THE BUYING PROCESS

Buying property is one of the greatest investments you will ever make. Before you part with your hard earned money, ensure that you have done all the necessary research.

Make sure you use a properly qualified and registered Estate Agent (ensure that they are licensed and have an AMI number).

The Staff at Pink Real Estate Lda, License Nº 7285,  have been in the Real Estate Industry for 15  years and will keep you informed of all matters relating to the buying process including all the necessary fees, taxes, bank mortgages and legal issues.

Once you have selected the property you wish to purchase, compared prices and your offer has been accepted, verbally, insist on being given the updated documents and reviewing them with your lawyer. It is advisable to have a lawyer check the property documentation. Most lawyers speak English.In Portugal, lawyers must be registered with the Portuguese Law Society. You can check their registration number on-line: www.oa.pt.

A preliminary contract (Contrato Promessa Compra e Venda) lays out the terms of the sale, including the completion date. At this time, usually a 10% deposit is paid. Should you withdraw from the purchase you lose the 10% deposit. Should the seller withdraw, he/she must pay you twice the value of your deposit. Make sure that anything you have verbally agreed with the seller during your negotiations is in writing when you sign the promissory contract of purchase and sale.


Properties in Portugal are generally sold with a Freehold Title.
 
Property Documents
Land Registration Certificate  (Known as the Certidão de Teor)
This certificate has a full description of the property´s registered legal history and will reflect any registered mortgages, servitudes.  The certificate is obtained at the Local land Registry Offices(Conservatória do Registo Predial) and is normally issued with a validity date.
 
Fiscal Certificate  (Known as the Caderneta Predial)
This document  identifies the property not only by a unique fiscal tax number, but also reflects the description of the property (size, areas, the number of rooms, floors and history).  Furthermore, it identifies the owner and displays his/her Fiscal Tax number.
 
Utility Licence (Known as the Licença de Utilização)
This Licence is proof that the property has been aproved for the purposes of which it is being used for - ex. residential use or comercial use.

Title Deed  (Known as the Escritura)
When all conditions as set out in the original Promissory Contract have been met with, the Final Deed is drawn up and signed by both parties at a Public Notary Office.  This is effectively the final Contract.  It is at this time that the final payment is usually paid.  This is after the Notary Public Officer has witnessed the act and has ascertained and verified all the legal aspects of the entire transaction, including ascertaining the payment of the applicable purchase tax (IMT) and that all parties are in agreement with all the terms and conditions of the transaction.  The Original Escritura is then held by the Public Notary Office and a copy registered at the Public Records Office.  The purchaser obtains a certified copy of the Escritura when applying for the connection of all respective service facilities at the local Municipal Offices. 

Make sure you obtain an estimate in advance of all the fees and costs involved in the property purchase, including Lawyers Fees, Notary Fees, Property Transfer Tax, etc.

Buying a property under construction 
Should you decide to buy a property under construction, or even in the pre-construction stage you would need to ensure that the following procedures and points are adhered to and included in the promissory contract. 
 - Identification of the property must include a full description of the land on which the property is being developed, as well as a description of the property being built;
 - The Construction License (Alvará de Construção) obtained from the local City Council for the construction is identified;
 - A copy of the plan of the specific property (villa, apartment or plot of land), and description of the finishes (materials, etc.) are included;
 - Due dates for completion of construction and for the signing of the Title of Deed are specified, as well as any agreed penalty clauses in the event of delays;
 - Payment conditions generally include the deposit and various stage payments corresponding to various stages in the construction. The conditions for these stage payments must be stipulated

There are are  a number of advantages to buying property under construction such as being able to choose the final finishings. Most developments have "promotional bargains" in the inital stages of construction. 
 
Property Registration (Registo)
Registration is  done with the Land Registry Offices (Conservatório do Registo Predial) in the area in which the property in question is located as well as at the local Tax Revenue Offices (Repartição de Finanças). There will be purchase costs payable upon registration which will include registration costs, stamp duty, notary fees and other sundry costs.

Purchase Costs, Transfer Tax (Known as IMT)
Since January 2004, transfer tax is now known as IMT ("Imposto Municipal sobre transmissões onerosas") and is calculated on the highest of the two taxable values (either on the newly predetermined taxable value or on the purchase price value.):
-Residential (villas and apartments)   0-6%
-Agricultural land - rustic property 5%
-Urban, construction land or commercial 6,5%
-Only when purchaser is domiciled in a tax haven territory known as off-shore - 15%

Stamp Duty (Imposto de Selo): This is 0.8% of the purchase price.

Opening a bank account
All Portuguese banks are part of a national grouping of banks called Multibanco. This makes accounts easily accessible and account holders may use a Multibanco debit card in ATMs across the country, and for buying most goods.
Non EU citizens will need the following to open a bank account in Portugal;
A passport
Proof of address in country of origin
Tax card and proof of employment
 
Expenses
Fiscal representation: Companies usually charge an initial fee of approximately €250, and an annual fee of approximately €250 for services as outlined above.(Find out FIRST if you need fiscal representative)
Legal Fees: Solicitors typically charge between 1-2% of the purchase price plus VAT.
Property Registration Fee: You will have to register the purchase with the Property Registry Office (Conservatória do Registo Predial) of the area in which the property is located, and at the Tax Office (Repartição de Finanças). The costs are as follows:
- Registration of purchase 250€.
- Registration of mortgage, 250€
- Extras 100€
Notary fees: When the Notarial profession was privatised, Notary fees changed substantially and now depend on the office where the Escritura is signed. The Title of Deed (Escritura Pública de Compra e Venda)  has to be drawn up; signed by both parties in front of a public notary and lodged at the local Land Registry (Conservatoria do Registo Predial), with copies issued to the involved parties.

IMI - Annual Rates on the property
The IMI is an annual tax on a property. 
0.8% for rural properties;
0.2 to 0.5% for urban properties (villas, apartments, offices and commercial spaces) when the Taxable Asset Value has been updated according to the new rules;
0.4 to 0.8% for urban properties which have not yet been re-evaluated in accordance with the new rules;
1% for any property owned by residents of the territories listed as 'Tax Havens' or Reduced Tax Domiciles by the Ministry of Finance. 
This rate increases to 2% if the property is left empty for periods longer than a year.
Where a spread exists, the actual rate is determined annually by the Municipality of the area in which the property is situated, and may exceed the limits under special circumstances.

The IMI calculation is based on the values recorded in the Property Matrix on 31 December of each year, and is due at the end of April of the following year. Should  the amount exceeds €250 it can be paid in two instalments, the first at the end of April, and the second at the end of September, of the year following that for which the tax applies.

When an urban property is used as a permanent and personal residence, some exemptions apply. The number of years’ exemption depends on the Taxable Asset Value (TAV) as follows:

Taxable Asset ValueYears of Exemption
Up to €150,000             6 years
€150,000 to €225,000     3 years
Greater than €225,000    no exemption

Madeira Island