Skip to main content

GARANTEES AND SEGURITIES IN PORTUGAL

In an open economy model, it is more important than ever to know what the legal risks are and how to minimise and overcome them. The better you know, the better you perform. In this article, we will summarise a clear and updated understanding of law and practice regarding guarantees.

Guarantees and securities
As a general rule, the debtor is liable in respect of his obligations. This rule affects all the debtor's assets, including future ones. The breach of an obligation, such as a payment, means that the debtor is liable to pay compensation.

Personal guarantees
By the contract, the parties may request additional guarantees besides existing assets to ensure the fulfilment of the obligation. One of these guarantees is "fiança." By entering into this kind of guarantee, a guarantor undertakes to pay on behalf of a third party in the event of this party not complying with the obligation of paying. The obligation depends on a principal debt and cannot exist without a valid principal obligation.

Mortgage
Like the other guarantees, the mortgage is designed to protect a creditor in the event of debtor's default. In this case, the creditor can recover payment from the judicial sale of the property. A mortgage aims to secure a defined sum of money that has to be clearly stated in the deed or contract. A mortgage is created by means of a deed made by a notary or contract before the land registry is duly registered.

Pledge
The granting of certain securities will ensure that payment of a debt will be made by selling some specific assets of the debtor. Under Portuguese law, a pledge (penhor) may be created over cash or fungible securities. There are two types of pledge, civil and commercial. A commercial pledge is a pledge between entities or individuals subject to the regulations of the Commercial Code. These will be individuals with the capacity to carry out commercial acts and other entities that engage in commercial activities. In general, the requirements for a civil pledge are somewhat stricter than those for a commercial pledge. A civil or commercial pledge may be used depending on the status of the parties. In practice, a civil pledge is more likely to be used.

Bank guarantee
A bank guarantee is a guarantee from a lending institution ensuring that the liabilities of a debtor will be met. A first demand bank guarantee: is issued by a guarantor (a bank) on behalf of the applicant, assuming his responsibility to pay to the beneficiary under a complying demand; represents an independent and irrevocable payment undertaking; and is separate from the underlying contract obligations and thus opposed to the concept of a contract guarantee mentioned above. As there is no direct regulation in Portuguese law regarding bank guaranties, the "law" is what parties have agreed on. Accordingly, it is always advised to pay special attention to the agreement submitted by banks to the parties.

Other securities 
Generally, it is possible to secure an obligation, e.g. an obligation of payment, by cash deposits, securities, precious stones or metals, pledge, mortgage, or bank guarantee. This security works well, especially with cash deposits. However, it is difficult to obtain from a debtor. For amounts over €5,000, a bank guaranty is more commonly used than a "caução."

POPULAR

PORTUGAL, A PEACEFUL COUNTRY

In the recent Global Peace Index 2016, Portugal is ranked as the fifth most peaceful country in the world, in a table that organises 163 countries.

The index is based on 23 quantitative and qualitative indicators that measure the level of peace in each country. The indicators can be grouped into three general themes: level of security and protection of society; the number of international conflicts and; the degree of militarization.

Among these factors, Portugal scored in militarization (1.4 points out of 5), society and security (1.6 out of 5) and internal conflicts (1.1 out of 5). Portugal also scored in other factors such as the perception of crime, the level of violent demonstrations and crimes, the impact of terrorism or the number of displaced persons.

PORTUGAL MAKES TOP TEN OF RETIREMENT DESTINATIONS

The Annual Global Retirement Index places Portugal as the seventh best destination in the world to retire. The top three destinations listed by International Living are Costa Rica, Mexico and Panama. Spain has listed two positions below Portugal in ninth and is the only other European nation on the list.

According to International Living’s report, “the third-safest country in the world in the 2017 Global Peace Index, Portugal is not only secure but beautiful.” It adds that “if Portugal’s attributes have convinced you to give it a try, here’s a tip: Begin your test drive in the capital. Lisbon is easy to reach, with direct flights from major cities around the world.”

DEBTS TO BE RECOVERED IN THE COURTS REACH THE EUR 7.2 BILION

The enforcement proceeding (debt recovery through the courts) has been considered one of the major problems in Portuguese justice and also one of the barriers to the development of the Portuguese economy. In 2013 the cases for legal collection amounted EUR 5.6 billion, regarding 201,000 enforcement proceedings lodged in the courts. Between January and April 9 this year, 38,924 cases were filed, valued at EUR. 1.6 billion. Portuguese courts have pending something like EUR 7.2 billion to collect, which corresponds to 4.3% of GDP.

I AM AN E.U. CITIZEN, HOW CAN I REGISTRATE IN PORTUGAL?

To make your registration in Portugal, you only have to apply for a Certificate of Registration of Citizen.

The Certificate of Registration of Citizen of the European Union must be requested by any citizen of the European Union, Iceland, Liechtenstein, Norway, Andorra and Switzerland, wishing to remain in Portugal for a period exceeding three months.

The request can be made to the City Hall, in person by completing a statement and delivering the necessary documents.

The application can also be made by a lawyer, as long as he has the necessary powers to act on your behalf.

I FOUND THAT THE PROPERTY I PURCHASED HAS DEFECTS, WHAT CAN I DO NOW?

Every consumer purchase is covered by a mandatory legal guarantee. As long as you are a consumer, no seller can claim otherwise.

Legally, the property must not suffer from any defect which has a negative impact on its value or which renders its regular use impossible. If these warranties are breached, the consumer can choose between repair, replacement, refund or a price reduction. However, the buyer must notify the seller of defects within one year of their discovery.

If the property is newly built, the purchaser will also benefit from a five-year warranty period. According to Art. 1225 of the Civil Code, the seller is liable for damages in respect of certain defects during five years, if he has also constructed, repaired or modified the building.