CLOSE X

Register - if you don't have an account

Yes! Sign me up for Global Property Guide's fortnightly email newsletter.


Login - for registered users

Forgot Password?
Explore destinations
continent map couldn't be loaded Pacific Europe & Russia North America Latin America Asia Africa Middle East Caribbean

 


Financial Overview

Directory

Property Search

Global Statistics

Regional Statistics






Jul 20, 2006

Portuguese law is strongly pro-tenant


The law in Portugal is strongly pro-tenant, despite substantial changes being made this June 28th 2006, as a result of the New Urban Lease Act (Novo Regime de Arrendamento Urbano – “NRAU”). NRAU is enormously controversial, and is at the centre of passionate public debate, and may yet face constitutional challenges.

Notice

The urban lease regime in Portugal is in transition. After a timid reform in the 1990’s, substantial further changes are expected on June 28th 2006 as a result of the New Urban Lease Act (Novo Regime de Arrendamento Urbano – “NRAU”). Aimed at revitalizing Portuguese lease market, NRAU replaces previous legislation, and is applicable to all urban lease agreements, although agreements signed before 28th June 2006 are treated differently (notably regarding rent updates).

RAU is enormously controversial, and is at the centre of passionate public debate. It may yet face constitutional challenges involving the Portuguese President (Presidente da República), Parliament, and the Constitutional Court (Tribunal Constitucional). Indeed NRAU could well suffer a last-minute downfall. So we outline the existing legislation which will remain in force at least until 28th June 2006, notably the Urban Lease Act (Regime de Arrendamento Urbano – “RAU”). We mention NRAU where it will introduce changes.

This article does not cover Portuguese urban lease agreements for “special purposes” (e.g. temporary residence in vacation areas), whose terms can be (almost) completely agreed between the parties.

Rents: Can landlord and tenant freely agree rents in Portugal?

The amount of the rent can usually be freely agreed between the parties, with the exception of low cost housing (“conditioned rent” and “supported rent”).

Rent reviews can also be freely agreed (although they must take place annually), and, with careful drafting, cost-of-living rent increases and suchlike can be agreed (although in some types of non-residential lease such freedom depends on the existence of a first term of five years for the lease). If no specific agreement exists, the rent may be adjusted by the landlord annually according to scales periodically established by law.

Deposits

The parties may agree on the payment of one month’s rent in advance (the agreement must be in writing). When NRAU becomes effective, the parties will be able to agree up to three months’ rent in advance. Rent is due on the 1st day of each month, except where the parties agree otherwise.

Security deposits are allowed, and will continue to be allowed.

What rights do landlords and tenants have in Portugal, especially as to duration of contract, and eviction?

In this area the differences between the present legal situation (RAU) and the laws shortly to be introduced (NRAU) are a little complex:

RAU


Duration

Open-ended leases are the “general regime.” Fixed-term leases are only allowed where the agreed first period is of a minimum five years’ duration, and at most 30 years. Automatic extensions of three years apply for residential leases.

Eviction

The landlord may only terminate the lease agreement for a few reasons including (but not limited to):

  • failure to pay rent
  • use of the property for purposes not set out in the contract
  • use of the property for illegal purposes (e.g. unauthorized sublease)
  • illicit, immoral or dishonest purposes
  • relevant works in the property without landlord consent

Eviction must be through an eviction claim (Acção de Despejo) in the courts.

The landlord may also (with some exceptions):

  • In the case of open-ended leases, judicially oppose a lease extension if he (or his direct descendants) need the property for residence, or to perform works that will result in additional property to lease;
  • In case of fixed-term leases oppose lease extensions by giving judicial notice one year in advance of the lease maturity date.

The tenant may:

  • In the case of open-ended leases, oppose lease extensions by giving prior notice ranging from a few days to 6 months (depending on the lease/lease extension period), in respect of the lease/lease extension maturity date.
  • In the case of fixed-term leases, oppose lease extensions by giving 90 days’ prior notice in respect of the lease/lease maturity date. Termination without cause can also be made at any time with the prior notice of 90 days, but this period may be (and usually is) contractually increased.

The tenant may terminate the lease at any time based on the landlord’s breach of the contract.

NRAU


Duration

The parties may stipulate a fixed term for contracts with a minimum initial term of five years. There are automatic and consecutive extensions of three years. In the absence of such a fixed term stipulation, the lease agreement will be considered open-ended.

Eviction

Residential leases may be terminated as follows:

  • Open-ended: the landlord must give five years notice. The tenant must give 120 days notice.
  • Fixed-term: the landlord may oppose extensions by giving a prior notice of one year. The tenant needs to give a notice of 120 days after the first six months of agreement execution. Both tenant and landlord may also terminate the lease on the ground of breach of the agreement by the other party, without any restriction as to the relevant breaches (new open clause system) .

Eviction requires declaratory judicial proceedings (acção declarativa) followed (when necessary) by enforcement proceedings (acção executiva).

A forthcoming package of extrajudicial instruments is expected to allow enforcement, in some cases, without prior declaratory judicial proceedings (including cases where there is a termination agreement, or evidence of notification to the tenant of executive procedures claiming payments of rent).

Non-residential leases will follow a different regime, an innovation introduced by NRAU.

How effective is the Portugal legal system?

According to the Government a complete eviction procedure presently takes about 31 months. It is not clear how long evictions will take under NRAU.

EVICTION FOR NON-PAYMENT OF RENT

Duration until completion of service of process 20
Duration of trial 180
Duration of enforcement 30
Total Days to Evict Tenant 330
Courts: The Lex Mundi Project

Legislation

Currently, urban leases are regulated by the Portuguese Civil Code (Código Civil), by RAU (as amended), and by complementary legislation.

All this legislation will be replaced by NRAU, approved by the Portuguese Parliament (Assembleia da República) through Law n. 6/2006 published in Series I-A of the Portuguese Official Gazette (Diário da República) on 27th February, which will enter into force in June 28th 2006. It comprises the reinstatement of articles 1064º to 1113º of the Civil Code (Código Civil) and amendments to other relevant legislation, including the Civil Procedure Code (Código de Processo Civil).

Brief History: Recent changes in Portugal landlord and tenant law

The urban lease has been regulated in Portugal for several centuries. In the last 140 years it has been subject to hundreds of laws and regulations, mostly as a result of political changes during the 20th century. The 1966 Civil Code (Código Civil) consolidated the urban lease regulations to date, including the 1948 law suspending rent increases in Portugal’s two main cities, Lisbon and Oporto.

The left-wing revolution of 1974 and the turbulent 1980s ushered in a highly pro-tenant urban lease regime. There were severe restrictions on the landlord’s termination rights, and rent increases were forbidden or very much limited.

After 1990, RAU and its amendments introduced some changes (e.g. in respect of fixed-termed leases). But NRAU and its complementary legislation is expected to restore balance between landlord and tenants’ rights, restore competitiveness to the urban lease market, and allow the recovery of property from tenants. This will be a major turning point in Portuguese urban lease history, if NRAU is not smothered at birth.






Comments

#1 MARIA NEVES | April 14, 2010

My parents have had tenants for over 20 years and they have paid maybe 20 months rental in all this time. Try and get a lawyer to sort this out without wanting a bribe - we've tried at least 4. I am embarrassed to be considered Portuguese. They are more corrupt and the least civilized country in the whole of Europe. Lawyers are corrupt, the system is corrupt, the majority of the poulation is ignorant, the whole country is an embarrassment. Why invest their if as a landlord you have NO rights.

#2 LEO DUARTE | May 12, 2010

The completed corrupted Portuguese judicial system is a sham supported by this puppet republic led by a seemingly powerless puppet rubber stamping president. I suggest that investors focus on investing in more transparent and profitable markets such as Canada, UK, Switzerland, and the US. The Portuguese rental market cannot be taken seriously and is similar to a third world market. We have sold all of our active real estate investments and placed them in more democratic states, any serious investor does not have time nor patience for this three ring circus. Investors must not be tricked into thinking that Portugal is a western European nation, it is in fact a quasi dictatorship struggling to be recognized as a destination for international investment.

#3 JOAO COELHO | June 08, 2010

I guess nobody has dealt with American lawyers. Anytime anyone hires a lawyer, if they want results they will need to hound the lawyer and sometimes even sue them. While i appreciate the critical comments made by some of the guests here, i think that denial is also prevalent amongst people who think only in Portugal we have corruption and bad laws and bad lawyers. How many times have we seen congressmen, businessmen paraded around in trials for corruption that goes all the way to the top. So give good information but do not distort reality. If things are so bad then why are you still investing in Portugal? I would not. So things cannot be as bad as that and the criticism tends to lose steam and value.

#4 M. VISSER | July 27, 2012

I have been told that the laws have changed in 2011 and will change again now, in 2012. Can anyone tell me how easy it is to NOT extend a contract after e.g. an agreed 12 months?

#5 EMANUEL SILVA | July 22, 2014

The laws regarding tenancy have been changing slowly in Portugal for the better. I have a rental property in Portugal and I think that, as in country in the world, the must importante thing is to choose wisely your tenants (Paycheck, Income Tax, etc.). I've been lucky enough to have tenants that never missed a payment but you do need to give 1 year notice to evict a tenant...

Login or Register to submit a comment!

In order to promote open and spam-free conversations, Global Property Guide moderates commetns on all articles. You can expect that your comment will be published within 24 hours.



Baltic property back! Q1 2014 - NewsecBaltic States Capitals 2014 - Ober HausScandinavia Property Report Q4 2014 - Newsec
Compare Countries



Free Newsletter

Fortnightly updates from the global property arena directly to your inbox.


Email Address:





Connect to professional advice in Portugal





PROPERTY RECOMMENDATIONS

 
Download free Global Property Guide reports

Our Newsletter

 
Fortnightly updates from the global property arena directly to your inbox.

Manage subscriptions
Chinese property buyers and Asian buyers, there is great property for high net worth Chinese buyers on Juwai.com

Which parts of the world are most attractive for property investment today?

Click here to download our FREE Property Recommendations Reports!

Close Me