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New rules for tourist properties in Portugal: find out everything

15 de October, 2019

New rules for tourist properties in Portugal: find out everything

Reading: 5 min

Portugal was for a long time a real estate aberration. In a tradition that goes back to the beginning of the last century, the balance of rights hung in the direction of the tenants, making residential rental one of the worst businesses that existed in Portuguese lands. The landscape changed in 2012 with the introduction of a new tenancy law, and changed so much that Municipal Councils are currently studying the containment and suspension of properties intended for tourism exploitation with the new rules for properties for tourists in Portugal. Learn everything below.

New rules for tourist properties in Portugal: as it was before the Tenancy Law

In the past, in Portugal, contracts were not readjustable. The tenant remained in the property, even after the expiration of the contract, passing the “right” to the children. Uncorrected rents lost value in the face of inflation, becoming derisory to the point of not justifying that the owner did any maintenance.

Without being able to remove the tenants and having to deal with the bizarre legal figure of the heredity of the rental contract, the landlord found himself in a vicious circle of symbolic rents and degraded real estate, without maintenance.

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2012: New Tenancy Law

The New Tenancy Law came into force in 2012. From then on, the landlord can take back the property upon expiration of the contract. Better yet, you can ask for a tenant’s leave for a full pension.

The change in the regulatory environment was essential for the historic centre of Lisbon and Porto to be renovated and rented to tourists, who have since then been arriving on low-cost flights and through digital sharing platforms such as Airbnb.

Local accommodation on the rise

The movement was so vigorous that the government decided to recognize and regulate the sector, which became known as “local housing”. Security rules, taxes, checks on foreign guests, and registration with municipal councils have been established.

The subtle detail is that no one could stop the creation of a new local lodge. Just report it to city councils and start billing. Eventually there would be inspection, but the beginning was immediate.

It began to rain reports in the printed and television media of the former tenants being removed. With an immense identity conflict, Portugal loved tourism money, but hated the eviction of people.

After years of complaints, the government decided to raise taxes on local housing as a means of curbing the sector, and then pass control of the installation of new local housing to city councils, including veto power.

If you are planning to invest in real estate in Portugal, we suggest you read this article.

Lisbon: suspension and regulation of containment areas

Immediately, in November 2018, Lisbon blocked the installation of new local accommodation in areas with a high tourist presence: Bairro Alto, Madragoa, Castelo, Alfama and Mouraria, and six months later included Graça and Colina de Santana in the blockade.

At the same time, it has placed in public hearing a new regulation, which is still in progress, providing that areas in which the local accommodation represents more than 10% of the properties are considered as containment (relative or absolute). At these locations, installation is only possible on the basis of the exception that the camera deems appropriate.

According to this draft regulation, the Chamber, however, can only consider properties that have not had residential tenants in the last five years. The intention is clearly to stop the diversion of houses and apartments to the tourist activity.

In cases where there have been no tenants in the last five years, the regulation that is in process establishes the criteria where the chamber may consider releasing local accommodation in the containment areas:

  1. Property that has been completely empty for more than three years or with rehabilitation works carried out in the last two years that have allowed two levels of conservation to be raised;
  2. When there has been a change in the use of logistics, industry or services for housing.

The authorisation, if granted, will have a period of five years, when it will be necessary to obtain a new licence.

Port: containment begins in 2019

The Port only began the movement of tightening in July 2019, establishing a blockade of new local lodgings in the containment areas, defined as those in which there are more than 25% of properties for tourists.

Similarly, the Porto City Council has put in public hearing a new regulation, which is still in progress, providing that new registrations of local accommodation establishments in the containment areas may be granted as long as the properties have not been rented in the last three years.

In light of this requirement, the clearinghouse may grant the license to:

  • Property that’s been empty for the last three years;
  • Buildings that were in a bad or very bad state of repair that were the object of a complete refurbishment carried out in the last two years;
  • Change of use of logistics or industry for housing or services;
  • New buildings that arose from demolitions based on a very poor state of repair or risk of collapse;
  • when the accommodation is operated on a room basis.

According to this draft regulation, the authorisation period is six years for places with a concentration of local accommodation of 25%, four years for more than 37.5% and two years for more than 50%.

See where it is best to buy properties in Portugal: in Lisbon, Porto or Algarve.

Additional care with the new rules for tourist properties in Portugal

Although still in progress, these new rules for tourist properties in Portugal make it clear that in order to obtain higher-than-average returns from the operation of local accommodation, the investor needs to take additional care in choosing the property in Lisbon and Porto.

It is necessary to evaluate the level of containment in which the property is inserted and choose the best areas, preferably those that are not yet under the containment spectrum and that do not have authorizations with a determined term.

Especially authorizations with a defined term carry the risk of changing the attitude of municipal councils at the time of renovation, bringing a great advantage to properties that are outside the containment area, whose authorization has no fixed term.

Read also our step-by-step guide to buying properties in Portugal.

Author: Marcio Fenelon
Real Estate Investment

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