Following the presentation of the «Mais Habitação» program and after the public consultation regarding that program, the Portuguese government has finally published Bill No. 71/XV/1.ª, which includes a proposal for concrete measures aimed, among other things, at amending the legal frameworks governing Alojamento Local (AL) and real estate rentals, as well as revise the special eviction procedure (Procedimento Especial de Despejo e da Injunção).

Mais Habitação Program: Lease and Local Housing

Long-term property rental 

With regard to the allocation of urban real estate, the measures included in the proposal essentially set limits on increases in real estate rent.

Protection for tenants with leases signed before 1990 is also being proposed.

Under the lease agreements referred to above, if the tenant can demonstrate that his or her adjusted gross annual income (RABC) for the household is less than five times the annual minimum wage (RMNA), or that they are 65 years of age or older, or have a disability with a disability rating of 60%, or have resided in the rented premises for more than five years, or are the tenant’s spouse, cohabiting partner, or a first-degree lineal relative of the tenant—who meets one of the aforementioned conditions, provided that the family’s RABC is less than five RMNA— the lease agreement is not converted to the NRAU (Novo Regime do Arrendamento Urbano) legal regime, with the rent adjusted by reference to the annual rent adjustment coefficient for the various types of leases—which is the result of the total variation in the consumer price index, excluding housing, corresponding to the last 12 months, as calculated by the Instituto Nacional de Estatística, in accordance with the provisions of Article 24 of the NRAU.

With regard to new real estate leases involving properties covered by prior leases entered into within the last five years, the criteria for determining the rent amount are as follows:

• The initial rent may not exceed the amount of the last rent charged for the same property under a previous lease, multiplied by a factor of 1.02; ;
• The annual coefficients provided for in Article 24 of Law No. 6/2006, dated February 27, may be applied, provided that no more than three years have elapsed since the date on which their application would have been initially possible; ;

In the case of buildings undergoing major renovation or restoration work, as duly verified by the City Hall, the amount corresponding to the related expenses borne by the landlord may be added to the initial rent of new lease agreements, up to a maximum annual rent of 15 %.It is also proposed that the rent adjustment factor to be applied for the year 2023 be 1.0543.

As part of the proceedings, a revision of the special eviction procedure (Procedimento Especial de Despejo e da Injunção) and the injunction procedure relating to real estate leases is proposed, with the aim of simplifying, expediting, and improving the functioning of these mechanisms. This is to be achieved through the creation of the Tenants and Landlords Help Desk (BAS) and by strengthening protections for the parties, notably through the government’s payment of rent owed after the expiration of the opposition period, when:

• The termination of a lease for real property is based on the tenant's breach of contract; ;
• The petitioner requested payment of rent and tenant-responsible expenses, in conjunction with the request for eviction; ; 
• and the tenant has not ceased the misconduct within one month.

Local Hosting (AL)

The main proposals that have an impact on the AL are as follows:

• the introduction of an incentive for owners who convert their AL properties to real estate leases; ;
• The AL license number is personal and non-transferable; ;
• The AL license is valid for 5 years and is renewable for the same period; ;
• The first renewal is valid as of the date of the prior notification to Turismo de Portugal, IP, and is subject to the decision of the mayor of the relevant municipality; ;
• the suspension of new AL licenses throughout Portugal for apartments and housing units, with the exception of municipalities located in rural areas of Portugal; ;
• Registration numbers issued as of the effective date of the new legislation will be reviewed during the year 2030 and will be renewable for 5 years following their first review, with the exception of AL properties that serve as collateral (garantia real) in loan agreements entered into through February 16 December 2023, and which were not settled until December 31, 2029; ;
• Holders of an AL permit will be required to demonstrate that they are continuing their activities—namely, the exploration of AL properties—within two months of the effective date of the new legal framework; ;
• If the AL activity is carried out in a self-contained unit of a building or in a portion of an urban building that can be used independently, the condominium owners’ association may, as a general rule, object to the conduct of the AL activity in that unit, unless the articles of incorporation expressly provide for the use of that unit for AL purposes or a resolution has been passed by the condominium owners’ association authorizing the use of the unit for AL purposes; and finally,
• the granting of supervisory powers to the ASAE, the City Hall, and the municipality where the property is located.

Vacant Properties 

The bill provides for the inclusion in the Portuguese legal system—with the exception of the autonomous regions—of a mechanism for the compulsory leasing of vacant properties.

Urban buildings or self-contained units that have been unoccupied for a period of two years are considered vacant.

Indeed, evidence of this vacancy is the absence of utility or telecommunications contracts for these buildings, as well as the absence of billing for the tenant in cases where the existence of such utility or telecommunications contracts is verified.

It is also important to note that the bill establishes a negative definition of the concept of vacant housing, as properties are not considered vacant under the following conditions:

• those intended for short-term stays at beaches, in the countryside, at spa resorts, and any other vacation destinations, whether for temporary rental or for personal use; ;
• those during the period when renovation work is underway, provided they are certified by the municipalities
• those for which construction was completed or the occupancy permit was issued less than one year ago; ;
• those acquired for resale by individuals or legal entities, and which have been or will be exempt from the municipal tax on real estate transfers for consideration (ITM) and during the 3-year period beginning on the date of acquisition; ;
• those who reside within the national territory of a Portuguese emigrant; and
• those who are the domestic residence of a Portuguese citizen who performs public duties or serves on commissions abroad in the service of the Portuguese State, international organizations, or functions of recognized public interest, as well as their respective authorized accompanying persons.

It is the municipalities that have the initial say in the compulsory lease procedure.

Accordingly, municipalities, having been informed that certain buildings may be classified as vacant, notify the owner of the obligation to maintain the unit so that the owner can facilitate the necessary repairs, or of the obligation to put the unit to use.

Once the property owner has been notified of the maintenance obligation, if the owner fails to perform the work deemed necessary, the municipalities themselves will arrange for the work to be done, and reimbursement for the work will be made through the collection of the rent due.

However, once property owners have been notified of their obligation to use the unit, municipalities may immediately submit a lease proposal. The rent amount in the lease proposal may not exceed 30% of the general rent caps by type, as determined by the municipality where the property is located. If a lease proposal is made and the owner refuses or fails to respond within 90 days, and the property remains vacant, a compulsory lease will be established. Thus, if the property can be considered vacant, a mechanism is proposed that includes two types of lease agreements: 

• the lease agreement between the owner of the vacant property and the municipalities; ; 
• the lease agreement between the municipalities and the citizen benefiting from the measure.

If municipalities do not wish to lease the property and do not need to undertake any work, the authority to activate the compulsory lease mechanism for vacant properties is transferred to the IHRU, IP. Finally, it should be noted that if municipalities waive the authority to notify owners of vacant lots of their obligation to maintain the property or to develop the lot, the application of the increased municipal property tax rates ceases, and the revenue generated—which constitutes income for the municipalities—is lost.

The bill introduced by the government includes a set of measures that will involve amending the legal framework governing local housing and residential leases, as well as revising the framework for special eviction proceedings and lease-related injunctions.

The proposed measures will now be discussed, and if all political parties are convinced of the merits of this bill, they will have to approve it unanimously; of course, this bill may still be subject to amendments (as is already the case).

We will be sure to keep you updated on the situation.