On 13 February, significant changes were made to the urban leasing legal regime and to the legal regime of works on leased buildings, with the intent of adjusting imbalances between tenants and landlords, to strengthen the security and stability of the urban leasing market and to protect tenants in situations of particular vulnerability.
Regarding the substantive urban lease regime, new amendments were made to the Civil Code, to the New Regime for Urban Leasing (NRAU), approved by Law no. 6/2006, of February 27, as amended, and to the legal regime of works on leased buildings, approved by Decree-Law no. 157/2006, of August 8, as amended.
The legislative package also includes the first amendment to Decree-Law no. 156/2015, of August 10 – which establishes the rent subsidy scheme to be granted to tenants with residential lease agreements concluded before November 18, 1990 -, and the second amendment to Decree-Law no. 74-A / 2017, of June 23, approving the regime of credit agreements for residential properties, as amended by Law no. 32/2018, of July 18.
Within the framework of the leasing general regime, such measures include:
- the reduction of the compensation due to the landlord in cases where the tenant is in default regarding the payment of the rent, from 50% to 20% of the owed amount,
- the possibility of the tenant proving the existence of the lease out of court when no written agreement has been entered into (this rule also applies to leases that are still in force at the date of entry into force of these amendments),
- the inclusion of new situations in which the tenant may carry out works without the consent of the landlord,
- a system of mandatory notifications whenever the landlord intends to terminate the lease on the grounds of late payment of rent,
- the disappearance of the possibility of the tenant to offset the credits arising from the works carried out through the waiver of payment of the rent, and
- prohibition of discrimination in the access to the lease market on the grounds of gender, descent or ethnic origin, language, territory of origin, nationality, religion, belief, political or ideological beliefs, sexual orientation, age or disability.
A minimum 1-year period is now foreseen for residential lease agreements, except for agreements for non-permanent housing or for special transitional purposes, namely for professional reasons, education and training or tourism.
The regime also creates new rules for the opposition to the first renewal of the agreement by the landlord which, under the terms of this legislative amendment, will only take effect once three years after the date of execution of the agreement have elapsed. The landlord is, however, safeguarded in case he needs the leased premises for its own residence or for his first-degree descendants’ residence.
Regarding the termination at the landlord’s initiative under indefinite duration agreements, this possibility is now removed if made for the purposes of carrying out remodelling or restoration works, in case results from the works a leased premise with the same characteristics or equivalent where the maintenance of the lease is possible.
The general rule for the notification by the landlord to the tenant of the termination of leases of indefinite duration is now a 5 years prior notice in relation to the date on which the termination is intended, contrary to the 2 years previously provided for.
Also, concerning the termination by the landlord, the law included a special mechanism regarding non-residential leasing, which obliges the landlord to separately indemnify the tenant and the employees of the establishment for losses that are proven to result from the termination of the lease. It is also established that, regardless of what is agreed with respect to the term of the non-residential lease, the landlord may not oppose to the renewal during the first 5 years of the agreement.
Regarding the opposition to the renewal or termination by the tenant, failure to comply with the legally established time limits for this purpose no longer implies the payment of rents corresponding to the lacking period, in case of involuntary unemployment, permanent incapacity for work or death of the tenant or of the person who has been living with the tenant in common economy for over a year.
In what concerns the regime of works in leased buildings, several significant changes are worth noting:
- The property tax value of the property is no longer the reference for the purpose of determining the concept of remodeling or deep restoration works, and was substituted by concepts such as gross construction area and median value of sales per m2;
- The compensation referred to in Article 6 (a) of the relevant regime shall now be equal to twice the amount of 1/15 of the asset value or to two years of rent income, whichever has the higher value;
- Whenever relocation of the tenant is needed due to the suspension of the lease, it can be done within the same municipality, not being restricted to the same parish or to neighboring parishes;
- The inclusion of several new specificities applicable to tenants of the age of 65 or above, or with disability with a proven degree of incapacity equal to or greater than 60% as foreseen in Article 6 of the relevant regime;
- If the termination of the lease is a consequence of the need of demolition imposed by the applicable spatial plan (in particular of a detailed urban rehabilitation plan), the landlord may ask from the entity responsible for the implementation of the plan the reimbursement of the costs incurred with the tenant’s relocation or compensation, having the waiver of the obligation of payment by the landlord of the compensation – provided for in the case of termination for demolition if the order or the need for demolition did not result from any fault or omission on his part – been eliminated; and
- The provision of new rules regarding the execution of certain works by the tenant in replacement of the landlord.
Regarding the amendments to the NRAU, it should be noted that the rules regarding the value of the rent in case of agreement by the parties in relation to the transition of the agreement to the NRAU are now also applicable in case the tenant invokes and proves that he has resided on the premises for more than five years with someone as a spouse, in communion in fact, or with a first degree relative, who is 65 years of age or older or has a proven degree of incapacity equal to or greater than 60%, if the household’s RABC (corrected gross annual income) is less than 5 times the national minimum annual income.
In addition, the lease for residential proposes ceases to expire on the death of the original tenant whenever there is a surviving son or stepchild who has been living with him for more than five years and who is 65 years of age or older, provided that the adjusted gross annual income of the aggregate is less than 5 times the national minimum annual income.
The law also provides (albeit with a margin for clarification of the wording) that, for agreements of limited duration whose tenant, on 13 February, has lived for more than 20 years in the leased premises and is aged 65 years or more or has a proven degree of disability equal to or higher than 60%, landlords may only oppose the renewal of agreements on the grounds of demolition or completion of a major remodeling or restoration work that requires the leased premise to be vacated. Oppositions to renewals that have been sent to tenants who meet the above-mentioned requirements while the special regime approved by Law no. 30/2018 of 14 June was in force are of no effect.
Likewise, in agreements transferred to the NRAU where no special circumstances have been claimed, where the tenant has been in the leased premise for more than 15 years and has, at the date of transition of the agreement, an age equal to or greater than 65 years or a proven degree of deficiency equal to or greater than 60%, there can only be opposition to the renewal of the agreements on the grounds of demolition or completion of a major remodeling or restoration that requires the leased premise to be vacated.
The provisions relating to the rental injunction (IMA) are also added to the NRAU; these will be carried out by the Injunction Service for Leasing (SIMA), competent throughout the national territory, and will be the subject of a specific diploma to be approved by the Government within 180 days from the date of entry into force of this Law no. 13/2019 of February 12.
It should also be noted that, among the amendments introduced by the law, the specification that the new rent, for the purposes of the update provided for in the NRAU (and with the articulation imposed by the income subsidy scheme to be granted to tenants with residential rental agreements entered into before November 18, 1990 and that are in the process of updating income), is only due:
- At the end of the transitional periods of 10 and 8 years provided for in articles 35 and 36 of Law 6/2006, of February 27, with the wording given by the diploma now amended;
- At the end of the 10-year period established in paragraph 3 of article 38 of Law no. 6/2006, of February 27, in its original wording; and
- On the date of extraordinary adjustment of income applied under the terms of no. 11 of article 36 of Law no. 6/2006, of February 27, with the wording given by the diploma now amended.
Regarding the matters related to credit agreements for residential properties, the law underwent a relevant change, within the scope of article 25 of Decree-Law no. 74/2017 of June 23 – from now on, in case of renegotiation of the credit agreement due to the entering into of a lease in relation to the whole or part of the property, the lending entity may not increase the charges related with the credit granted for the purpose of financing the acquisition, construction or maintenance of property rights over permanent housing (in particular by increasing the previously agreed spreads).
Finally, Law 12/2019 of February 12 was also approved, prohibiting harassment in the leasing, which consists on the illegitimate behavior by the landlord, by whoever represents him or by a third party interested in the acquisition or commercialization of the leased premise, that, with the purpose of causing the vacancy of the premise, disturbs, constrains or impairs the dignity of the tenant, sub-tenant or of the persons who legitimately reside at the leased premise, subjects them to an intimidating, hostile, degrading, dangerous, humiliating, destabilizing or offensive environment, or seriously hinders or impairs the access and good use of the leased premise.
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