1. A SMOOTH SALE, HAVE YOUR DOCUMENTS READY
If you have read the buying steps you will understand the relevance of the property documentation, and the importance of providing updated property documents, when and if you decide to sell, as this will assist in a smoother process.
Bear in mind that there will be several documents that either the real estate agent handling the sale (to allow them to properly advertise on the property), or the buyers, will certainly request the seller to provide. These documents should reflect what is expected. The Land Registry Certificate should reflect no issues with the property, including the areas and the descriptions of the property as well as with the identification of the owners. Sometimes, as a result of a divorce, or death, the registration may become outdated and will not reflect the current juridical situation of the ownership. The same can happen in the tax department, if the owners have done works on the property which have consequences on the tax value. This should all be updated.
Be sure to have the energy certificate in place, and the technical file of the property is compulsory, if the habitation license was issued after 30 March 2004.
2. BE AWARE OF THE CAPITAL GAINS TAXES PAYABLE AFTER THE SALE
Owners may decide to sell their property for a value they have in mind (usually and fortunately with a profit), and they don’t realize that there may be significant capital gains tax (CGT) to be paid. It is, in our opinion, essential that these calculations are correctly exercised prior to any final agreement, so that the seller knows what to count on. Bear in mind, that sometimes the price that the sellers recall having paid for the property upon acquisition, is not necessarily the value to be considered for CGT base calculations (note that furniture prices will not be electable for CGT). On the other hand, there are several costs (taxes, inflation, notary registration), in addition to (real estate fees on selling, or improvement invoices) than can be used to reduce tax bill substantially.
In certain occasions the seller may be selling the property for a price that is lower than the actual VPT (Fiscal value), and according to the tax rules, the tax department will call on the taxes to be paid, as if they had sold the property for the amount of the VPT.
There are also some specific situations when the seller is allowed to rollover the capital gains taxes. If the property being sold is the owners principle residence and it is their r intention to buy another property as their main residence, the amount of CGT to be paid will depend on the value of the purchase of their new property.
3. BEAR IN MIND THE EXACT CONSEQUENCES IN SELLING YOUR PROPERTY
Properties may be subject to preference rights to be exercised depending of their location, historic or architectural relevance. This will be enforced either by the municipal council where the property is located or by the Portuguese State (through the General for Culture Heritage). In these cases, prior to the transaction, the sellers must give notice and “offer” the selling condition to anyone that is entitled to it. If this is not correctly addressed, the sale may be considered void with the respective consequences.
If owners make some alterations to their property on land that is registered as Agricultural for example, then they will be limited to selling their property within a certain period of time. This is called the “inalienability onus”.
It is also important that sellers are aware of the any kind of irregularities in licensing their property (garage or some other part of the property). It is advisable that this information is disclosed to the buyer immediately before any offer. It is very common that a survey is requested by the buyers and they will make a point disclosing this in their report. Usually, this obliges renegotiation, which may have been avoided had the sellers disclosed this initially.
4. PREPARE FOR THE DEED
Usually, owners are obliged to provide all the documents that will be checked by the notary at the deed (registration and tax document, habitation licence, energy certificate, and technical file). Even if habitually these documents are checked before the promissory contract is signed, it is important that the owners are aware that these documents may expired meanwhile. If there is a mortgage charging the property, there will be the need to liaise with the bank in due course, so that on the deed date the document is updated accordingly.
5. DO NOT FORGET POST-DEED OBLIGATIONS
Finally, it’s never too much to recall that after the deed takes place, owners should follow up if the buyers have transferred the utilities contracts or if they just have contracted directly with the supplier. The idea is to be sure that no contract will be kept in force in the sellers name. Be sure to have cancelled all to avoid unnecessary payments (insurances policies, internet or box contracts, etc).
Sellers must also bear in mind that, there will be a need to submit the Capital Gains Taxes declarations to the tax office (even in case there will be no tax to pay), as it is mandatory to declare the sale of a property. There are specific deadlines to comply with and penalties for anyone who does not fulfil this obligation.
Information provided by renowned lawyer, Tiago Gonçalves Luis from Tiago Luis, Josue Coelho & Associados International Law office in Faro. For more information, please contact their law office at:
T: +351 289 887 440