Real Estate Comparative Guide

• Published date: 11 October 2022
• Subject Matter: Real Estate and Construction, Construction & Planning, Real Estate, Landlord & Tenant - Leases
• Law Firm: Gil Figueira & Devillet Lima
• Author: Mr Rodrigue Devillet Lima and Catarina Branco Valada

1 Legal framework

1.1 What legislation governs real estate in your jurisdiction?

Portuguese real estate law is a combination of administrative law and private law. The key pieces of legislation governing real estate include:

• the Constitution of the Portuguese Republic;
• the Civil Code;
• the New Urban Lease Regulation;
• the Land Registry Code;
• the Notarial Acts Code;
• the Code of Urban Development and Construction;
• the General Regulation of Urban Construction;
• the Municipal Property Tax Code and the Municipal Property Transfer Tax Code; and
• the Horizontal Property Regime Decree-Law.

1.2 What special regimes apply to different types of real estate?

Portuguese law differentiates between greenfield sites/rural properties and urban properties. A given property serves as a greenfield site or as an urban property in accordance with the use it is given by its owner and with state land management and urban planning policies. In particular, such policies are essential in determining whether a greenfield site can be converted into urban property. Properties can also be mixed.

Thus, in evaluating a given property, not only its geographical location and size but also - and most especially - land management and urban planning should be considered.

Urban proprieties are subdivided according to their authorised and intended use: housing, commerce or services.

2 Ownership

2.1 What types of ownership rights exist in your jurisdiction?

Ownership (or co-ownership) comprises the right of use, enjoyment and disposal of property.

The Civil Code provides for other rights in rem over real estate:

• Surface rights provide for the use, enjoyment and administration for a term or in perpetuity, allowing for construction or plantations.
• Usufruct rights provide for the right to build and maintain an edification on land partially or wholly owned by third parties and can be temporary or set in perpetuity.
• Real rights of use in rem allow third parties to harvest fruit for a predetermined period.
• Permanent housing rights in rem grant an individual the use of a third party's property during the duration of the former's lifetime. Real timeshare rights in rem are allowed for tourism units.

2.2 What ownership structures are commonly used in your jurisdiction?

Residential properties are traditionally owned by individuals, either as their primary dwelling or as a second home.

Larger commercial properties are often owned by companies and used as investment assets or as business facilities. When a company is involved in real estate commercial development, it is common to incorporate a special purpose vehicle for each project.

Collective investment schemes such as funds are also increasing in number and volume.

Fiduciary structures such as trusts are not recognised by Portuguese law. However, fiduciary ownership is accepted in the Madeira Free Trade Zone.

2.3 Are there any restrictions on real estate ownership in your jurisdiction?

There are no general restrictions on real estate ownership in Portugal.

Special restrictions apply to non-constructible areas in order to protect agricultural industries, the coastline, forests and other natural assets.

2.4 Is ownership of land and buildings constructed thereon legally separable?

As a rule, real estate ownership includes the land, the airspace above its surface, and subsurface rights, with everything contained therein. However, it is possible to agree on the establishment of a surface right in rem.

2.5 What security interests can attach to real estate? How are they prioritised?

The most effective security interest applicable in Portugal is a guarantee in rem, such as a mortgage, which follows the property in case of sale without prior cancellation. In the case of a court-ordered sale of the property, a mortgage allows the secured lender to collect its claim (relating to or secured by the property) provided no other stronger or prior guarantee is in place.

In other legal proceedings for debt collection, the lien is also widely used to prevent the property from being sold to third parties during judicial proceedings. In the event of a sale, the creditor will be paid soon after the mortgage holder. Mortgages must be registered in the Land Register to be valid.

Under certain conditions, it is possible to register a promissory sale and purchase agreement with erga omnes effect.

According to the principle of priority of registration, if multiple incompatible rights entries have been registered, the oldest registered right will prevail. Mortgages registered second are subordinated to those registered first.

Other guarantees and securities include:

• assignment of income;
• pledge of shares/quotas;
• assignment of claims as security;
• pledge of bank accounts; and
• sureties.

Operational, collateralisation and financial covenants may also be agreed upon, but do not qualify as guarantees in rem.

2.6 How is a real estate lender protected from claims against the borrower or the real estate asset by other creditors?

Upon enforcement or foreclosure proceedings against the borrower, the lender will take preference over other creditors whose claims are not preferential or have no registered priority. In the event of an enforced sale, assets are transferred free of any liens and any other in rem rights with no registration prior to any seizure, pledge or guarantee.

3 Registration

3.1 What body administers the land register in your jurisdiction?

The Land Registry Office is the competent public body overseeing title changes regarding Portuguese real estate.

3.2 Is registration of real estate rights, transactions and encumbrances mandatory? What are the consequences of failure to register?

Only facts determining the constitution, recognition or acquisition of, or changes to, in rem rights over property are subject to mandatory registration. Among other things, the constitution, recognition, acquisition or modification of property rights, usufruct, use, habitation or surface rights must be compulsorily registered.

Except for the registration of a mortgage, the lack of registration does not void the underlying agreement or transaction. However, enforceability against third parties is contingent on the completion of registration. Erga omnes effects do not apply to unregistered transfers of ownership.

Applications must be filed within two months of the date of completion.

3.3 What are the formal and documentary requirements for registration?

The application for registration can be filed before any branch of the Land Registry Office in Portugal. The necessary documentation always includes the applicable court ruling, contract or public deed that establishes the fact to be registered.

3.4 What is the process for registration?

The necessary documentation is submitted for analysis and validation by the registrar, who will conduct the final registration once the government fees have been paid.

3.5 Is registered information publicly accessible?

The Land Registry is public and can be verified by issuing a Land Registry certificate.

4 Commercial leases

4.1 What types of commercial leases exist in your jurisdiction?

Commercial leases can be categorised as either fixed term or open ended. Other arrangements - such as the assignment of use of retail, industrial or office properties - will include ancillary services that are provided in connection with the use of the property and are not independent thereof. Shop use agreements are also common and are finetuned to regulate in detail the use of properties in a shopping mall or retail space.

4.2 Are the terms of a commercial lease regulated or freely negotiable? What do they typically cover (eg...