Pitfalls buying Property in Portugal

If you are interested in buying property in Portugal, you should be aware that some issues could potentially arise, which we detail below:  

First, you must find out if the owners of the property are the real owners and that the property has no debts or else you could find yourself responsible for repayment debts. These checks must be carried out both before signing a promissory contract (contrato de promessa de compra e venda) and before signing the deed of sale (escritura). Particular care must be taken when considering the clauses in such contracts – they may be described as ‘standard’ but contain clauses that are anything but! The best policy is not to sign anything that your lawyer has not reviewed first. It is not uncommon for those buying property in Portugal as a foreigner to let down their guard and agree to things that they would never do at home, for example make an informal deal in a bar or restaurant with a person who seems all too credible in the moment, but is nowhere to be seen when a deposit payment has been made.

Another issue that can frequently arise is for the vendor to suggest that you pay part of the price ‘under the table’ - thus lowering the price declared to the tax authorities and reducing the vendor’s capital gains tax liability. While you would also benefit from saving money on taxes and fees, don’t forget that you will have a higher capital gains tax bill when you later sell the property. Bear in mind that if you’re selling a house and the buyer refuses to make the ‘illicit’ payment after the contract has been signed, you will have no legal redress! This practice is of course strictly illegal and is not a clever way to reduce the costs of buying property in Portugal! Other errors that buyers typically make in Portugal is to buy in the wrong area instead of renting first. Unless you know the area well, it would be advised to take your time to look around and know the territory. Portugal is a small country and it doesn’t take too much time to go up and down, and the roads are good, so you have a chance to find the best place for you to live. Be careful also when buying a property for renovation as there is always a danger of grossly underestimating the restoration costs. If you want to build a house on land you have bought it is always better to request the appropriate planning permission information from the local council - to make sure you are allowed to do what you want to – before you buy. Otherwise you might end-up very disappointed if the permission is denied and you are forced to change your plans drastically. Take your time and be cautious: beware the aforementioned pitfalls buying property in Portugal and don t let the seller or the real estate agent pressure you into a quick purchase that you might regret later!