Buying, Selling & Moving.
We've sold literally hundreds of homes to satisfied Clients since we opened our doors in 1981. Our Partners and Sales Consultants are all fully conversant with the process, however there are some basic guidelines that should be followed when buying or selling.
Many Clients are pleasantly surprised by the ease of navigating the process here in Portugal, and of course, we'll be with you throughout; but good choices made early in the process will help you in the longer term. We're always updating this section and are currently producing buying and selling guides, so check back regularly or watch out for regular updates on our social media pages.
If you're looking to sell, you've also come to the right place. With the central Algarve market in recovery and our continued in high profile marketing, we'll do all we can to see your home quickly and efficiently. Take a look at our 'Property Sellers' section for more information or contact our Partners via contact us.
Also within this section you'll find some useful information if you're looking to spend a little more time in The Algarve, or are considering making it your permanent home.
We look forward to welcoming you.
Robert, Ana and all the Cerro Novo team.
Buying your home is a straightforward process provided you stick to the letter of the law and are advised or represented only by competent and reputable specialists who are fluent in a language you understand.
Deal with an Estate Agent who is Government Licensed (Mediador Autorizado) with Ami Number and whose conduct is subject to enforced rules. You can check our credentials by entering our license number (860) here.
Deal only with Lawyers and Solicitors (Advogados or Solicitadores) who are fully qualified and whose conduct the Portuguese Law Society controls.
Consider giving your Lawyer a specific Power of Attorney (PoA) to sign documents on your behalf, but you should ensure that the proper steps are being taken without any undue delay. Lawyers’ fees are between 1% & 2.5% plus IVA (VAT) of the purchase price.
- Deal with a local Chartered Surveyor who can ensure the Purchaser can understand the nature of the property being purchased and will also highlight any likely liability for future repairs.
Having chosen a property, ask your representative to search the local Land Registry (Conservatória do Registo Predial) to check that the seller (vendedor) has clear title of ownership and that no one else has rights, charges or mortgages over it.
Also check that what is registered conforms to what is actually built, as well as the area of land and plot size.
Your Lawyer will help you organise the application for a fiscal number (número de contribuinte) at the local Tax Office (Finanças), as you must have one to purchase a property, to open a bank account, for payment of annual property rates & other taxes.
EU residents no longer have to instruct a fiscal representative, although we would recommend it. Please ask our Partners for recommendations.
Obtain the official tax document (caderneta predial) relating to the property from the seller and check that the description of the property (number, of rooms, area of the house, area of land, etc.) is the same as in the land registry.
Obtain a copy of the usage licence (licença de utilização) from the local town hall (Câmara Municipal). For residential property you will need a Habitation Licence (licença de habitação), which confirms that the town hall has inspected the property and that it complies with planning permission and building regulations.
If you're buying a commercial property, non-residential licences need to stipulate the appropriate commercial or industrial use.
Short term rental licenses (Alojamento Local) are applied for at the local town hall with the following needed to obtain one: Existing usage license; Documents proving ownership (Certidão do Registo); Declaration from a qualified technician for electrical & gas installations, including hot water supply; Fire extinguishers & equipment including signage; Floor plan; Fiscal booklet (Caderneto Predial), Complaints book.
Our General Manager within the Property Management office can provide a turn-key service for Clients wishing to let their property.
There are other checks and enquiries, which are strongly recommended and should be carried out:
- Ask your lawyer or a Chartered Surveyor to examine the local developments planned for the area.
- Ask a Chartered Surveyor to fully survey the property.
- If buying in a development, check the regulations governing condominium charges.
This all adds to the expense, but it cannot be stressed enough that in making these enquiries you will fully understand all the obligations you are taking on in making this investment. If Portugal isn't your home country and if you're not fluent in the language, making sure your questions are answered in full at this stage should prevent issues arising in the future.
A Euro mortgage can usually be obtained on the property that is purchased but the spread can be quite high and the decision making process is relatively slow compared to some other European economies. Basing a mortgage on a property in Portugal will also increase the stamp duty by 0.6% of the amount borrowed plus additional registration and notary costs.
Our tip: Thought should be given to using potential equity in a property outside of Portugal to raise any required funds for purchase. It is often easier to do so based upon a good financial history in your home country and if you're working or receiving a pension, it is considered safer to borrow the funds in the currency that one receives income, so that exchange rate fluctuation won’t alter the monthly payments.
Your legal representative will have a Promissory contract of purchase and sale drawn up (contrato promessa de compra e venda) to be signed by you and the seller. It should include:
- Identification of the parties
- Identification of the property
- Agreed terms and conditions of the contract
You will normally have to pay the deposit of 10% to 30%, of the full purchase price at this stage. The contract can be signed in the Notary's office or by a Lawyer.
It is legally binding on both the buyer and the seller. If the buyer defaults he/she forfeits the deposit. If the seller defaults he/she has to pay the buyer double the deposit (or, if a clause of specific execution is included, the vendor cannot withdraw and the purchaser can legally force the vendor to sell to him).
Purchase Taxes: IMT (Property Transfer Tax) & IS (Stamp Duty)
These are the Portuguese Purchase Taxes that are paid simultaneously and will need to be paid prior to completion. The amount payable varies with the value of the property and your lawyer will always advise you of this figure before you incur any expenditure.
IMT Tax applied is on a sliding scale from 1% of €92.407 up to 6% above €550.836 on purchases of second/holiday properties. (There is also a special rate if you are a resident and if it is your permanent residence – Exemption below €92.407 and then taxed up to 6% above €574.323)
Stamp Duty Tax is 0.8% on the value of the purchase.
Different percentages are applicable on land or non-residential property and in those cases it is a fixed percentage that does not vary with the price. Rural Land is 5% and for other non-residential purposes and urban land it is 6.5%.
A very important exception has been introduced to the above figures in that whenever the purchasing entity is a “black listed” Offshore territory resident / company, the IMT Tax percentage will be 10% regardless of the purchase price or the nature of the property.
Notary& Registration Fees
These will have to be paid by you on completion, and as a rule will be approximately 400 Euros for the notary and 250 Euros for the registration fee.
Outstanding Annual Property Taxes (IMI)
Unpaid property taxes (IMI) attract fines but may be allowed to mount up for some considerable time without official action; so ask the seller to show proof of payment for the last five years. Any outstanding property taxes should be settled before you make the final payment (your lawyer should do this for you).
Energy Certificate (Certificação Energética)
Since 1st January 2009 an EU regulation requires Energy Certificates for all properties (including ruins) in order to inform about the thermal insulation values of properties; to recommend ways of improving these; to promote refurbishment works and also to increase the efficiency of buildings. From 1st December 2013 this has been compulsory for all properties that are rented or for sale . The Energy Certificate is valid for 10 years.
Final Deed (Escritura)
Proper title to the property comes with the final deed of conveyance (escritura de compra e venda) which is signed in the office of a notary. All the relevant documents have to be checked before the final contract is read aloud and, unless the buyer understands Portuguese, interpreted in the buyer’s language.
Finally, register the property in the name of the new owner in a land registry office, which is automatically carried out at the time of completion by the notary.
If the registered owner of the property changes in the transaction, new contracts will have to be entered into with the utilities companies for electricity, water, telephone, gas etc.
We recommend that your Lawyer should attend to these transfers on your behalf and most payments can now be effected by automatic bank transfer.
This is still a legitimate, convenient and common place way of acquiring property in many countries, including Portugal. When a property owned by an Offshore Company is bought, it is the shares of the company, rather than the property itself which changes hands. By buying Offshore one avoids property Transfer tax (IMT) plus Stamp Duty, Notary and Registration costs. Please note that one should still carry out all of the searches, checks and inspections mentioned previously.
However, in November 2003 the Portuguese Government revised of all property taxes in Portugal and introduced new legislation. Included in this was a clause which obliges any Company registered in an Offshore base included in the “Black List” to pay higher rates. In 2014 the rate is 10% per annum. If a company is registered in a “White Listed” location such as Delaware or Malta then the standard taxable value for rates will apply.
Rateable value or Property Tax (IMI or Valor Patrimonial)
In 2015 the IMI annual tax applied is between 0.3 and 0.5% of the taxable value for urban property and 0.8% for Rustic property (but 7.5% for offshore – see above).
If you intend to become a resident in Portugal, advice should be taken from an accountant or fiscal representative. If you do not intend to become resident, there are only three taxes that will concern you, Capital Gains Tax, Annual Council tax (IMI) and Tax on the rental income should you decide to let your property.
Your lawyer and, if necessary, your accountant, can advise you of your future liability with any of these taxes.
Note: If you are acquiring the shares of an offshore company, care should be taken as to any past Capital Gains Tax liability that the company has accrued (28%). Europeans who haven’t been resident during the past 5 years can apply for Non Habitual Resident status (NHR) and be exempted for 10 years from income tax on Pensions and other non Portuguese derived income, while some professions can pay reduced income tax of 20% on income within Portugal. Take a look at our guide on NHR here.
It is always advisable for purchasers of a property that they immediately make a Will in Portugal dealing with the assets in Portugal. If this is not done, probate in the country of residence has to be taken out then transferred and translated into Portuguese. Making a Will in Portugal will reduce the expense and avoid time delays. The Portuguese Will is in addition to and not in place of your existing Will. As from the 1st January 2004 inheritance tax was zero-rated for EU residents leaving assets to immediate relatives. The rates for non EU residents are very low and are set off against any double taxation agreements in place with your home country.
We're putting together handy guides to help Clients with Buying Selling and Moving to the Algarve. Please click on the links below for more information. (All files require a PDF viewer)