The buying process in Portugal is described in depth below. The process is straightforward and relatively swift; ownership is typically transferred inside of 4 to 6 weeks, or marginally longer if the asset is kept in a corporate structure.
The “Letters of Intent” are produced by the agent for both the buyer and the seller once a property is identified and an agreement is reached. Although the terms and conditions of the agreement are reflected within these same letters, they are not legally binding. The letters are delivered to the parties’ respective representatives after being signed.
At this stage, the buyer’s lawyer shall conduct due diligence on the property. This procedure entails making certain that all paperwork is in order and that the property is ready for sale, without any impediments or outstanding fees.
Once due diligence has been concluded, the Promissory Contract is formed, typically by the buyer’s lawyer, and forwarded, together with the vendor-approved inventory listing, to the vendor’s lawyer for signature.
PROMISSORY CONTRACT (Contrato Promessa de Compra e Venda)
The Promissory Contract is signed by both the vendor and the purchaser. This is a legally binding preliminary contract of sale. On signing the Promissory contract, the purchaser should provide a deposit to the vendor. This transaction, which often amounts to 10% of the purchase price, is typically managed through the purchaser’s lawyer. Portuguese law disciplines sellers that withdraw following the completion of the Promissory Contract, by obliging them to refund twice the sum of the purchaser’s deposit. Upon signing the Promissory Contract, the buyer cannot withdraw without forfeiting their deposit.
FINAL DEED (Escritura)
Both parties must sign the Final Deed at a notary office, the signing of the final deed transfers ownership of the property to the buyer. If either party are unable to attend, they can give their legal representative power of attorney. A legal representatives will register the new owners in the Land Registry and change their utility bills into their names after the remaining balance of the purchase price is paid, along with any related taxes.
BUYING A PROPERTY HELD IN A CORPORATE STRUCTURE
Once a property is found and negotiations are met reflecting the terms and conditions of the agreement, the agent prepares ‘Letters of Intent’ for both the buyer and seller. When the letters are signed by the buyer and seller, the letters are then delivered to the parties’ respective legal advisers.
This is the point when the purchasers’ lawyer will conduct due diligence on the current corporate structure and the property being purchased. This procedure guarantees that the property is fit for sale and that all required documentation is in order. Additional inspections are carried out into the expenses, liabilities, representations, assurances, history, and legal processes of the business entity selling the property.
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 the purchase price
Notary & Registration Fees – Usually between EUR 1,000 – 2,000
CORPORATELY OWNED – BUYING COSTS
Legal Expenses – 1-2% of the 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 vary greatly between management companies
Once a property is identified and an agreement is made, the ‘Letters of Intent’ are prepared by the agent for both the buyer and seller
The purchaser’s lawyer drafts a Share Purchase Agreement describing the terms of the deal. All parties sign this agreement, and the purchaser pays a deposit to the vendor. This transfer is often made via the purchaser’s lawyer and is typically 10% of the purchase price. The undertaking may take place under the firm’s domicile or another Portuguese or non-Portuguese jurisdiction having ties to both parties.
Next, the buyer pays the Vendor the balance of the purchase price. To conclude the procedure, both parties comply with the Share Purchase Agreement’s terms. The final step involves the management company in place transferring share ownership to the purchaser. In most cases, this process is quick, easy, and in English.
Know Your Customer (KYC)
The purpose of the standards is to guard financial institutions against corruption, money laundering, terrorist financing, and fraud. KYC entails a series of steps to establish the identity of the customer, comprehend the nature of the customer’s actions, and verify the legitimacy of the fund’s source.
When you are buying a local property, property agents, lawyers, and banks will always ask you to fill out forms with standard questions about where the funds you are using to buy the property came from and whether you, your close family, or other beneficial owners are or have been politically exposed. It is now commonplace, so please prepare for it.