Information

The Buying Process

The Buying Process

Property searches and due diligence:CeliaRamos_20160724.jpg

 

When purchasing a property ensure that all searches and due diligence are carried out by a registered solicitor or lawyer.

 

The due diligence and searches should verify the following:

 

- all property documentation is in good legal order;
- that the vendors have good title to the property;
- if the property is leasehold or freehold;
- if right of first option must be given by the vendors;
- that there are no onus, charges, mortgages, loans or third party rights which affect the property;
- that the property has got valid planning permission.

 

Documents needed for a purchase and sale of a urban property:

 

- Updated and valid certificate of register;
- Updated and valid tax registry certificate “caderneta predial”;
- Habitation License for properties built after the 7th August 1951;
- Town Hall Certificate of Habitation License exemption, if property was built before the 7th August 1951;
- Technical File of Habitation (for habitational properties built after the end of March 2004);
- Certified plans for the property;
- Energy Efficiency Certificate.
- IMT (purchase tax) payment;
- IS (stamp duty) payment;
- Other documents may be required depending on the particular case or property, namely location, loans, mortgages, etc.

 

Documents needed for a purchase and sale of a rustic property:

 

- Updated and valid certificate of register;
- Updated and valid tax registry certificate “caderneta cadastral”;
- Location plans for the property;
- Certificate of the Town Hall allowing for co-ownership if more then one owner is purchasing (in the case of a married couple if married under separation of assets it is also needed);
- Energy Efficiency Certificate.
- IMT (purchase tax) payment;
- IS (stamp duty) payment.
- Other documents may be required depending on the particular case or property, namely location, loans, mortgages, etc.

 

Procedures:

 

Once initial searches and due diligence is completed and satisfactory, a promissory contract is usually drafted and signed. This contract sets out all the transaction conditions (price, deposit, date of completion, amongst other conditions agreed by the parties) and it is the only binding document for both parties from the time the purchase is agreed until the completion date.


Usually upon signing of the said contract a deposit is paid. Although the parties may agree upon the value of the deposit, the most common is 10% of the price. The rest of the price will be due upon signing of the title deed.


The deposit is a very important factor to consider as it has relevance in case of breach of contract. In Portugal if the purchasers default on the terms of the contract and do not complete the purchase, they will lose the deposit paid in favor of the vendors. If the vendors default on the terms of the contract and do not complete the sale they will have to refund the purchasers for the amount of the deposit received plus the same amount in compensation.

Final searches to confirm the initial due diligence should be carried out prior to the completion date.


The final title deed of transfer of the property can be executed before a Notary Public, a lawyer or solicitor who do not represent either of the parties or at the Casa Pronta office ( land registry office). 

Following the title deed, the records in the tax office and the land registry office must be updated to show the new owners. This is extremely important as the registration update is the proof of ownership and advertises the position of the new owners to third parties.

 

Taxes due on sale of property:

 

The vendors must be aware that on sale of a property capital gains tax can be levied. For non resident vendors the tax currently applicable for the sale of property is 28%. If the vendors are resident then the percentage applicable is indexed to all their worldwide income and is applicable in a sliding scale. 

Whether or not capital gains tax is levied the obligation to submit the tax declaration the year after the sale remains in place.

 

Charges and taxes due on acquisition:

 

- Notary fees – variable but around € 300,00/€ 400,00
- Register fees - € 250,00
- Stamp duty - 0,8% of the price
- Purchase tax – rates vary depending on the type of property being purchased.

 

Purchase tax:

 

- Rustic property – 5% of the price
- Urban property – 6,5% for non habitational property
 
For habitational property we have to consider two different calculations for the purchase tax.

- If for permanent residence

 

Taxable value (price or tax value whichever the highest) - Euros Marginal tax to apply (percentage) Deduction (Euros)


Up to 92.407,00 0% 0,00
Above 92.407,00 and up to 126.403,00 2% 1.848,14
Above 126.403,00 and up to 172.348,00 5% 5.640,23
Above 172.348,00 and up to 287.213,00 7% 9.087,19
Above 287.213,00 and up to 574.323,00 8% 11.959,32
Above 574.323,00 6% 0,00

- If for secondary residence

 

Taxable value (price or tax value whichever the highest) - Euros Marginal tax to apply (percentage) Deduction (Euros)


Up to 92.407,00 1% 0,00
Above 92.407,00 and up to 126.403,00 2% 924,07
Above 126.403,00 and up to 172.348,00 5% 4.716,16
Above 172.348,00 and up to 287.213,00 7% 8.163,12
Above 287.213,00 and up to 574.323,00 8% 11.035,25
Above 574.323,00 6% 0,00