Buying A Privately Owned Property

Below we have detailed the buying process in Portugal. The procedure is simple and relatively quick; transfer of ownership is usually achieved within 4 to 6 weeks or slightly longer if the property is held in a corporate structure.

 

After a property is found and a deal agreed upon, the ‘Letters of Intent’ are prepared by the agent for both the buyer and the seller. These letters reflect the terms and conditions of the deal that was reached during negotiations but are not legally binding. Once signed, the letters are forwarded to the legal representatives of each party.

At this point the buyer’s lawyer will undertake due diligence on the property being purchased. This practice involves ensuring that all paperwork is in order and that the property is fit for sale with no obstacles or outstanding fees.

With due diligence complete the Promissory Contract is prepared, usually by the purchaser's lawyer and sent to the vendor's lawyer along with the vendor-approved inventory list, for signature.



Promissory Contract

The Promissory Contract (Contrato Promessa de Compra e Venda) is signed by both the vendor and the buyer. It is the legally binding preliminary contract of sale and purchase and should be accompanied by a deposit from the buyer to the vendor. This transaction is usually 10% of the purchase price and is customarily made via the buyer’s lawyer.

Portuguese law penalises vendors who withdraw after the Promissory Contract has been signed requiring them to return double the amount deposited by the buyer. If the purchaser withdraws after the Promissory Contract is signed they will lose their deposit.

 

Final Deed

The Final Deed (Escritura) is signed by both parties at a notary’s office. The signing of this document transfers ownership of the property to the buyer. If either party cannot be present, they may give power of attorney to their legal representative.

The remaining balance of the purchased price is paid, along with the associated taxes, completing the transaction. The new owners will be registered in the Land Registry by their legal representative and utility bills will be changed into their name.

 

Buying A Property Held In A Corporate Structure

After a property is found and a deal agreed upon, the ‘Letters of Intent’ are prepared by the agent for both the buyer and the seller. These letters reflect the terms and conditions of the deal that was reached during negotiations. Once signed, the letters are forwarded to the legal representatives of each party.

 

Privately Owned — Buying Costs

 

Legal Expenses

1-2% of purchase price

 

IMT

Variable up to 6.5%

For residential properties with

a value of over EUR 1m, 7.5%

 

Stamp Duty

0.8% of purchase price

 

Notary & Registration Fees

Usually between

EUR 1,000 - 2,000

 

Corporately Owned — Buying Costs

At this point the buyer’s lawyer will undertake due diligence on the property being purchased and the corporate structure that currently holds it. As with the sale of a privately-owned property, this practice ensures that the property is fit for sale and that all necessary paperwork is in order. Further checks are done concerning the fees, liabilities, warranties, representation, history and legal procedures of the corporate structure selling the property.

 

Legal Expenses

1-2% of purchase price

 

IMT

Not applicable in a

corporate ownership

 

Stamp Duty

Not applicable in a

corporate ownership

 

Notary & Registration Fees

Not applicable in a

corporate ownership

 

Management Company Fees

Fees very greatly between management companies

 

After a property is found and a deal agreed upon, the ‘letters of intent’ are prepared by the agent for both the buyer and the seller.

 

A Share Purchase Agreement is prepared by the buyer's lawyer outlining the conditions of the sale. This document is signed by both parties and a deposit is paid to the vendor. This transaction is usually 10% of the purchase price and is customarily made via the buyer's lawyer. The transaction may occur under the jurisdiction of the company's domicile or under an alternative jurisdiction, Portuguese or otherwise, connected with the parties. The buyer then transfers the remaining balance of the purchase price to the vendor. Both parties fulfil the terms described in the Share Purchase Agreement to complete the process. The respective management company will transfer the share ownership to the purchaser. This process is usually quick, simple and in English.

 

Know Your Customer (KYC)

Standards are designed to protect financial institutions against fraud, corruption, money laundering and terrorist financing. KYC involves several steps to: establish customer identity; understand the nature of customers' activities and qualify that the source of funds is legitimate. Property Agents, the local lawyers and certainly the banks who you might deal with while buying a property locally will ask you to fill in some forms with standard questions with regards to how the funds you are using to purchase the property were generated and whether you, your close family members and or fellow beneficial owners are or have been politically exposed. It has become quite standard and please do expect it.

 

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