Snapshot: real estate financing in Portugal

Financing

One of the main ways of financing real estate in Portugal is through secured loans, which usually cover all phases of real estate development (according to agreements on terms and conditions of use). Banks typically act as the main providers of real estate finance in Portugal, but direct lenders are increasingly entering the market.

The types of collateral commonly associated with real estate finance can include mortgages on property, transfers of income, pledges of shares or interests, transfers of loans as security, pledges of bank accounts or sureties.

Form of security

What form of collateral is created and perfected as security for real estate collateral?

The creation of security interests over real estate in Portugal, under the applicable conflict of laws rules, is mandatory state law. However, obligations secured by such rights may be subject to foreign law.

Mortgages are created by drawing up a notarial deed, which is a contract drawn up before a notary public. However, for full legal effect and enforcement, the mortgage must be registered at the Land Registry.

Valuation

Do lenders require third-party real estate appraisers to analyze lending? Are there government or industry standards for appraisals? Are appraisers required to have specific qualifications or is government or industry certification required? Who should order an appraisal?

Real estate valuations should be carried out by real estate valuers registered and regulated by the Portuguese Securities Commission.

Legal requirements

What are the consequences for a lender from another jurisdiction when extending a loan secured by collateral in your jurisdiction? What is the form of the lien documents in your jurisdiction?

The provision of lending activities in Portugal is an activity requiring licensing, which can only be carried out by legal entities with a local license or under the EU passport system for credit institutions. These requirements apply to both services provided to consumers and professional clients. Banco de Portugal oversees compliance with prudential and business regulations.

The granting of collateral does not trigger any licensing, permit requirements or other restrictions, regardless of the lender's state of residence. Therefore, a creditor from another jurisdiction may have loans secured by Portuguese immovable or movable assets. However, there are certain assets (such as those on public property or connected to public services) that cannot serve as collateral.

Claims in loan defaults

Do creditors have the right to collect a money judgment against the borrower or guarantor in respect of any shortfall between the loan balance and the amount obtained from forfeiture? Are there deadlines for a lender seeking a deficiency judgment? Are there limits on the amount or method of calculating the deficiency? "

Lenders are given the right to collect money judgments against borrowers or guarantors in respect of any deficiency between the residual balance of the loan and the amount received from forfeiture. There are no restrictions on the amount or method of calculating the deficit.