Introduction - Purchase & Living cost - Buying guide
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Introduction

The autonomous region of Madeira consists of a group of islands, the principal islands being Madeira and Porto Santo. The region is owned by Portugal and is therefore technically within the European Community, but the autonomy allows the islands to operate according to their own governance. The laws and language within Madeira are Portuguese but the mentality of the islanders is insular, they have their own way of doing things and, in particular, they have adapted the laws of property purchase to fit the customs and modus operandi of the islands. Foreign nationals can purchase property or land in Madeira freely: there is no restriction on the amount of property any one person may purchase or to whom the property may be resold.

Purchase & Living Cost

Purchase Costs

• At escritura the purchaser is obliged to pay the costs of purchase, the first being SISA, roughly translated as Property Transfer Tax. SISA is 0 - 6% of the declared sale/purchase price.
• The preparation of the public deed requires action by the notary public, who will charge a fee which includes stamp duty. This will be no more than 2% of the declared sale/purchase price.
• The purchase will need to be registered with the appropriate Land Registry, who will charge a small fee: a few hundred euros.
• If there is a mortgage, this must be declared and another small fee paid: a few hundred euros.
• The solicitor will require payment. A down payment of 1,500 euros will be required to retain a lawyer; fees should not be more than 2,000 - 3,000 euros and may well be considerably less.
• There is too much variation to be specific, but 5 - 8% of the purchase price should be set aside for these costs.

Running Costs

British buyers will be pleasantly surprised at property running costs on Madeira. On a three bedroom property rates might be £500 per year and water, electricity and gas might cost collectively about the same. Telephone rental is just over £10 per month and connection to cable television and permanent internet access costs £36 per month (Pay as you go internet access is also available). A cleaner or gardener will cost about £3.50 per hour and a swimming pool could cost £1,000 per year to maintain.

Buying Guide

Tenure of Property

Property on Madeira is purchased freehold.

Methods of Purchase

There are two ways of purchasing property on Madeira, the simplest of which is to go direct to settlement, escritura. Escritura is the ceremony, for want of a better word, where the 'public deed', which identifies the vendor(s) and purchaser(s) and stipulates the terms of the sale and purchase, is witnessed by a notary public. The notary public recites the deed out loud in front of the vendor and purchaser, the purpose of the recital being to safeguard the fact that anyone present may not be able to read. After the recital the vendor and purchaser sign the public deed and, if there is a foreigner involved, an interpreter, usually a lawyer, will sign as having faithfully translated the document. The purchaser hands over a cheque, the vendor hands over the keys and the sale/purchase is made.

 

If there will be a significant delay between the initial agreement of the sale/purchase and the escritura, for any one of a hundred and one different reasons, it may be prudent or essential for either vendor or purchaser to suggest the drawing up of a contrato promessa de compra e venda - a promissory contract. The contract identifies both parties and the fact that the vendor promises to sell and the purchaser promises to purchase; it identifies the responsibilities attaching to each party prior to and post- purchase and an escritura date is set for a mutually agreed date in the future. The contract is signed by both parties and the purchaser puts down a financial deposit as a mark of good faith. In due course the sale/purchase is effected at escritura.

 

The escritura system will be familiar to anyone who has bought property on mainland Portugal or Spanish territory, but this knowledge does not apply to Madeira. It is absolutely imperative to understand all of the implications of both methods of purchase. Without such knowledge there is every possibility of making a serious legal or financial error, which may manifest itself in the short term (during the purchaser's lifetime) or in the long term (after his/her death).

Mortgage

At the time of writing (spring 2004) Madeiran banks will permit only a Madeiran resident to take out a mortgage on a Madeiran property and only one lender in UK will offer a mortgage on a Madeiran purchase. This reluctance to lend is probably based on nothing more sinister than the lack of precedence, simply because foreign owners in the past, and up to the present, have paid in cash. This will almost certainly change in the future as more foreigners buy property on Madeira.

Purchase Process

Our associates on Madeira will take you through the bureaucratic requirements for property purchase, introduce you to English-speaking solicitors and guide you through the purchase process. They will negotiate the best possible purchase price and advise you fully on all legal and financial aspects to ensure that your method of purchase - contract or escritura - is the best possible, that the purchase is correct in every legal aspect and that the financial arrangement is in your best interests. This latter aspect includes consideration of the eventual sale of the property by yourself or your successors.

Purchase of Offshore

There is a single title deed which is registered in the Czech land registry for each property.

Letting

Property Management

Our associates on Madeira operate a property management facility, caring for your property if you do not intend to live in it yourselves and assisting with the Madeiran end of property rental: maintenance, airport transfer, etc. Fees for this service will be arranged separately depending on the amount of help required.

Property Letting

The letting potential on Madeira is excellent. Madeira is benefitting from a steadily increasing amount of tourist interest, and historically tourist interest has been taken up by hotels. There is no central Madeiran property rental agency; individual owners establish their own marketing strategy and their own clientele. The more interest Madeira receives the more tourists will look to cost-effective self-catering in preference to the inevitable costs of hotel occupation, and, with the new leisure facilities of marinas and golf courses yet to be exploited, it is considered that this letting potential is in its infancy.

 

A rough guide to rental income is L250 per week for a one-bedroomed apartment or cottage increasing to L500 per week for a three bedroomed property. There will be variations for properties in desirable locations or those with swimming pool. These weekly incomes may not seem high compared to rental incomes attainable from similar properties in other areas of Europe, but purchasers considering property rental should bear in mind that the tourist season on Madeira lasts for 52 weeks per year.

 

Aquavista have their own "Property Rental Board" attached to their website. This enables clients who have purchased a property in Madeira to advertise their property for a nominal monthly sum.

Other Information

Residency

It is not necessary to become a Madeiran resident to purchase property on Madeira, but those who intend to remain on the island might choose to do so and the British Consul will provide the appropriate forms and advice. The applicant must show proof of the method of arrival on the island, undergo a medical test and show financial and medical independence. The process can be prolonged.

Work Permits

It is EXTREMELY DIFFICULT, for a foreigner to obtain employment on Madeira and the only safe answer is to assume that it is impossible. The Madeirans take exception to any foreigner who takes work away from a Madeiran, so the only work which a foreigner can do is that which a Madeiran cannot - selling timeshare to British clients is one such occupation, and any occupation which involves a speciality not currently present on the island is another. Madeira may indeed be part of the EU, but it remains an island with its own attitude.

Social Security

For general details and information of the social security agreement between the UK and the Czech Republic explaining national insurance contributions and benefits visit www.dwp.gov.uk (Dept. for Work and Pensions).

Financial Considerations

Madeira is within the EU, and the UK and Portugal have signed up to a double taxation agreement which stipulates that tax need only be paid once. UK pensions can be paid direct to a Madeiran bank, but, if they are governmental, these will be taxed in UK and there will be no requirement to pay further tax on Madeira. However, income deriving from capital transferred gross to Madiera will be subject to Madeiran taxation.

Medical Insurance

Madeira has national health clinics and hospital. Accidents and emergencies will be treated in exactly the same way as they are in UK. Foreign employees on Madeira will contribute through their employment contracts to the Madeiran medical facilities. Those self-employed or retired and not contributing to the national facility might choose to take out private medical insurance rather than face the direct costs of medical treatment should they arise.

 

To view previously asked questions on purchasing property in Madeira, or to ask your own question click here

 

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