Buying Property in Madeira: what real estate agencies don't tell you
- Filipe Ferreira Correia
- May 25
- 4 min read
The Autonomous Region of Madeira has experienced sustained growth in real estate investment. The combination of quality of life, economic stability, and the consistent appreciation of the local market has positioned the archipelago as a premier destination, attracting both national and international investors.
However, buying property in Madeira involves a set of legal obligations, risks, and specificities that are frequently omitted or simplified during the commercial negotiation phase.
In today's article, we aim to provide an objective legal perspective on the critical aspects that must precede any financial decision in this context.
The Promissory Contract of Purchase and Sale (CPCV): Binding Commitment and Hidden Risks
The Promissory Contract of Purchase and Sale (Contrato-Promessa de Compra e Venda — CPCV) is the legal instrument through which the parties reciprocally bind themselves to execute the definitive property transfer contract (Article 410 of the Civil Code). Despite sharing the nature of a preliminary agreement, its obligations are fully binding and produce immediate financial effects.
It is common to observe investors - both from outside the Region and local residents - who execute a CPCV and advance substantial sums as a down payment (sinal) without a rigorous legal due diligence having been conducted on the property. This practice exposes the purchaser to severe contingencies, such as:
Undisclosed Liens or Encumbrances: Mortgages, judicial attachments, court freezes, or pending rights of first refusal, the timely verification of which requires consulting an updated land registry certificate;
Co-ownership and Inherited Shares: Situations where the property belongs to multiple co-owners or heirs, making the full transfer of ownership impossible without unanimous consent (Article 1408 of the Civil Code).
Tenancies with In Rem Effect: Pre-existing lease agreements which, by virtue of the ex lege transfer of the landlord's position, bind the purchaser and delay the immediate enjoyment of the property.
Zoning and Planning Non-Conformities: Structural expansions or alterations executed outside the scope of projects approved by local municipalities.
Signing a CPCV without this prior validation can result in the forfeiture of the down payment delivered or, in extreme cases, the need to resort to judicial litigation to resolve the non-conformity.
Due Diligence: The Minimum Verification Protocol
Real estate legal auditing constitutes a technical procedure aimed at neutralizing transaction risks. In practice, this scrutiny must validate the following pillars:
a) Land Registry and Tax Registry
The land registry certificate (certidão do registo predial), obtained from the competent Land Registry Office, is the only document that certifies the true ownership of the property and the absence of encumbrances. In parallel, the urban tax registry document (caderneta predial urbana), issued by the Tax Authority (AT), confirms the tax description of the property and its Tax Registration Value, which is the determining indicator for calculating associated taxes.
b) Urban Licensing and Property Suitability
Any built property must possess a valid Use License, issued by the respective Municipal Council (Funchal, Santa Cruz, Calheta, among others). The absence or inadequacy of this license prevents the securing of bank financing in Portugal and invalidates the exploitation of the property for specific purposes.
Regarding the topics mentioned in items a) and b), please also see our article Real estate market in Funchal: the legal perspective that secures your investment, a post where we discussed certain aspects of real estate due diligence, as well as matters related to Local Accommodation (Alojamento Local). Specifically concerning Local Accommodation, we also provide an article on our blog: Local Lodging (AL) in Funchal: Exceptions to License Suspensions, Alternatives and Legal Safeguards.
c) Horizontal Property and Condominium Dynamics
When dealing with an autonomous fraction, it is imperative to analyze the Constitutive Title of Horizontal Property and the minutes of the most recent condominium assemblies. These documents reveal whether there are ongoing judicial disputes, extraordinary fees already approved for structural repairs, or regulatory restrictions that might conflict with the purchaser's intended use.
d) Property-Associated Tax Liabilities
The purchaser must ensure that the property is free from Municipal Property Tax (IMI) debts. In specific scenarios, tax liabilities with an in rem nature can encumber the asset itself, transferring indirectly to the new owner.
The Role of Real Estate Mediation: Limits of the Commercial Mandate
Real estate mediation plays an important role in bringing supply and demand together in the Madeiran market. However, it is essential to define the boundaries of their operations. The mandate of real estate agencies is of a strictly commercial nature, regulated by Law no. 15/2013, of February 8.
Their commercial remuneration (commission) is indexed to the completion of the transaction, which means the agency acts in the interest of the deal itself. These entities are not legally authorized - nor do they possess the technical competence - to provide legal advice or to validate the registry and urban planning compliance of a property for the exclusive benefit of the buyer.
Unfortunately, disregarding the importance of retaining the services of an independent and technically prepared lawyer has contributed to increased litigation within real estate law - a reality that benefits no one, maxime the buyer/investor.
Final Remarks
In addition to what we have already mentioned, we could also add technical-legal considerations regarding the tax framework of transactions of this nature, as well as the distinctions applicable to national or international investors.
We could also address aspects concerning measures to combat money laundering and terrorist financing, and their particular relevance within the context of the Autonomous Region of Madeira.
The truth is that the purpose of today's article is not to burden the reader with technical information. It is to leave this warning: relying on real estate mediation services to handle aspects of the legal sphere can transform your investment into an economic loss of tremendous proportions.
Protect your investment. Avail yourself of the services of professionals who are technically prepared and legally authorized to ensure the legal protection of your real estate transactions in the Autonomous Region of Madeira. Those professionals are lawyers.
O Direito Imobiliário é uma das áreas em que o nosso escritório foca a sua prática jurídica na cidade do Funchal, prestando assessoria tanto a investidores nacionais quanto investidores estrangeiros.
Real Estate Law is one of the areas in which at our office we focus our legal practice in the city of Funchal, providing advisory services to both national and foreign investors.
Learn more about the services available on this page of our website:
Filipe Ferreira Correia, Lawyer
Email: geral@ffc-advogado.com
Telf: 291 618 920 | Tel: 935 893 791
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