Real Estate in Portugal: Quick Guide
By Luis Miguel Amaral
Posted: 15th July 2016 08:03
Portugal is Europe’s most western country. Its total area is 92 090 km2, and is bounded on the north and east by Spain and on the south by the Atlantic Ocean with a coastline of 1,230km. The country is formed by a mainland and two autonomous regions, Azores and Madeira archipelagos.
Portugal has several high quality beaches which, associated with a Mediterranean, mild and sunny weather, make this country the ideal place to live, or to spend your holidays.
Portugal is a member of the European Union since 1 January 1986 (the accession treaty was signed on 12 June 1985), is a member of the Schengen area since 26 March 1995 and is part of the European Monetary System, using the Euro as its currency.
Portuguese cost of living is lower than the average of the remaining European Union members. Portuguese people are known by their hospitality, and in general, English is spoken and easily understood in the urban centres, facilitating communication. Portugal has also one of the world’s lowest crime rates.
The Real Estate Industry
Despite the financial crisis affecting Portugal, the country is trying to recover its economy and has a real estate market with great potential and quality supplies for all areas and industries, representing a quality investment location. Tourism and real estate industries have been deemed as strategic by the successive Portuguese governments, therefore contributing to the Portuguese economic growth.
The real estate industry and foreign investment on the real estate area has increased in the last years (according to INE - Instituto Nacional de Estatística (Portuguese National Institute for Statistics), the value of traded accommodation totalled €3.4 million in the first quarter of 2016). This is mainly the outcome of legislative political options, such as the new urban rental regime and “Golden Visa” implementation. Note that the introduction, in the year 2009, and subsequent development of a highly competitive tax regime for the non-habitual resident in regard to the Income Tax, set out the objective to attract to Portugal non-resident professionals qualified in activities with a high added value or intellectual and industrial property or know how, as well as beneficiaries of pensions gained abroad, and has been attracting people and investment for Portugal.
The Process Of Real Estate Property Transfer
The process of real estate property transfer, although a simple process, must be addressed with caution, mainly in relation to the property’s legal, urban, environmental and tax situation. The support of an independent and qualified lawyer is therefore crucial to protect all parties’ rights and interests. In the scope of such acquisitions, the following are essential:
- making a correct real estate appraisal;
- confirm if there are any encumbrances and/or burdens on the property (and if there are, ensure their settlement prior to or at the purchase and sale moment);
- obtain and analyse the Land Registry Office certificate, the Property Tax Document and all remaining permits, i.e. utilisation permit (unless its construction is prior to 7 August 1951), the House Technical Sheet (real estate property built after 30 March 2004) and, in the case of real estate property destined for housing or offices, the Energy Performance Certificate;
- obtain a taxpayer identification number (in case there is none) – for which there may be the need of a tax representative;
As a matter of course, real estate property purchase and sale process formalisation begins with the parties entering into a promissory agreement, which has to include signature witnessing and certification of the respective utilisation or construction permit.
The process of entering into such promissory agreement must be addressed with caution in order to ensure, namely, a proper date to enter into the agreement, the price and respective payment terms and consequences of a potential breach.
In this case, an advanced payment is common (advanced payment of a part of the overall price). If the promising buyer fails to comply with the promissory agreement, the promising seller is entitled to withhold the received amount, and, in the event the promising seller fails to comply with the promissory agreement, the promising buyer is entitled to receive all amounts paid in double. It is however possible to establish additional penalties.
Likewise, it is possible to make the promissory agreement liable to a specific execution, in the event of non-compliance, in order to obtain a court ruling for the purposes of the defaulting party business proposal in case of breach.
The parties can also attribute actual effectiveness to such promise, upon explicit contractual declaration and Land Registry registration.
Real estate property acquisitions are generally subject to a Local Real Estate Transfer Tax, whose amount varies, and Stamp Duty.
Lastly, the deed (or private authenticated deed) is made in the presence of the entities with powers to legalise this act – notaries, lawyers, solicitors, Commerce and Industry Chambers and Registry Services – with the registration being made in favour of the buyer.
Property registration, tax settlement and other administrative formalities were simplified by means of a service named “Casa Pronta” (Finished House), which allows to carry out all formalities required for urban, mixed or rural buildings purchase and sale, donation, barter, accord and satisfaction, with or without a bank loan, and for the transfer of a house purchase bank loan to another bank, or for carrying out a mortgage loan, in a single service counter.
Luis Miguel Amaral, Founder & Managing Director of Luis Miguel Amaral – Advogados / Lawyers. Advogados / Lawyers (also known as LMA-ADVOG) is a multilingual and awarded full service Portuguese law firm with offices in Faro / Algarve and Lisbon (Lisboa) and representation offices in Porto, Portimão, Caldas da Rainha, Azores (Açores), Madeira, Spain, Germany, Switzerland, United Kingdom, Brazil (Rio de Janeiro, São Paulo e Salvador), Venezuela and Argentina.
The area of focus include litigation, family law, civil law, criminal law, employment law, real estate law, TMT law, maritime law, company formations, sports law, intellectual property law, public law, tax law, environmental law, international human rights law, Portuguese nationality law and foreign law.
Luis can be contacted on (+351) 289 82 49 70 or by email at LMA@LMA-ADVOG.COM