At the beginning of 2024, a significant change was made to the law in Portugal which had a significant effect on the documents required to complete a property sale. One of the primary alterations was the removal of the necessity to provide a habitation licence (or similar equivalent document) when a property is sold.
This change in the law has created some confusion (not least because there is a lot of outdated information on the internet), and there are people who do not understand the reasons for the alteration of the law, and the consequences of purchasing a property in Portugal that is unlicensed.
It is very important to understand the difference between being able to sell a property and having a property that is correctly licensed. Just because a property can be sold it does not mean that it has automatically been licenced.
This article contains some of the key questions (and answers) in relation to habitation licences.
Why has this changed?
The removal of the requirement to provide a habitation licence upon the sale of a property is part of the Simplex programme that was intended to open up areas of the housing market that were previously unable to be sold. By removing the necessity for a licence, properties that were unable to be sold have been released to the market.
The types of properties that can now be sold are:
- Unlicensed properties
- Properties that have been extended/altered without permission
- Properties in the process of legalisation
Is a habitation licence important?
Absolutely, because the licence (coupled with the registered plans) confirm that the property is legal and that you will have no issues with the local council. Just because a property can be sold without a licence does not certify that the property is in accordance with the planning rules and registered project.
My house does not have a habitation licence, but is it now legal?
Despite what many real estate “experts” will tell you, the short answer is no. There is a significant difference between being able to sell a house, and the house being legal.
How will this affect property prices?
This will depend on how well informed purchasers are. If we consider two identical houses, one of which is licensed and the other is not, it is clear to see that the licensed house will have a higher value.
Logically a property that is not licensed will have a lower value, but purchasers need to factor this into the price that they pay for a property.
Can I build what I want now and ignore the rules?
Absolutely not. The controls and laws relating to construction are not affected by this new law and the rules in relation to any form of licensed construction remain the same.
Do I have to tell a buyer?
Ethically and practically yes you do, and any real estate agent involved in the transaction must inform a buyer.
How does this affect a mortgage?
It seems that banks are insisting on having a habitation licence (or exemption certificate) and if a property does not have one, the bank will not lend money secured on the property. Whilst there is no legal requirement to have a licence the banks (it would appear) will not loan money against a property that does not have a licence, as they want the added security of knowing that the property is licenced.
Won’t I be protected by the notary?
At the escritura the notary informs the buyer that the property does not have a licence and may not be suitable for habitation. Unfortunately many people do not pay attention to the details of the escritura, and as this is now a standard clause it can go unnoticed. The notary will not prevent you from buying an unlicensed property, which is another reason why you should appoint a lawyer or solicitor to verify the property documents before purchase.
How does this affect properties with exemption from having a habitation licence?
There is no difference between the requirements for properties with an exemption certificate and those with a habitation licence, so if a property has no exemption certificate it can be sold in the same way that a property with no habitation licence can be sold.
This all sounds wonderful, are there any disadvantages?
Unsurprisingly, yes there are some disadvantages. We have already seen cases where buyers are told “you do not need a habitation licence any more” which is not correct. There are many real estate agents who try to dissuade purchasers from using a lawyer, and some even offer in-house lawyers who will draft a contract for you, but often offer no protection to a purchaser. In these cases there is a real chance that purchasers will not be given the essential information that they need to make a purchase.
If a potential purchaser of a property in Portugal decides that they want to purchase a property that is unlicensed, and they are aware of the risks and consequences then that is perfectly acceptable. The concern is that if purchasers buy unlicensed properties believing that all is in order, they can have an unpleasant surprise in the future, and may pay over the odds for the property.
What should I consider when buying a property in Portugal that does not have a habitation licence?
It is important that you understand what you are purchasing, if any parts are unlicensed and (very importantly) if any unlicensed parts can be licensed in the future. There is a difference between unlicensed construction that can be retrospectively licensed and unlicensed construction that can not be licensed.
Find out if the council has inspected the property and taken action against the current owners. If this is the case then you should carefully consider if you want to take on someone else´s problems with the council.
What can happen if I buy a property without a licence?
This really depends on what you plan to do in the future. If you plan to resell in the near future then the current law permits this and unless the law changes you will be able to sell the property.
If you plan to alter the property and need to submit a project and request permission, then any unlicensed parts will either have to be demolished or licenced at that point.
You should remember that although you have been able to purchase the property, this does not alter the status of the licence. Although it rarely happens there is nothing to stop the council from insisting that you rectify this in the future. If the property has already been the subject of an inspection from the council then you will inherit any issues that exist. In some cases councils will order that properties have to be demolished, so this is a concern.
Should I buy a property in Portugal that does not have a habitation licence?
As long as you are aware of the potential consequences, and the price of the property takes this into account, then there is no reason not to. In fact the law was revised to encourage people to do exactly this. It is very important that you do your homework before purchasing any property that does not have a licence.
How can I protect myself as a purchaser of a property in Portugal that does not have a habitation licence?
You should seek professional advice in relation to the details of the property. A surveyor and lawyer can verify the discrepancies and also provide you with a report that details the history of the property and the potential to rectify issues in the future. A comparison between the registered plans and the reality of the property is fundamental as is an understanding of the planning and construction rules applicable.
Conclusion
The concept of this new law was well intended, as it will ensure that properties that were previously unsellable can now be sold and used. Purchasers need to make sure that they understand the details of the property they are purchasing and pay the correct price as a result of this.
There is the potential for this new system to be abused (e.g. to sell totally illegal properties) and this is a concern. As with any property purchase in Portugal due diligence is essential to avoid future problems.
CLICK HERE to read the original article, by Azul Properties.
