[BUYING AND SELLING REAL ESTATE IN PORTUGAL]
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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 for a ten- year period upon delivery, regarding non- conformities concerning structural construction elements, and for a five-year period upon delivery, regarding all other non-conformities. The lack of conformity is presumed to exist at the time of delivery, except when this is incompatible with the nature of the property or with the characteristics of the lack of conformity. 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 warranty periods referred to above). 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 acquisition deals it’s also recommended the commission of a due diligence procedure by the purchaser, in order to i.) verify the property’s legal status, as detailed above, and to ii.) analyze the investment vehicle’s commercial, financial, tax, corporate and legal status, ensuring the legal acquisition of equity stakes as well as that no undesired obligations or rights are dragged along with the entity to be used as vehicle. IV.2.2. SHARE DEAL This process involves the acquisition of equity stakes in investment vehicles, such as commercial companies (usually joint- stock and limited liability companies) and undertakings for collective investment of a contractual nature or of a corporate nature. IV.2.3. SALES GUARANTEES In special purpose vehicles acquisitions, it is common practice for the seller to accept liability for a specific length of time for any infringement of its representations and warranties on the object of the sale and underlying assets. V. TYPES OF SPECIAL PURPOSE VEHICLES It is standard practice in Portugal to make real estate investments through one of these three vehicles which, in other words, represent the process of a special purpose vehicle acquisition deal: (i) commercial companies, (ii) real estate investment funds and, (iii) real estate investment companies. V.1. COMMERCIAL COMPANIES Joint-stock companies as well as limited liability companies are on the Portuguese frontline, representing most of the existing national commercial entities.
ILN Real Estate Group – Buying and Selling Real Estate Series
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