Buying Property in the Algarve

Buying your dream Algarve property may seem like a daunting prospect but actually it is a relatively straightforward procedure.
 
When looking for your property always deal with a Government licensed agent (AMI licensed). If you are to purchase property through an unlicensed agent you would have no legal protection should a problem arise.

The easiest way to find the right property for you is to have a clear idea of what you are looking for, for example:

• Preferred location
• Type of property required
• The number of bedrooms
• The number of bathrooms
• Would you consider a property under construction or do you want to move in quickly?
• Would you like a swimming pool?
• What type of outlook you prefer?
• Is the property for permanent residence or holiday home?
• If it’s a holiday home are you considering renting the property? If you do plan to rent, then think about how convenient other people may find it in terms of closeness to various amenities, for instance - shops, beaches, and restaurants. Will you need a car, or can you use local transport?
• Your budget
• How are you going to finance your purchase?

When you’ve found the ideal property, you need to make an offer for the property and this needs to be supported with the following:

• The value of the offer
• The timescale that you would like to purchase the property
• How much deposit you have available for the Promissory contract?
• Is finance required?

Once the offer has been accepted the property is reserved for 30 days. This is a form, which is signed by the owner of the property and the purchaser. A cheque is then given to the real estate agent to be held as a sign of good will. The cheque is not deposited and is refundable.
 
The next step is to instruct a lawyer and to obtain your fiscal numbers and open a bank account.
To obtain your fiscal number, simply take your passport along to the local ‘finanças' (tax office)  and be prepared to queue! This number will be needed to open an Algarve bank account as well as registering for the utility services - water, electric, telephone etc. Alternatively your lawyer can arrange this for you.

Your lawyer will then check all papers regarding the property for the signing of the promissory contract. The promissory contract is normally signed within 30 days of the offer being accepted and at this point the deposit (normally between 10% and 30%) is paid. This is a legally binding contract and if the buyer backs out of the purchase the deposit is not refunded. If the seller backs out they have to pay  twice the amount of the deposit back. The final deed will then be completed at a date to be set by the owner of the property and the purchaser.

It’s worth mentioning here to check exactly what the seller will be removing from the property - it isn’t at all unusual for the water heater or the marble worktop to be taken with them!

It is common practice to now hand over Power of Attorney to your lawyer to enable them to complete the sale for you. This is signed at the Notary Office and there will be a small fee payable for this service.

As a guideline the costs for the purchase would be as follows:

Lawyer’s fees 1 – 2%
Notary and registration fees 1.5 – 3%
IMT, as transfer tax is now known (previously SISA), the rates ( 2007) are as follows:
 
Sale Price - Percentage of tax due - Amount to deduct: 

Under €85,500               1%                                €0
€85,500 to €117,200     2%                                €865
€117,201 to €159,800   5%                                €4,371
€159,801 to €266,400   7%                                €7,567
€266,401 to €532,700   8%                                €10,231
Over €532,701                6%                                 €0
 
Rustic property has a flat rate of 5%.
Plots for construction have a flat rate of 6.5%.

Council Taxes: Imposto municipal sobre imóveis (IMI): you pay between 0.4% and 0.8% of your taxable value. Portuguese properties are being revalued and you may end up having to pay between 0.2% and 0.5% of the value given to your property.

Inheritance tax: Inheritance tax has been abolished in Portugal. There is still a 10% stamp duty charge on transfer of assets. Gifts or donations to a spouse, children, parents or grandparents are exempt.

Your lawyer should check that all local annual property tax has been paid up to date on the property before you pay the final balance.

Other ongoing charges you will need to bear in mind - if you are buying an apartment, or a property on a complex, there will be an annual condominium charge for maintenance of the communal facilities.