Portugal’s real estate law is governed by a Civil Code. In the Code, provision is made for:
(a) Absolute Ownership (“Direito de Propriedade”) which is similar to South African common law dominium or freehold title;
(b) Joint Ownership (“Compropriedade”) which is similar our common law co-ownership – except that co-owners have a right of first refusal in respect of other shares in the property; and
(c) Condominium (“Propriedade Horizontal”) which is similar to sectional titles.
When real property is sold and purchased, lawyers usually prepare a promissory and a final agreement, and they appear with their clients before a Notary to execute a public deed of purchase and sale. Transfers are usually exempt from Value Added Tax, but the transferor is liable for capital gains tax. Unless the parties agree otherwise, the transferee pays all notarial and registration fees, a transfer tax called IMT (“Imposto Municipal sobre as Transmissões”) and stamp tax. In addition Municipal Property Tax is paid by the party who owns the property on the last day of each calendar year.
“…they appear with their clients before a Notary to execute a public deed of purchase and sale…”
According to Sandra Passinhas in a report to the European University Institute, the concept of horizontal property ownership was recognised in the Portuguese Civil Code adopted in 1867 but more extensively dealt with in a Decree that came into force in October 1955. This was replaced in 1967 by Chapter VI, Title II of the third Book of the current Portuguese Civil Code (Articles 1414 to 1438-A) which is the current body of law on condominium or horizontal ownership and was amended by Decree-laws in 1994.
Horizontal ownership involves different persons owning ‘units’ in a development comprising exclusive ownership of individual parts and undivided shares (“forced indivision”) in the common parts. The common parts are managed by an assembly of co-owners [“Assembleia de Condóminos”] and a manager [“Administrador”].
The developer arranges for the preparation of a constitutive title [“título constitutivo”], a public deed that is registered in the Land Register and has the effect of dividing the building into individual and common parts. The constitutive title might also:
(i) specify the purpose for which each unit or a portion of the common parts can be used,
(ii) contain regulations governing the use, enjoyment and maintenance of the individual and common parts, and
(iii) include compulsory alternative dispute resolution mechanisms and penalties.
According to Prof. C. G. van der Merwe in his work ‘Apartment Ownership’ that comprises Chapter 5 of the International Encyclopedia of Comparative Law, alterations to the scheme must be approved by a majority of two thirds and are only permitted if they do not affect the utility of any individual part or any of the common parts.
The content of the constitutive title can only be changed with the consent of all co-owners. So, for example, unanimous agreement is required to change the stated purpose of a unit. The decisions of the assembly of co-owners are also binding on co-owners. But the assembly can only regulate the common parts, not interfere with ownership of an individual part. In addition, a majority resolution can only be taken if the meeting has a quorum of at least half the total value of the co-owners’ votes.
“…In addition, a majority resolution can only be taken if the meeting has a quorum of at least half the total value of the co-owners’ votes…”
The Civil Code specifies that levies must be shared by co-owners on the basis of the relative market value of their units as set out in the constitutive title, but charges in relation to common services can be shared in equal proportions or in proportion to the actual use of a particular service. In addition to the regular expenses, a reserve fund [“fundo comum de reserva”] must be established for painting, renovations and other foreseeable future common expenses.
In Portuguese residential schemes you cannot ban pets by making rules or decisions of the assembly of co-owners; in order to be enforceable such a restriction has to be contained in the constitutive title. But the issue of pets is emotive throughout the world. Some Portuguese authors argue that a general prohibition of pets is ineffective, even if it is in the constitutive title, because there are certain types of pets, such as goldfish, that cannot negatively affect the rights of other co-owners.
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