Opportunity Knocks

Buying a future property based on its plans and drawings may be a bit daunting, but off-plan property purchases are becoming more and more attractive amongst international clients. Indeed, it can be a thrilling experience being part of a tailor-made turn-key project.

In this article “Opportunity Knocks”, Joana Neto Mestre – managing partner at MATLAW – enlightens the advantages and the risks of buying off-plan in Portugal.

You can read the full article and find out more here (p. 218, 219) 

What does buying off-plan entail?
In a nutshell, it means agreeing to buy a property when it is still under construction, based on the building plans and drawings of the future property. As such, until the property is fin shed and duly licensed, its not possible to complete the purchase.

Why is this such a popular way to invest at the moment?
Buying off- lan is becoming an increasingly popular option, due to the shortage of ready-to-move in real estate. The advantages are numerous, but this type of investment also entails higher risks which prospective buyers must be aware of before committing to the purchase.

What are the main advantages?
The opportunity of having a brand-new property, built according to the latest spec and with the most recent materials available in the construction market, combined with the possibility of monitoring the construction process and customising the finsh of the property.
Also, committing to a property purchase at such an early stage, can often mean a discounted price and potential yield appreciation during the construction cycle, with the possibility of selling at a profit on completion.

Talk us through the buying process
The buying party will normally undertake to buy a future asset and the developer/seller undertake to sell it, once construction is fin shed and the property is duly licensed. A promissory agreement of purchase and sale is then signed, under which both parties agree the payment terms and set a prospective timeline for construction and completion. Unlike the process with built property, off- lan promissory agreements rarely have completion dates set in stone due to the uncertainty surrounding the construction time-line.

What if the contractor fails to build the property?
While the property is not completely built, the investor has a credit claim on the contractor in case of such an eventuality.
In this event however, it’s likely that other creditors, such as the Tax Offi , Social Security and Banks will have the right to be paid ahead of ‘non-privileged’ creditors. As such, it’s important to negotiate collaterals that may increase the chance of recovering the amount paid as a deposit.

What key piece of advice would you give for a successful off-plan purchase?
Successfully buying off- lan depends on the conditions laid out and agreed between the parties at the outset. This specifi type of purchase, if well designed, can be an interesting and profitable investment opportunity. Prospective buyers however, must do their due diligence and seek legal advice before commiting to the purchase.