what you should consider when buying a house
Updated: Oct 21, 2022
In addition toanalysing specific documents, it is also essential to pay attention to tax analysis.
If you are thinking of buying a house or land, this article is for you. Before proceeding, it is essential to carry out a due diligence legal and technical audit of the property.
In legal due diligence, it is important to analyze the following documents:
Urban Building Record - All properties in Portugal have a "Caderneta Predial", which is a tax identification of the property that defines, among other things, the location, area of the property and the Government assessment for that specific unit. Recently, the Portuguese Government automatically updates the taxable amounts, which are subject to new valuation criteria that make the taxable amount similar to the market price of the property. Any transaction implies the registration of the transfer of ownership of the property at the land registry office and at the tax department.
Permanent Certificate of Land Registry - In the Portuguese legal system, land registration is considered declarative when it comes to the transfer or acquisition of property rights. The information in the Portuguese Land Registry is organized according to the Land Registry Unit, which can be land, a condominium apartment or a sharing right. This register has the physical, economic and fiscal identification of the unit. And also all rights in rem and encumbrances that are registered chronologically according to the date and number of your registration application, as indicated by the entry in the land registry book. The Land Registry Code provides for the obligation to register all legal facts that determine the constitution, recognition, acquisition or modification of property rights, use, surface or rights of way, acquisition in inheritance, promissory contract. Mortgage registration is not mandatory, however, registration is part of the mortgage constitution itself, so we can always access this information at the Land Registry Office.
Municipal Use License - All residential properties built since 1951 are required to have a Housing License, which confirms that the Municipality has approved the construction and execution of the project complies with the original planning and building regulations.
Condominium regulations - also within the scope of legal analysis, it is essential to analyze the latest minutes of the condominium general meetings to confirm the condominium's pressing problems as well as whether any works are planned that may imply increased costs. Since April 2022, it is not possible to carry out deeds without obtaining a certificate of non-debt from the condominium.
In addition to the analysis of these documents, it is also essential to pay attention to the tax analysis. If you are going to buy a house, you will pay Municipal Tax on Onerous Property Transactions (IMT). The amount of this tax varies depending on the nature of the property (urban or rustic), location (mainland Portugal or islands) and purpose (whether it is for own and permanent housing or secondary housing/investment). On the day of the deed, Stamp Duty is also payable. This is the oldest tax in the Portuguese tax system and is applied on the purchase, in which the amount payable is 0.8% of the amount defined in the deed.
On an annual basis, it is important to consider the Municipal Property Tax (IMI) but which is not charged at the time of purchase. This is an annual tax. As a rule, only in the year following the purchase will you be notified to pay this contribution as the new owner of the property. To calculate this tax, you have to multiply the rate charged by the municipality where the property is located by its Tax Asset Value (VPT) - which is registered with the Tax Authority.
After concluding that the legal analysis allows us to proceed with the acquisition, we advise a more detailed visit with an architect and an engineer for a deeper analysis of possible pathologies of the property.