Steps of buying your Property in Portugal

Buying your property in Portugal Here are the main stages:The first step to purchase a property in Portugal is to find the right property. You will need to look at issues like is the property for an investment, for holidays or for retirement. The first step when you find the property of your dreams is the "Reservation Form". This is not used in all transactions. This procedure is usually followed when the parties cannot enter immediately into a Promissory for any reason, such as: the legal document, have not been provided or examined; the buyer cannot immediately pay a deposit; a new construction has not yet been approved by the Town Hall or is still in progress. The main purpose of such a reservation is for the purchaser to ensure that the property is taken off the market – usually for a limited period of time – and for the seller to assure that the purchaser is really interested to proceed. The reservation implies that the Promissory Contract will be signed within a pre-determined period and if that does not happen the property will be again placed on the market. The ‘Reservation Form’ should include identification of the parties and the property and at least define the amount to be paid upon its signature, the total price, payment conditions and the period in which the Promissory Contract will be signed. The amount paid on reservation is deducted from the total price to be paid by the purchaser. The form should also establish the consequences of (i) not signing the Promissory Contract and (ii) any of the parties withdrawing from the transaction. The ‘Reservation Form’ must be dated and signed by both parties. The second step will be the signature of the Promissory Contract. Although not mandatory, and whether or not reservation has preceded it, normally both parties enter into a promissory agreement identifying the property to be sold and detailing the conditions of the transaction: this is the Promissory Contract of Sale and Purchase (‘Contrato de Promessa de Compra e Venda’). This type of contract is used in almost 100% of transactions made in Portugal and as a rule is prepared by the purchaser’s lawyer. Usually, the Promissory Contract of Sale and Purchase is legalised by a Notary that certifies the signatures of the parties; alternatively the parties may by agreement decide not to legalize the contract. In either case the Promissory Contract of Sale and Purchase is legally binding on both sides. This contract must establish in detail all procedures by which the transaction will be effected and the conditions of sale, such as stage payments (when applicable) and the maximum term allowed for completion. A deposit (‘sinal’) must be simultaneously paid by the purchaser to the vendor and normally this varies between 10 and 30% of the total purchase price agreed. Portuguese law protects both parties in case one of them fails to accomplish any contractual obligation. In some cases, the innocent party is allowed to start court proceedings requesting the judge to formally replace the other party and perform the act that this party is refusing to perform. It is the so-called ‘specific performance of the contract’ (‘execução específica’), normally introduced by the parties in this kind of contracts. There are other specific rules relating to the Promissory Contract of Sale and Purchase that a lawyer will be able to explain. The other consequence in case of non compliance with the contract which is used in alternative to the "specific performance of the contract" is, for the buyer recovering double the deposit paid and, for the vendor, keeping the deposit paid. The Promissory Agreement of Sale and Purchase can be signed personally by the parties or by the lawyers acting for them. The final step will be Completion. Once the seller have presented the Notary with all appropriate documents, all final searches have been done, and the Transmission Tax duly paid, the formal act of sale and purchase can proceed at any Notary Office in Portugal. This act, known as the Public Deed of Sale and Purchase (‘Escritura Pública de Compra e Venda’), takes place in front of the selected Notary and consists of a formal record of the purchase and sale that is printed in the official and public books of the Notary. The Deed is prepared by the lawyers of the parties together with the Notary and is then signed by the parties and by the Notary. The main tasks of the Notary are (i) to assure that all appropriate rules are applied, (ii) to check that all taxes due have been paid and (iii) to protect as far as possible the interests of both parties. Therefore, the Notary must check prior to the execution of the Deed that all necessary documents are in order (mainly those referred to above), with the purpose of ensuring that the transaction can lawfully proceed. At the same time, payment to the vendor is normally concluded, the balance of agreed purchase price being made according to the Promissory Contract of Sale and Purchase. As stated, the Deed of sale and purchase is recorded in the Notary books. After it has taken place the Notary Office will issue as many certified copies of the corresponding entry as required, and these serve as official proof that the transaction has been lawfully completed and the price fully paid. The copies will bear the official seal of the Notary Office but, as further official certified copies can be requested at any time, these documents should not be confused with a ‘Title Deed’ as in English law. As with the Promissory Contract of Sale and Purchase, the Public Deed of Sale and Purchase can be signed personally by the parties or by their lawyers. After the Public Deed of Sale and Purchase, the transmission of ownership (‘transmissão de propriedade’) has to be registered at the local Property Registrar (‘Conservatória do Registo Predial’). This means that it is necessary to ‘inform’ the Property Registrar that the sale has been completed (by providing a certified copy of the Public Deed of Sale and Purchase) and to request the property in question to be registered in favour of its new owner. It is recommended that this registration be made immediately after the execution of the Public Deed of Sale and Purchase. Simultaneously, it is also necessary to provide a certified copy of the Public Deed of Sale and Purchase to the local Tax Office (‘Serviço de Finanças’) and request the property to be inscribed in name of the new owner.

 

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