Dealing with buying or selling property in Portugal as a foreigner can be intimidating, especially when there is a major language barrier; nevertheless, afterwords and the processes are clarified, we will see that, luckily, things are not as hard as they looked.
The seller is responsible for ensuring that any outstanding condo maintenance and service fees are paid in full and that all applicable municipal rates and taxes have been paid in a timely manner.
The seller must ensure that all utility bills (electricity, water, gas, telephone, internet provider, insurance) are paid in full and in order after identifying a potential buyer or accepting an offer on the sale of the home. If the council rates and taxes on a property are not paid in a timely manner, the government may auction it off. Upon final payment of all bills, some sellers choose to terminate utility service, while others prefer to transfer it directly into the name of the new owners (typically when both parties are legally represented by lawyers/solicitors), thereby saving the new owners the trouble of filling out a fresh application.
Both sellers and purchasers should strongly consider using the services of a Real Estate Agency that holds the appropriate government license. As a result, you can rest easy knowing that you’re covered in the event of any hiccups or disagreements that may develop throughout the course of the transaction. When the government grants a real estate agency a license, it does so only after making sure that a long list of requirements has been satisfied, and it also mandates that only government-approved forms be used.
If the seller does not have a permanent U.S. residence, it is highly advised that they utilize a legal representative. The purchaser is relieved of future encumbrances after the solicitor performs essential acts such as drafting the Promissory Contract of Purchase and Sale, verifying all paperwork concerning the property is in order, checking with the tax office to confirm there are no taxes outstanding, and booking the transfer deed with the notary office.
There are three main phases in each real estate transaction. The first is entering into the Promissory Note, the second is executing the Transfer of Property Deed, and the third is making the necessary payments to satisfy any Capital Gains Tax obligations.
The terms and conditions of the transaction are spelled out in a legally enforceable document called a Promissory Contract of Purchase and Sale (Contrato Promessa de Compra e Venda). It’s drafted by a lawyer or solicitor and signed by the seller and buyer or their agents under power of attorney. After that, the purchasers will provide a deposit (Entrada) to the seller or their legal representative that might range from 10 percent to 30 percent of the purchase price (depending on what was previously agreed to by both parties). This agreement acts as binding proof of the parties’ earlier expressed intent to acquire and sell the property. If the seller backs out, the buyer is obligated to pay two times the initial deposit. When a buyer backs out of a purchase, they risk losing their deposit.
The final contract in a real estate transaction is the Transfer Deed (Escritura Publica). The purchaser (or the purchaser’s attorney) is often responsible for scheduling a mutually convenient time and date for the transfer deed to be signed. This is done in the presence of a public notary once both parties (or their legal representatives) have certified that all of the requirements set forth in the Promissory Contract have been satisfied. At this point, the buyer has the cash available to pay the seller, and the deal may be finalised. A translator should be present in the event that one of the participants does not speak the language. All remaining funds owed by the buyer to the seller are paid at this moment, and the seller hands over the keys. Following this, the new owner (or their legal agent) will be responsible for paying the deed fee and any applicable taxes.
If the sale price of a property is greater than the purchase price, the seller must pay a Capital Gains Tax (Mais Valias) to the government. If the seller reinvests the proceeds within a particular time frame and meets other criteria, they may be free from this tax. Due to the complexity of the calculations involved in determining capital gains tax, the seller is encouraged to obtain the advice of a lawyer or tax professional.
At the time of the signing of the deed, the property owner must have an energy certificate of the property accessible to present in compliance with the declared legislation no 78/2006 which was published on 4 April 2006. Without this certificate demonstrating the property’s energy efficiency, the escritura (a public deed) cannot be signed. Obtaining an energy certificate takes around 5 days and is granted by accredited businesses and engineers. The seller is responsible for applying for and paying for the certificate, which can cost anywhere from a few hundred to several thousand euros depending on the nature and size of the property. A copy is given to the new owner at the time of the public deed, at which point it is valid for 10 years. Sellers can have their lawyer or solicitor apply for the certificate on their behalf, and many real estate agents will do so at no extra charge.