Selling Property – A Checklist for vendors

As a vendor you should also be prepared for the transaction if you want everything to go smoothly and successfully. The following checklist summarizes the main questions to consider.

Prior to the conclusion of the contract

• Are all necessary documents at hand?

Make sure that all necessary documents are at hand - as far as this is possible. The examination of the documents is the duty of the lawyer.

• Are the records in the land register and the real estate tax register correct?

In Portugal you have to be recorded in the land register as the owner before you will be able to transfer ownership to the vendee. Otherwise the land registry will not register the vendee. There can be an exception for heirs: Under certain circumstances they don’t have to be stated in the land register. Therefore the land register should always be kept up to date. You should also check whether the real estate tax register entry is correct. Usually both registers should be consistent.

• Do other persons have to participate in the process?

Sometimes a declaration of consent of the spouse might be required, you should consider this beforehand. If the vendor is a Company it should be represented properly to be able to sell property. Furthermore, the approval of the shareholders could also be necessary.

• Is the property encumbered with third party rights?

The ownership on the property will be transferred together with third parties' rights if these rights are recorded in the land register. Therefore you or your lawyer should check upon third parties' rights (e.g. a mortgage) before selling the property and, if necessary, request their deletion. Eventually you will have to coordinate this course of action with the bank which benefits from such a right. This is the safest way to prevent claims for compensation.

• Does somebody have the right of first refusal?

There is always a possibility of an existing right of first refusal. The right of first refusal is the right to acquire property before it can be offered to any other person. The Law provides for several such possibilities. A disregard of this right can have adverse consequences, particularly if the price you agreed on is inferior to the property's value. Especially in these cases the vendor should ensure that no such right exists.

• Does the property have legal dues?

In certain cases the state has a privileged right to seize the property for legal dues even if the ownership was transferred. In such a case the seizure could be registered in the land register and the buyer would be claiming compensation. The vendor should take care that no such legal dues exist. Thus, especially all due taxes should be paid.

• Are there tenancies or leases?

If - according to the contract - the property is to be sold without tenancies, then you have to make sure that the property is indeed uninhabited at the time of the transaction. You should terminate existing rental agreements on time. Be aware that the Portuguese law favors tenants; it can take a long time to terminate the contracts. A quick termination of the existing contracts is usually only possible with a mutual agreement or even a pay-off of the tenants.

• What is to consider in regard to the authorisation of occupancy?

The authorisation of occupancy has to refer to the building as a whole and to all changes which are subject to licensing. If you have changed a newly constructed building after its completion you have to apply for a new authorisation of occupancy at the local council. If the changes which are subject to a license were implemented without a building permission (licença de construção) a legalisation procedure - i. e. an ex-post approval procedure - has to be carried out first, before applying for the license. If the authorisation of occupancy was not yet issued by the local council it might suffice to provide the granted building permit (alvará de licença de construção).

After the transaction

• Do not forget to submit the annual income tax return!

After the sale you have to declare your income tax in Portugal concerning the gain realized by the sale (mais-valias). There is a certain period regulated by law to make this notice. The declaration has to be made even if you did not have any gain.