Please read this before making any travel arrangements to Portugal

We have experienced over the last year a high amount of clients arriving here in the Algarve wanting to purchase a property without having all of their finances in place. This has caused a great deal of upset as clients deciding on a property have then pursued financial assistance both here in Portugal and back in the UK, and although have been promised quick decisions have been very disappointed at the time taken to formally accept or decline the offer of a mortgage or loan. In the meantime additional expenses have been incurred such as air travel/hotel/car hire etc. As well as valuations sometimes required by lenders. This has happened due to lack of understanding on what documents are required to successfully apply for a mortgage here in the Algarve whilst on your visit. In some cases the whole process has taken 3-4 months and during this time the property has been sold to another client by another agent causing distress and serious loss of money. We feel that this has happened far too many times this year due to the high demand on property aimed at the rental market where purchases have been completed quickly in time to gain this years rental return. Therefore we would recommend having at least 30% of your expected budget available as a deposit. It is then possible to add a condition to the promissory contract allowing the buyer to back out of the purchase without losing the deposit if the lender refuses to agree a loan for the property declared in the contract. This way you are able to come over find the property of your dreams and secure the sale of the property pending an agreement from your lender. This will take the property off the market and prevent the property from being sold to another client.

Should you wish to apply for a mortgage here and take full advantage of the low interest rates then please read the following page on what documents are required and what we can do to help you expedite the whole process. With careful planning we can have a mortgage application processed in time for your arrival. If you would like to know how this can be achieved please click here. LINK

Above all It is not a good idea to come out to Portugal in search of a property if you are dependant on selling a property first. This will almost certainly end in disappointment. The market in the UK has begun to settle and buying in this way is very dangerous especially if a promissory contract has been signed as you are legally obliged to purchase the property on the agreed deed date, failure to do so will result in the loss of your deposit. We are here to help, and we really do not want you to undergo any unnecessary stress and heartache when it can be easily avoided.

If you would like further advise, then please call us or drop us an email.

Buying Tips

The most important recommendation we can make to you is, do not sign anything until you have attained competent and independent legal advice.

Buying a new property can be a daunting prospect with all the legal processes to consider and more so in a foreign country, where the language and purchase law is far different. However, with our help and a reputable legal advisor there will be no need for concern when buying your new home in Portugal.

We will guide and assist you through the buying process once you have found the property you wish to purchase. The next step is to contact a lawyer. Your legal advisor will require full information on the property, which we will provide, and then will commence the process as follows:

Land Registry – Conservatoria. A search will be made to check the land registry title at the local municipality. Where appropriate, checks on licences and permissions will be made

Inland Revenue  - Repartição de Finanças. A search will be made to ensure tax registration on the property and there are no charges that may adversely affect the property.

Taxation Number – Numero de Contribuinte. Your lawyer will apply for your fiscal number through the local Tax Office. Your fiscal number will be required for many transactions, including opening a bank account in Portugal.

Contract – Contrato de Promessa de Compra e Venda. A promissory contract is drawn up between purchaser and vendor. At this stage a deposit of between 10% and 40% is required. (Dependant on vendor) This is a legally binding contract and should you wish to withdraw from the purchase then you will forfeit the deposit. In the event that the vendor defaults, then they must repay double the deposit.

SISA tax - Will be replaced by a new tax called Imposto Municipal sobre Transmissões - IMT which will have lower rates than the current tax. Thus, the maximum rate will be 6%, instead of 10% as before, and the exemption limit has been increased. Please see the chart below.
 

IMT Tax Scale

Percentage

Deductions

Until 87.500	1%	€0
From 87.500 until 119.700	2%	€875
From 119.700 until 163.200	5%	€4,466
From 163.200 until 272.000	7%	€7,730
From 272.000 until 521.700	8%	€10,450
Up from 521.700	6% Flat

(b) Buying Rural Land plots - 5% 
(c) Buying Urban Land plots - 6.5%

Purchase of agricultural land will have a rate of 5% instead of 8%, and purchase of shops and plots of land for construction will be subject to a rate of 6.5% instead of 10%. Also, instead of the tax being calculated on the declared price of the property, hitherto it will be calculated on the market value of the property. For that, the Finance Department is re-evaluating all the existing properties and new property will be evaluated taking under account several aspects, like location, size and construction costs. However, if a property is to be purchased by a company based in one of the black-listed territories stated in Law nº 1272/2001 the rate of SISA will be 15%. Because of pressure from builders and local councils, which feared a freeze in sale of properties until the new law has been in effect, new SISA rates have been introduced according to what is stated above.

Final Deed – Escritura. Your official property deed. The signing of the Escritura must be in the presence of a Notary official. All parties must attend the Notary office and proof of payment be identified before the Notary.

Legal Fees – It is important that you are aware of the approximate costs involved prior to signing the promissory contract. Your legal representative will be able to advise of all the costs including land registry, notary fees, IMT tax, and their own fee (normally 1.25% – 1.75%). It is important to note that vendors are not required to pay any part of the fees towards your purchase of their property.

In the case of new build properties, it is customary for payments to be made in stages as the works progress. Your legal advisor will ensure that certificates are attained at each agreed level of construction.

You should be aware that many of the service charges relating to your new property are payable on a monthly basis and not charged quarterly as in the UK.

Rates – Contribuição Predial. Payable twice yearly.

Electricity – EDP. Payable monthly.

Telephone – Portugal Telecom. Payable monthly.

Local Services – Câmara Municipal. Mains water/sewage/etc. – Payable monthly.

House Insurance – Seguro Habitação. Payable monthly or annually