Portuguese estate agents must be licensed and qualified, so ask to see their INCI certificate and AMI licence. With typical agent fees of more than 5%, private sales are common – look out for boards saying vende-se or para venda.
Among Portugal’s largest online property portals are imovirtual.com. Although the agent is paid out of the sales price, the buyer should budget for an average of 10% extra in fees and taxes.
Portuguese euro mortgages are available both to buy and to renovate a property. The maximum loan-to-value is 80% and rental income generally cannot be included in your calculations. You will need to pay an arrangement fee of 1.5–2% of the loan value, and pay for life assurance cover.
Your first step when looking seriously at buying should be to engage a lawyer – advogado – who is independent of the agent or developer. Being able to communicate with them, of course, is vital and there are English-speaking lawyers available in popular areas and cities.
When you find a property it is quite common to be asked for a modest (less than €3,000) deposit to take it off the market. It should be clearly stated to be refundable under certain conditions, such as a legal issue that cannot be resolved, or a survey – inspecao – that turns up something nasty. It should also be kept in a separate escrow-style account.
Avoid agreeing to under-declare the purchase price to avoid tax: it is quite a common practice but is illegal and could cost you extra in capital gains when you sell, unless you continue the deceit.
You will need to obtain a tax card and identity number (Cartão de Contribuinte) and NIF – a simple process of attending the local tax office with your passport and the small fee and filling in a few forms. Often the estate agent will be only too keen to help you with this.
Over the next few days your lawyer should be making the basic legal checks of the Land Registry to check the title is clean, checking basic features of the property such as boundaries, that there are no debts on the property or unresolved planning issues, that it has a habitation licence, and that your own plans for the property such as new buildings, extensions, use for rural tourism perhaps, are likely to be allowed.
Only when these are done should you sign the promissory contract – Contrato de Promessa de Compra e Venda (CPCV). This is signed at the office of the local notary, a government official whose job is to officially witness a legal document. They will not give advice and cannot replace the security of using your own lawyer. If attending in person is difficult at this stage or completion, you can appoint power of attorney to a representative.
The CPCV contract states details about buyer and seller, the property including fixtures, fittings and completion date for new homes. It is legally binding and backed with a 10% deposit that you pay at this stage. From now, if you pull out you lose all the money you have paid so far. If the seller pulls out he or she must pay you double the deposit.
It is back to the notary’s office to complete the process by signing the public deeds, the Escritura de Compra e Venda. It is sensible, and some notaries insist on it, to have a translator with you. At this point the notary will witness your payment of the balance as well as all taxes and his own fees. Your lawyer should then send the deeds to the land registry, your ownership will be officially recorded and new deeds issued.
At or before completion you will pay taxes and fees, the biggest of which is property transfer tax (IMT). There is nothing to pay on the first €92,400 but thereafter it is 2% rising to 8%. Stamp duty is 0.8% of the purchase price. The notary charges around 1% of the purchase price, the survey if you have one is another 1-2%, your lawyer also 1-2% and the land registry 0.5%. Those fees are subject to VAT (IVA) of 21%. You will also pay the IMI in advance, which is a kind of council tax.
Please note, tax rates and average professional fees are subject to change.
By Christopher Nye
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