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Buying Property in the Algarve and Portugal
Useful information for buying a property in the Algarve and Portugal. All about property searches, contracts, taxes, deeds, licenses and much more. |
Property Searches
Having chosen a property, have your representative search the local land registry (Conservatória do Registo Predial) to check that the seller (vendedor) has clear title of ownership, that no one else has rights over it, that it is exactly described and that it is free of charges or mortgages. Photostat extracts from the land registry are valid for a limited period.
Fiscal Number
Apply for a fiscal number (número de contribuite) at your local tax (Finanças) office. It will come in the form of a card which you will need for payment of rates.
Tax Document
Obtain the official tax document (caderneta predial) relating to the property from the seller and check that the description of the property (numbers of rooms, area of house, area of land, etc) is the same as in the land registry.
Usage License
Obtain a copy of the usage licence (licença de utilização) from the local town hall (câmara municipal). For residential property you will need a habitation licence (licença de habitação). Check that the description on the habitation licence is totally in accordance with what you are buying. Non-residential licences need to stipulate the appropriate commercial or industrial use the property is being put to.
Contract
Have a promissory contract drawn up (contrato de promessa de compra e venda) to be signed by you and the seller. It should include all the terms and conditions of sale.You will normally have to pay the seller a deposit of at least 10% of the full purchase price at this stage. The contract is signed in front of a notary. It is legally binding on both buyer and seller. If the buyer defaults he forfeits the deposit. If the seller defaults he has to pay the buyer double the deposit.
Transfer Tax
IMT (previously known as Sisa), is the Municipal Transfer Tax for change of title of property in Portugal. This must be paid on property valued over € 83.500,00. There is a flat rate of 5% for rural land. On residential property there is a sliding scale up to flat rate of 6% on purchase above € 521.700,00.
Notaries & Registration Fees
To be paid by the purchaser on completion – Allow up to max. 1.2% of the total sale value. Example: If you buy a property listed for € 250.000 –the total estimated cost will be € 261.372.
Outstanding Rates (IMI)
Unpaid rates (contribuição autárquica) attract fines, but may be allowed to mount up for some considerable time without official action, so ask the seller to show proof of payment for the last five years. While paying the transfer tax, check that rates have been paid up to date. Any outstanding rates should be squared up before you make final payment.
Final Deed
Proper title to the property comes with the final deed of conveyance (escritura), which is signed in the office of a public notary. All the relevant documents have to be checked before the final contract is read aloud and, unless the buyer understands Portuguese, interpreted in English.
Registration
Lastly and vitally, register the property in the name of the new owner at the local land registry. Do it without any delay.
Offshore
This has been a legitimate, convenient and now commonplace way of acquiring property in Portugal. When property owned by an offshore company is bought, it is the shares of the company rather than the property it self which change hands. A word of caution: check with your lawyer before going ahead. The government is looking closely at property owned offshore in an effort to close the loophole and has recently imposed a 15% transfer tax (Sisa) on officially “black listed” offshore. |
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