BUYING A PROPERTY IN BRAZIL – BUYER’S GUIDE

There are some easy steps a buyer must follow every time a property is going to be purchased abroad. As every international location has its own regulations, it becomes quite important to know what to do and how to do it, aspects which our buyers guide aims to give you an overview of. Nonetheless we always recommend using appropriate legal representation with any overseas investment.

USING AN AGENT

A good agent knows the local market and will find your dream holiday home or investment property in the right location and at the right price. Reputable agents do extensive research to ensure a developer has planning permission and they’ll make sure your property carries your name on the title deeds. An agent’s contacts are invaluable, especially if you don’t speak the language. They’ll know if the area has a good resale market and what facilities are available – such as schools. You’ll also save time using an agent.

MAKING AN OFFER

Having selected a property, the process is very similar to that operating in the UK and other European countries (unsurprising, considering Brazilian law is based on that of Portugal). The buyer approaches the owner of the property (or the developer) with an offer. If the offer is accepted – and some degree of haggling is to be expected regardless of how generous the offer may be – a preliminary contract is drawn up by the lawyers of one or both parties and, assuming agreement on terms, the contract is signed by both parties. A holding deposit is usually paid at this point, normally of between 5–20% of the property’s value.

APPOINTING A LAWYER

If you are planning to buy a property abroad or even just thinking about, whether it be a farmhouse, cottage, apartment, villa or business, you must bear in mind that you need to retain legal representation. Your lawyer will help you avoid the pitfalls and minimize the risks associated with buying a home abroad, which is often one of the largest financial transactions you may ever undertake. Whatever type of home you decide upon, there are certain safeguards you should take to make sure your dream purchase does not become a nightmare. One of the most common mistakes is to assume that the purchase procedures are the same as in your country. Not true, failure to take basic advice can result in disastrous financial losses. Some of the things a lawyer will take care of are the following:

• Check the current owners have the correct title to the property
• Check for any charges and liabilities still owed on the property
• Check your contract and advise you on the obligations for both parties
• Help you through the payment/funds transfer
• Ensure the property is registered in your name

LAND REGISTRATION

To buy a property in Brazil you must register for a CPF (Cadastro de Pessoas Fisicas). This is an easily obtainable personal ID number that will enable you to open a Brazilian bank account, to buy a property and to invest in the country’s financial and capital markets. Anyone who fills in the form and submits it at any Brazilian diplomatic representative office can register. For a property to be purchased the transfer certificate (i.e. the sale) must be registered at an Immovable Property Register. Your contract will not be valid, and ownership will not be granted, until you are registered.

BRAZILIAN CPF

As noted, foreigners are entitled to own freehold property in Brazil. In order to become eligible to purchase, however, one must first obtain a CPF number (Cadastro de Pessoas Fisicas), similar to a National Insurance number in the UK, which entitles the buyer to register title and register accounts with utility providers. This can be done by the buyer, assuming they speak Portuguese, or by a lawyer retained by the buyer, for a nominal fee. However, most agents and developers will be able to process the buyer’s application on his or her behalf (but check beforehand what the cost will be as this is frequently seen as a money-making opportunity by less scrupulous entities).

FEES AND TAXES

The buyer is liable for a number of fees and taxes when purchasing in Brazil. A purchase tax is applied by the government at between 2-7% depending on the home’s value and location; funds brought in from abroad are liable to a transfer tax of 1%; stamp duty is payable at 5%; an agent will typically charge between 4-10%; and legal fees are normally an additional 1%. Furthermore, capital gains tax is normally applied at a flate rate of 15% and is payable upon the sale of the property. For more details on applicable taxes, please see our section on Taxes - Brazil

MONEY TRANSFER

In order to send money to buy your house, there are some easy steps to be followed. First thing is sending the money directly from your bank account to the seller’s bank account in Brazil, but this has to be done via the Central Bank of Brazil or you may have problems transferring funds out of Brazil when you sell your property in the future. The bank will record your funds entering the country and the seller will have to present the contract in order to release the funds. There will be no limitations to returning your money overseas as it was previously registered with the Central Bank. MORTGAGES

The mortgage market in Brazil is still underdeveloped and despite the fact that foreigners cannot yet obtain a mortgage, British investors usually arrange alternative financing in the UK for the Off-Plan Property in Brazil. However, we estimate that Brazilian mortgages will become available to foreigners in the near future as interest rates drop and banks develop their financial products. The current development of new mortgage laws should make home ownership a more affordable option for Brazilians as 20% of the population do not have adequate homes. In 2005 about 50,000 mortgages were granted in Brazil but at high rates. In turn, with the introduction of the Brazilian mortgages, foreigners will be encouraged to create a new supply of housing and assist the economic development currently underway.