case of land purchase, that permissions are correct and you are able to build on the land. It is important to ensure that any plans in the local Town Hall (Câmara Municipal) relating to the property, agree with the existing/actual construction.
6) At this point the lawyer will be able to calculate for you the exact costs of completing the purchase including Property Transfer Tax (IMT) and all the other associated fees and costs including Notary fees. As a guide you should allow a further 6% of the purchase price over and above the lawyers fee.
Once the price is agreed and your lawyer confirms that documents are in order, both parties can move towards signing the Promissory Contract. If there are any specific terms and conditions agreed by both parties that relate to the purchase then they will need to be clearly set out within this document.
This Contract is then legalised by registering it with the Notary. The buyer normally pays a deposit between 10% to 30% to the seller at this stage. With regards to the deposit, the Portuguese law is clear – if the buyer defaults, he will lose his deposit to the seller, BUT if the seller defaults he is obliged to return double the value of the deposit paid, to the buyer.
The vendor must be able to prove that the financial affairs of the property are up to date. All charges (such as mortgages, debts. liens or utility bills) must be paid off and the property sold with vacant possession and free of encumbrances.
Upon signature of the promissory contract your lawyer will release the deposit to the purchaser or their lawyer and a date is agreed to for the signing of the Final Deed (Escritura Pública).
In accordance with the Portuguese Civil Code, the act of purchase and sale of a property must be completed at a public notary. This Contract by which the property is transferred from one owner to another is signed by both parties or by their representative lawyers in front of the notary whose job it is to witness the transaction and ensure that all documentation is in order.
It is at this moment that payment is normally released to the seller. A photocopy of the notarised entry (showing the Notary seal), becomes the buyer’s proof that the act has officially taken place. They keep the original and further official copies can be requested at any time.
Note that this document is not the “Title Deed” – as it’s known elsewhere – This is completed by the lawyer 3 – 12 weeks after signing the final contract and once the property has been registered with the Land registry Office (Conservatoria do Registo Predial).
In order to buy a property in Portugal, you will need an NIF number (Fiscal ID number). Note: A fiscal number is also required to open a bank account, buy property or a car and pay tax.
Who is the Notary?
The notary is an independent public or private identity who acts as official witness and legal guarantor of property ownership transfer. In accordance with the Portuguese Civil Code, the act of purchase and sale of any property must be undertaken at a public notary. This buying contract is signed by both parties in front of a notary whose job it is to confirms that all documents are in order.
Please note: These notes are for guidance only and do not replace the need for professional legal advice. Laws and regulations change frequently. Do not trust advice from anyone with a vested interest in providing it with the exception of your chosen lawyer. Enjoy the purchase of your home in the sun but do not forget you need to continue using normal business caution from the moment you step off the aeroplane!