REALWorld Law

Is secured debt traded between lenders? If so, how is a transfer of the debt to another lender effected?

Foreign lenders are not subject to any kind of restrictions or legal barriers concerning the creation of security over real estate property located in Portugal in favour of the same.

Last modified 13 Mar 2025

Is secured debt traded between lenders? If so, how is a transfer of the debt to another lender effected?

Yes. Stamp Duty, registration fees and notaries’ fees (whenever public notary services may be required) are usually associated with granting and enforcement of security over real estate.

Stamp Duty is levied in respect of security (except if such security is materially ancillary to another agreement subject to Stamp Duty, eg a loan, and granted simultaneously with such contract, in which case the security would not be subject to Stamp Duty, but the loan would be subject to the applicable Stamp Duty rates) at the following rates:

• 04% of the total amount secured, for each month or part of a month, for security with a maturity not exceeding one year;
• 5% of the total amount secured, for security with a maturity of one year or more but less than five years; and
• 6% of the total amount secured, for security with a maturity of five years or more or which are open ended.

Last modified 13 Mar 2025

Is secured debt traded between lenders? If so, how is a transfer of the debt to another lender effected?

In Portugal, a company is not allowed to finance another company or to provide its assets, such as real estate, as a guarantee, unless it has a direct interest in the transaction or in cases where the debtor is part of the same group of companies.

The law also provides for the prohibition of financial assistance, which means that a company cannot grant loans or create any type of security over its assets to or in favour of third-parties to finance or pay for the subscription or acquisition of shares in its share capital.

Last modified 13 Mar 2025

Is secured debt traded between lenders? If so, how is a transfer of the debt to another lender effected?

There are no restrictions to payments made to foreign lenders under security documents or under loan agreements.

Last modified 13 Mar 2025

Is secured debt traded between lenders? If so, how is a transfer of the debt to another lender effected?

In Portugal, lenders and borrowers do not have the right to postpone an existing secured debt due to a newly created debt. There are, however, cases of priority of real security in respect of legal expenses incurred directly for the benefit of the relevant creditors, and also those arising from tax debts directly related to the real estate.

The priority of a financial pledge granted for the benefit of the Central Bank or the European Central Bank by a lender in order to collateralize the loans it has contracted with the interbank market does not depend on any registration or notification to the debtor and prevails over any other security, even if previously registered or notified.

Last modified 13 Mar 2025

Is secured debt traded between lenders? If so, how is a transfer of the debt to another lender effected?

As a general principle the physical location of the property determines the applicable law. However, for those matters not directly related to real estate, but rather with lenders/borrowers rights and obligations under finance agreements and security documents, a foreign law may be recognized and applied by Portuguese courts, provided that certain conditions are met, including:

• The choice of the relevant law not flowing from fraudulent intentions in order to avoid the application of mandatory provisions
• The law chosen does not contradict the principles of public international legal order expressly recognized under Portuguese law, in which case the foreign law would apply, however it would be subjected to any relevant limitations

Last modified 13 Mar 2025

Is secured debt traded between lenders? If so, how is a transfer of the debt to another lender effected?

Mandatory formal requirements under Portuguese law, including registry with the relevant Land Registry Office, must be satisfied in relation to a security document for it to be valid and enforceable. A creditor holding a non-registered security, such as a mortgage, against an insolvent debtor will be treated as an ordinary unsecured creditor.

Last modified 13 Mar 2025

Is secured debt traded between lenders? If so, how is a transfer of the debt to another lender effected?

Under Portuguese environmental law, a lender holding or enforcing security over real estate in its country has no liability if the lender did not cause any pollution or environmental damage to the property, does not hold possession of the real estate and does not manage the asset. Consequently, the holder of security cannot and could not control or prevent the material cause of any damage or environmental breach.

Last modified 13 Mar 2025

Is secured debt traded between lenders? If so, how is a transfer of the debt to another lender effected?

As a first step, and depending on the relevant contractual arrangements, the lender must undertake a court procedure to enforce the security on the basis of the borrower’s default. Thus, in order to avoid judicial procedures, lenders often try to sell the real estate to a third party with the agreement of the borrowers, under accord and satisfaction agreements.

Last modified 13 Mar 2025

Is secured debt traded between lenders? If so, how is a transfer of the debt to another lender effected?

Another possibility is the Special Procedure for Recuperation (PER), which involves a judicial liquidator appointed by a court who must propose the plan, the scope, the conditions and the duration of the proposed restructuring, which must then be approved by the creditors and by the insolvency court. Additionally, if the debtor is subjected to a PER, the approved plan binds all creditors even if they did not enter the negotiations. Consequently, lenders, even when holding a secured debt, may be subjected to the debtors' restructuring plan which, if approved by the creditors and by the insolvency court, prevents the immediate execution of any security. Security can only be enforced if the debtor fails to perform its obligations under the approved plan.

Last modified 13 Mar 2025

Is secured debt traded between lenders? If so, how is a transfer of the debt to another lender effected?

The registration of real security such as mortgages granted in benefit of the State, municipalities or social security entities may be cancelled if the registration occurred less than two months prior to the insolvency proceedings. Other mortgages can also be cancelled if the registration is not accomplished on the date of the relevant insolvency ruling.

It should be noted that the registration of mortgages with the relevant Land Registry Office is essential for the recognition of the guarantee’s existence and effectiveness.

Last modified 13 Mar 2025

Is secured debt traded between lenders? If so, how is a transfer of the debt to another lender effected?

In cases of insolvency the creditors with privileged credits such as salaries (in case of the insolvent’s workers, taxes and social security contributions) and also debts towards the Treasury and the State benefit from first ranking.

Furthermore, it should be notice that if a lender finances the debtor restructuring process within the PER, its credits do benefit from a first ranking regarding other third parties’ credits, though ranking after the privileged credits of workers, Treasury and Social Security.

Mortgages are next to be repaid. If there is more than one mortgagee holding a mortgage over the same property, the first mortgagee will be paid first and the remaining mortgagees will be paid according to their respective dates of registration.

Last modified 13 Mar 2025