[BUYING AND SELLING REAL ESTATE IN PORTUGAL]
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On the other hand, if the intention is to acquire a building, or building unit, the buyer should also verify the use permit license which defines the purpose of the property. IV.1.2. SALE AND PURCHASE PROMISSORY AGREEMENT Before the formalization of the real estate sale, it is common practice to celebrate a promissory agreement (or pre-contract agreement) as an immediate binding document, in which case the signing of the definitive sale agreement is usually conditional upon the parties ’ compliance with several obligations. The parties can also agree with a deposit and down payment of the property price. In the case of default by the promissory seller, the promissory purchaser may receive twice the amount paid; if the default is caused by the promissory purchaser, the promissory seller can keep the amounts he has already received. IV.1.3. SALE AND PURCHASE AGREEMENT The real estate sale is formalized either in a deed, signed before a notary, or by a certified private document, which can be signed in the presence of a lawyer. Altogether with the deed, or certified private document, there is the Land Registry Office record, which is one of the main instruments of a real estate deal, destined to make public the property’s actual legal status. Due to the principle of the priority of registration, the first registered right is effective before third parties and prevails over their incompatible rights even if those rights have been established before the date of registration.
Accordingly, together with the sale and purchase agreement, the registry of the property acquisition is vital to assure the protection of the purchaser before third parties. IV.1.4. REAL ESTATE WARRANTY According to Portuguese Law, the real estate seller (and the property builder, when applicable) is responsible for any defects or flaws in the property that may occur in a five-year period upon delivery. The purchaser must report the defect or flaw to the real estate seller or property builder within one year from the date of detection of the defect (always within the five-year warranty period). The problems that have arisen during this period cannot be the result of bad use by the purchaser. There may be warranties with distinct deadlines when a conventional warranty is stipulated between the parties and is expressly stated in the sale and purchase agreement. This legal warranty can also be refused by both parties, specifically if they agree to sell the property “as it is” at the moment of the sale. IV.2. SPECIAL PURPOSE VEHICLE (INDIRECT ACQUISITION) The second form of real estate investment is the indirect acquisition of property, via a special purpose vehicle, previously incorporated, or acquired, for such purpose. This procedure requires the compliance of
some steps, as follows: IV.2.1. DUE DILIGENCE
As in direct acquisition deals, in indirect acqui sition deals it’s also recommended the commission of a due diligence procedure by the purchaser, in order to i.) verify the
ILN Real Estate Group – Buying and Selling Real Estate Series
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