TRANSFORMATION & LEGALIZATION OF PROPERTIES IN PORTUGAL

CHALLENGES AND OPPORTUNITIES

The transformation and respective legalization of properties is a highly relevant topic in the current context of the real estate market in Portugal. The existence of properties constructed or modified without the proper licensing represents not only a legal issue but also an urban, social, and economic challenge. With the increasing need to regularize these situations, both for property owners and the community, understanding the processes and implications of legalization becomes essential.

The Context of Irregular Properties in Portugal

Portugal has a significant history of irregular constructions, often resulting from failures in urban planning, lack of supervision, or the need for quick and affordable housing. These properties, while potentially offering housing solutions, frequently do not meet the safety, health, and sustainability standards required by law. Moreover, they do not constitute official residences for fiscal and citizenship purposes for their occupants, whether tenants or owners.

Challenges of Legalization

Legalizing an irregular property involves a series of challenges for both property owners and authorities. Among the main obstacles are:

• Compliance with Urban Planning Regulations: Irregular properties often do not meet zoning and land use requirements, which may necessitate significant modifications for legalization.
• Financial Costs: Legalization can entail high costs for property owners, including architectural and specialty project costs, administrative fees, fines, and expenses for adaptation works to comply with technical and safety standards.
• Bureaucratic Processes: The procedure for legalization can be complex and time-consuming, involving multiple steps and the need for approval from various public bodies.
• Social and Community Impact: Legalizing irregular property can have implications for the local community, especially in densely populated areas, where legalization can affect urban planning and public services.

The Role of “Simplex Urbanístico” (1)

The recent introduction of “Simplex Urbanístico” law in Portugal represents a significant advancement in simplifying licensing and legalization processes for properties. This legislation aims to reduce bureaucracy and expedite administrative procedures, facilitating not only the legalization of properties but also the transformation of property uses. Relevant measures include:

• Simplification of Licensing Processes: Reducing the number of steps and documents required for legalization, making the process more accessible and less burdensome for property owners.
• Flexibility in Urban Planning Regulations: Adapting legal requirements to allow the legalization of properties in areas where full compliance would be unfeasible or extremely costly.
• Incentives for Legalization: Creating financial and technical support programs for property owners seeking to legalize their properties, including subsidies and favorable credit lines.

Benefits of Legalization

The legalization of irregular properties offers numerous benefits for both property owners and society at large. Legalized properties have a higher market value as they become formally recognized and can be traded without legal restrictions. Additionally, property owners of legalized properties enjoy greater legal security, avoiding the risks of demolition, fines, and other sanctions. The adaptation of properties to safety and health standards results in better living conditions for residents. Furthermore, legalization contributes to more orderly and sustainable urban planning, allowing for better management of resources and public services.

Is It Worth Transforming a Commercial Property into a Residential One? (2)

To illustrate the costs and gains involved in transforming commercial properties into residential ones, consider a practical example. Suppose a T2 apartment with 100m2 of area in Vila Nova de Gaia has a sale value of €180,000. Now, let’s compare this scenario with the acquisition of an office of equivalent area that can be legalized as a residence.

Scenario A – Acquisition of a T2 Apartment as a Second Home:

• Purchase price: €180,000
• Municipal Property Transfer Tax (IMT): 2.2% (approximately €3,960)
• Stamp Duty: 0.8% (approximately €1,440)
• Notary and registration fees: approximately €1,000
• Total acquisition costs: €186,400

Scenario B – Acquisition of an Office for Conversion into a Residence:

• Purchase price: €100,000 (considering that offices are generally cheaper)
• IMT: 6.5% (approximately €6,500)
• Stamp Duty: 0.8% (approximately €800)
• Notary and registration fees: approximately €1,000
• Administrative fees for legalization and adaptation: €2,000
• Adaptation works: €50,000
• Architect and engineer fees: €5,000
• Total acquisition, adaptation, and legalization costs: €165,300

Potential Gains:

By opting to convert an office into a residence, the owner can save approximately €21,100, or around 11%. In a rental scenario, this cost difference implies an increase of approximately 1% in yield. Additionally, the property’s value after legalization can significantly increase, especially in high-demand areas, potentially raising the property’s market value.

Conclusion: Path to Legalization

The legalization of irregular properties in Portugal is a complex process but essential for ensuring the safety, value, and sustainability of housing. With the implementation of Simplex Urbanístico, the path to legalization becomes more accessible, offering new opportunities for property owners and communities.

At AWANTT PRIME , we are ready to assist our clients at every stage of the property legalization and adaptation process, ensuring that each step is conducted with maximum efficiency and responsibility. For more information and specialized consultancy, we invite you to contact us. Visit our website at www.awantt.pt and discover how we can help you realize your property regularization project. (3)

(1) “Simplex Urbanístico” is a legislative initiative in Portugal aimed at simplifying and expediting the processes of urban licensing and property regularization. This initiative seeks to address bureaucratic hurdles, making it easier for property owners to obtain necessary permits and for municipalities to manage urban development efficiently. For more information see DECREE LAW No. 10/2024 .

(2) All values presented are illustrative, subject to market variations and legislative changes.

(3) This article was originally published in Portuguese on July 21st on the BrasileiroSou blog .