With the approval by the Portuguese Parliament of the “Projeto Mais Habitação”, rules have come into force in various legal areas, but especially in the area of lease law, with the aim of encouraging and boosting the lease housing market in Portugal, in order to combat the current shortage of properties.
To this end, the main new features of the law are listed below:
The approved measure is aimed at homes that have been vacant for more than two years and are located outside the interior of Portugal.
1. Forced Leasing of Property in Vacant
According to the law, a property is vacant and therefore unoccupied when there have been no contracts with telecommunications companies and water, gas and electricity supply companies for more than a year, as well as invoices for water, gas, electricity and telecommunications consumption.
After being notified to carry out construction works or use the building, the owner has 90 days to respond and provide clarification on the situation of the property. If no response is received within the time limit in question, the municipality may proceed with the forced lease of the property, and the municipality may also, on its own initiative or at the request of any interested party, order an inspection of the conditions of use of the property.
Vacation homes, those that are vacant because their owner is in a care home or providing permanent care as an informal carer, as well as those belonging to emigrants, and those of people displaced for professional, health or training reasons, are not considered vacant for this purpose.
2. Limitation on Rent Increase in New Lease Agreement
In the event of a lease agreement termination, the initial rent for new lease agreements on properties that have been on the rental market for the previous five years may not exceed 2% of the previous rent.
To this value can be added the automatic update coefficients of the previous three years, if have not been applied.
The above limitation does not apply to lease agreements whose value is lower than the rents considered in the Affordable Rent Support Program.
3. Old Rents Updated by Inflation
Old lease agreements, namely those prior to 1990, which have not been transferred to the New Urban Rental Regime, will not be transferred, and the rent will be updated in line with inflation and will benefit from exemption from IRS and IMI. Landlords will be compensated for this by means yet to be defined.
4. Leasing to the State for Sublease
With the aim of increasing the supply of properties on the rental market, the Government will be able to rent out vacant properties to landlords and then sublet them at affordable prices.
The rent paid to the landlord by the Government will have tax benefits as long as the lease agreements lasts no less than five years and the rent is within the prices and types set out in the Affordable Rental Support Program.
5. The Government Ensures Payment of Overdue Rent in the Event of Default
The Government will be able to take the place of the tenant and pay rent arrears in cases where there is a default of more than three months. The Government will assess the tenant’s situation and may proceed to collect the outstanding amounts using the means currently available for collecting other debts. The maximum monthly payment will be 1.5 times the national minimum wage, up to a total of nine times the national minimum wage.