Buying Property in Portugal
Guide to Portugal
Portugal is a country that offers so much to the visitor, from superb beach resorts in the Algarve to the beautiful city of Lisbon and landscapes decorated in olive groves and vineyards. A country with a rich seafaring history, Portugal is still a visibly underdeveloped country, especially in the rural areas. You don’t have to venture far to discover what else Portugal has to offer, such as traditional smaller towns and countryside regions that have changed little in the past century.
The Algarve
Situated in the extreme South of Portugal the Algarve is Portugal's most popular tourist region, with beautiful beaches and gorgeous coves and the most unpolluted climate in the European continent. In addition to this the region offers superb golf courses, watersports, golden sands and splendid food.
The Azores
The Azores are nine islands lying some 900 miles from the coast of Portugal in the middle of the Atlantic Ocean. They are divided into three groups: the Eastern group including Santa Maria and Sào Miguel; the Central group including Terceira, Graciosa, Sào Jorge, Pico and Faial; and the Western group including Flores and Corvo. The islands are beautifully unspoilt; with emerald-green lakes, volcanic craters, pleasant vineyards and historic settlements. The islands have a temperate climate all year round with temperatures ranging from around 11-29 degrees Centigrade.
Costa Azul
The Costa Azul (‘blue coast’) is the name given to the coast south of Lisbon. This region remains relatively undisturbed by international tourism and manages to retain its traditional atmosphere and the delightful scenery and excellent beaches make up the special charm of this coastal region. If you are looking for a real Portuguese experience this is a good place to start.
Costa de Prata
Costa de Prata is located along the west coast of Portugal from just above Lisbon and just south of Oporto. The mild temperatures and stretches of white-sandy beaches and lush green hills make this an attractive location. Fishing villages are dotted along the coast with many beautiful inland towns.
Costa Verde
Costa Verde ("green coast") is the name given to the tourist area in the north-western part of the country. This is a lush area with dense vegetation and is steeped in history. This area has a number of fabulous long beaches and is a good base for visiting nearby places such as Peneda-Gerês National Park.
Estoril Coast
Estoril Coast is one of the best known areas for ex-pats and one of the most popular. This is an elegant resort which lies on the south-facing coast west of Lisbon with sandy beaches, bustling sidewalk cafes, and mild year-round temperatures. Despite its popularity this region still manages to retain all its charm and tranquillity, especially in the cheerful resort of Cascais.
Maderia
Madeira is a gorgeous island situated in the Atlantic Ocean off the coast of Portugal. The pace of life is quite slow and the quality of life very high. With mountains, a wonderful all year round climate and spectacular views it has become a popular expatriate and holiday location.
Trás-os-Montes
Trás-os-Montes ("behind the mountains") a historical province of Portugal located in the northeastern corner of the country. For the most part the region consists of magnificent countryside, sleepy little villages and historic towns. Trás-os-Montes retains a certain remoteness that makes it, perhaps, the least known region in the whole of Portugal. This is a striking region that is definitely off the beaten track.
Practical Information for Buying Property in Portugal
Top 10 Tips
1.You may find a bargain by looking outside tourist hotspots such as the Algarve and Lisbon.
2.Many apartment complexes are community run so you may end up buying a share and also be responsible for communal maintenance.
3.If buying a property to rent out when you are not using it, yields will be low if it is not in much desired tourist zones.
4.Local town halls and tax offices often determine rules in different ways for buying property in particular regions.
5.Ensure that the entire property has valid planning permission.
6.You will have to pay local taxes on the property.
7.If you withdraw from sale after signing the initial agreement, you could lose your deposit.
8.A public notary is responsible for completing the sale.
9.Difficulties can arise if the sale is the result of a divorce or a number of siblings are involved in the sale.
10.You are likely to need the services of a Portuguese lawyer or one in Ireland with a good knowledge of Portuguese property.
Key Phrases
ENGLISH - PORTUGUESE
Initial contract (promissory contract) - Contrato de Promessa de Compra e Venda
Land Registry - Conservatoria do Registo Predial
Local Rates - IMI (formerly Contribucao Autarquica)
Stamp duty - Imposto de Selo
Tax Number - Numero de Contribuinte
Document detailing purchase at Notary’s office - Procuração Publica
The Portugal Property Market
The Portuguese economy has grown rapidly in recent years and the price of property has matched that growth. However, it is still possible to find some beautiful properties at reasonable prices. There are no restrictions on foreign ownership of real property if the property is for personal use. However, approval from the Portuguese Institute of Foreign Trade is needed if the purchase is for purposes of investment or business.
Property is one of the strongest sectors of the Portuguese economy and a source of income for the Portuguese Inland Revenue. Areas such as the Algarve and around Lisbon remain popular with foreign buyers, many other areas are only now being explored and it is still possible to obtain better bargains in these lesser known areas. The cost of land with planning approval in Portugal varies considerably depending on the area, e.g. from around €30 to €100 per m2 for a rural location, from €150 to €200 per m2 for a rural location in easy reach of the coast and from €500 to €1500 per m2 for a prime coastal plot in the Algarve where there’s currently a shortage of land and housing units.
Before buying in Portugal, determine your budget and if you are obtaining a mortgage from an Irish financial institution, make yourself aware of the sum available to you and any terms and conditions applying. Very few Portuguese lending institutions will give a mortgage to someone living overseas.
How to Find a Property Agent
There are some agents in Ireland who assist in buying Portuguese property and of course, some Portuguese agents advertise on the web and in magazines and supplements in Ireland. It makes sense to contact such agents before you travel to an area to look at property.
Ensure that you use an estate agent that is licensed by the State. This license is granted according to a number of required qualifications on the part of the Estate Agent. It mainly serves as a guarantee that any individual Estate Agent must use certain forms of approved documentation to implement their functions in their profession. The Licensed Estate Agent is also bonded by the State in the form of an Insurance Cover that may be claimed against in the case of a proven dispute.
You will need to decide on the type of property for which you are looking. Is it a holiday home to be used a few weeks in the year or is it a more permanent residence. A holiday home ideally will require little maintenance.
Make sure that you make appointments with agents in Portugal in advance. Give the estate agent a clear understanding of what you seek in a property. Be prepared for the types of property you are viewing i.e. wear appropriate clothing. Take a good local map and have a list of questions prepared.
The Legal Issues
It is advisable that you use the services of a Portuguese lawyer or an Irish solicitor who has a good knowledge of the Portuguese property market. You will also be dealing with a notary, a public official who acts for both sides who is legally empowered to witness and validate deeds and contracts. The process of dealing with paperwork can be slow in Portugal so be prepared to give yourself time in carrying out the purchase.
You should secure for yourself a Numero de Contribuinte (tax number) as this is need to do virtually everything from opening a bank account to getting utilities connected. This is reasonably easy to do by contacting your local tax office in Portugal.
It is quite normal for both Parties to initially enter into a Promissory Contract detailing the conditions of Sale - "Contrato de Promessa de Compra e Venda". This Contract is then registering in the Notary’s office. The Notary is the law agent of the State and their role is to oversee the State’s role in recognising the contract. This Contract is legally binding on both sides and the law requires the seller to repay twice the deposit should they withdraw from the sale. Likewise, if the buyer fails to complete, you forfeit all of your deposit. There are specific laws relating to this act that your legal advisor will be able to explain.
It is often found practical for the buyer to appoint someone to act for them legally in the purchase of property. A document named "Procuração Publica" is prepared with the necessary details and then in the Notary’s office, this document is signed and registered by the Notary.
Before the purchase is finalised, it will be subject to a Municipal payment named "IMT - Imposto Municipal sobre Transamissões" which as from the 1st of January 2003 replaces the previous tax payment named "SISA". This payment is paid in the local Tax Office nearest to the property. The amount to be paid is determined by the value of the property. In exceptional cases, there are exemptions.
The formal purchase of the property takes place at the Notary’s office is known as the "Escritura de Compra e Venda" which takes place in front of the selected Notary and it is officially registered. The Notary will check prior to the act of sale that all the necessary documents are correct to ensure that the sale can proceed according to the information provided. Payment is now made to the seller. After the act is recorded, you will receive a photocopy of the official registration and this will call the Notary’s seal.
The property must then be registered in the new owners name in the Land Registry (Conservatoria do Registo Predial). This registration is not obligatory but it is strongly recommend that it is done immediately after the deal before the Notary as a preventative measure against any abuses by the previous owner.
It is also important to insure that any plans in the Town Hall referring specifically to the property do physically agree with the existing construction. A property for living purposes must also have the following -
- A Habitation Licence for property constructed after 1951
- Certified Land Conservatory records
- A detailed "Caderneta Urbana" from the Tax Office stating the current position of taxes relating to the property
- Commercial and Industrial properties require both the Land Conservatory and Tax documents.
- In the case of a rural property, another document, the "Caderneta Rustica" is also required. This comes from the tax office and gives a description of the property.
Each Town Hall and Tax Office tends to have their own local interpretation of the laws and regulations and these should be first carefully checked prior to an intended purchase. It is always advisable to make legal and other specific searches prior to acquiring any property.
- Insurance
From the signing of the final contract the buyer is responsible for the insurance of all the buildings on the property.
- Taxes, Fees and Charges
Every year the owner of any property is subject to pay an annual local tax called "IMI" (formerly know as "Contribução Autarquica"). This charge is levied each April relating to the previous year and if the amount exceeds €250, then it will be divided into two equal bills; the first for payment in April, the second for payment in September. It is very important to pay this charge as the failure for doing so eventually results in the property being placed for sale on the market by the State and goes to the highest bidder.
- Planning Permission
In getting a builder or architect, you should use recommendations from friends or those based in the local area.
The local Council will determine the nature of your planning permission and you should seek advice from them if you have any queries.
When a property has been completed the builder must arrange for an inspection (visitoria) by the local council to ensure that it has been constructed according to the plans and building regulations. After a satisfactory inspection, the local council issues a habitation licence (licença de habitação) and the final payment to the builder is due only after this has been issued. When this has been completed a property must be registered with the local authority, the local tax office (finanças) and at the local land registry (conservatória de registo predial).
Under Portuguese law, builders are responsible for minor defects for one year after completion and for structural defects for five years (less than in many other countries). You should have a completed building checked by a structural surveyor for defects and a report drawn up, and if there are any defects, they should determine exactly who was responsible for them. Architects and builders in Portugal are required by law to have indemnity insurance.
Additional Information
Major difficulties can result if a property has been willed to a number of siblings and there is a family dispute as to ownership. Similar difficulties can arise where a divorce is involved. Get your legal adviser to ascertain as soon as possible that such difficulties will not arise.
Check to ensure that the property actually matches its legal description and has all relevant planning licences. Else you may end up with a property that is actually less than that in the description or which is technically illegal.
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