Buying property in Portugal

21-09-2015

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Initial agreement between the seller and the buyer - Before Contract

What form can this agreement take? Preliminary contract?

A simple document by private agreement is sufficient to conclude a preliminary contract, even if the agreement must take the form of an original or authenticated document. This shall not be the case only if the parties wish to give the document real effectiveness, in which case it must take the form of an original act or an authenticated private agreement.

In the case of a preliminary agreement concerning the conclusion of a contract in return for payment for the sale or transfer of usage rights of a property, which is already built, in the process of being built, or to be built in future, or of an autonomous part of it, the private agreement must contain the witnessed signature(s) of the prospective vendor(s) as well as the certification by the witnessing entity of the existence of the right of use or construction; nonetheless, the contractual party which promises to sell or transfer the rights, cannot invoke the omission of these conditions, unless the omission has been caused intentionally by the other party.

With whom must the parties (buyer/seller) formalise the initial agreement? Is a legal form imposed?

The witnessed signature may be carried out by a notary, a lawyer, a solicitor or at a public registry.

In the case that the parties wish to give real effectiveness to the preliminary agreement, they may do so by an authenticated act drawn up in front of a notary, by means of a document by private agreement with a certificate of authentication written by a lawyer or solicitor, or by means of a certificate drawn up by the commissioner of a public registry.

What are the legal effects of this preliminary contract? Is a preliminary contract necessary?

A preliminary agreement is not obligatory between the parties.

However, the parties may give real effectiveness to the promise of sale or transfer of real rights to properties by means of a written declaration and entry in the register, which must be shown in the authenticated act or the authenticated private agreement. Once these conditions have been fulfilled and, above all, by means of the publication in the registry, the rights deriving from the preliminary agreement shall take effect against third parties, permitting the specific execution of the contract, and the buyer, as the holder of the rights, shall have the possibility to enforce his/her rights against a third party that has purchased the same property from the vendor, by means of a legal action of reclamation.

Are there amounts to be paid, and to whom? Can these amounts be repaid?

At the moment when the preliminary agreement is signed, it is usual for the buyer to pay a sum to the vendor as an upfront payment or deposit with the main objective of ensuring the contractual obligations are respected.

In the case of a default, there are two possible solutions:

a)      If the default is the fault of the buyer, having paid the deposit, the vendor will keep the sum transferred;

b)      If the fault is on the part of the vendor, he/she must pay back double the amount transferred to the other party or, if the property which is the object of the contract has been transferred, the buyer has the right, instead of double the deposit, to claim back the value of the property at the moment of the lapse in the contract, plus the sum of the deposit, minus the agreed price.

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