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Buying Real Estate in Portugal - Brief overview

  • Portugal
  • Real estate

21-09-2021

In Portugal, real estate ownership right comprises the full and exclusive rights to use, enjoy, transfer, and encumber immovable assets with no limitation in time. Another type of rights in rem such as surface right (corresponding to the common law “leasehold”) is also admissible. Real estate can be acquired directly (“asset deal”) or indirectly (“share deal”) through a corporate vehicle.

The negotiation procedure is initiated by a letter of intent or a non-binding offer from the buyer to the seller, after which the parties agree on the next steps of the transaction such as the performance conditions of the due diligence. Typically, after the binding offer is accepted, the parties execute a promissory sale and purchase agreement, which sets forth the main commercial terms of the transaction and may include representation and warranties, as well as certain precedent conditions to be met before completion, such as the notification to public entities holding pre-emptive rights over the property or completion of building works. In residential properties, the seller often requests a reservation deposit from the buyer (usually €10.000) to grant an exclusivity period provided based on the reservation agreement that usually includes certain clauses of the transaction. Often the buyer’s lawyer carries out due diligence to the legal status of the property and comments on the draft promissory agreement provided by the seller. The buyer may also commission a technical survey (which may include an environmental assessment) of the property. With the execution of the promissory agreement, the parties commit to complete the transaction on a fixed date or after certain conditions are met. The buyer typically makes an initial deposit corresponding to 10 to 20% of the purchase price upon execution of the promissory agreement. Additional deposits of the price may be agreed upon by the parties before the deed takes place.

A provisional register of the purchase may be requested at the Land Registry Office to guarantee that final acquisition becomes effective as of the date the provisional registry was filed, based on the seller’s consent or in specific provisions of the promissory agreement for such purpose. The transaction is executed by public deed or private authenticated document and requires certain mandatory documents, such as the Land Registry certificate or use permit of the property. Acquisition of real estate assets is subject to Municipal Property Transfer Tax and Stamp Duty which are levied over the acquisition price or the property’s tax value (whichever is higher) and must be paid by the buyer before the transfer deed is executed. Other transaction costs such as notary and registry fees are also borne by the buyer. Transfer of ownership must be registered at the Land Registry Office to be effective against third parties.

 

Eversheds Sutherland FCB in Portugal

Eversheds Sutherland FCB, is a full-service law firm with over 30 years of experience in Portugal and internationally. We provide a full range of legal services, including Corporate and M&A, Commercial Law, Real Estate, Public Law, Litigation, Tax, Employment, Banking and Finance, TMT, Intellectual Property and Data Privacy, Energy and Competition.

Rodrigo Almeida Dias | Partner, Co-Head of Real Estate

Miguel Lorena Brito | Partner, Co-Head of Real Estate