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Buying a property in the Algarve needs careful understanding of Portuguese procedures. Whilst each Town Hall and Tax Office can have local interpretations of the laws and regulations, in general, the rules are the same. We would like to offer you some basic guidelines based on our daily experience of selling and conveyancing in the Algarve.
It is most important to engage a Government Licensed Agent like ourselves and a reputable lawyer to work on your behalf. We can recommend well established legal representatives in the area who have considerable experience in dealing with property sales to purchasers living outside Portugal. Their fees vary depending on the complexity of the work involved but average about 1.5% of the agreed purchase price. It is important that they are able to translate the contract into your language to enable you to have a complete understanding of the agreement.
It is essential to establish ownership of the property as there can be several interested parties due to the complications of inheritance. Although there is careful monitoring of land development to protect existing property owners, thorough investigation should be made into the future of surrounding land and properties. It is possible that there could be plans and proposals for redevelopment or changes to the existing landscape which might not immediately be apparent.
Once the ownership and property details have been confirmed to be satisfactory then a Promissory Contract (Contrato de Promessa de Compra e Venda) is drawn up. This secures the property for the purchaser with the payment of a deposit of at least 10% of the purchase price. The Contract is legalised by the registration at the Notary Office and is legally binding on both sides. If for any reason the purchaser is unable to complete the agreement then the deposit is forfeited. Should the vendor change their mind and withdraw from the sale the law requires them to repay twice the deposit to the purchaser. If it is appropriate, we recommend giving Power of Attorney to ourselves or other third party dealing with your property in order that, if necessary, documents can be signed on your behalf. This document is called ‘Procuracao Publica’ and is also registered in the Notary Office. This can be implemented in a Portuguese Consul overseas.
Every buyer is required to obtain from the Tax Office (Financas), a fiscal number. If this is not already held it is usually acquired on the purchasers behalf by their lawyer.
Prior to the act of completion the purchase is subject to a property transfer tax known as Imposto Municipal sobre Transmissões “IMT” (Municipal Transactions Tax). As the amount varies with the value of the property it is difficult here to give a precise figure but it is reasonable to assume a figure of up to 6% on the purchase price of the property when considering final costs.
Having completed the above formalities the sale can then proceed with the final act known as ‘Escritura de Compra e Venda’. The full purchase price must have been paid to the vendor or must be made at this time. This takes place in front of the selected Notary where the Contract is read aloud to the purchaser and vendor. It is usual for a translation to be made available, if necessary, in order that all parties understand fully the terms of the Contract. It is at this point that the Contract is signed and subsequently registered at Registo Predial together with a fee of between 1.5% and 2.5% of the purchase price. The Notary Office then issues a photocopy of the Registry entry.
Although the above procedures are very different from the way in which conveyancing may be conducted in other countries we will be happy to simply and clearly guide you through each process.
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