Rent hikes must be capped at 2% in Portugal
Due increase prices in rentals, interest rates and general inflation, the Portuguese Government limited the increase of rents to a 2% rise in 2023.
Urban leases are regulated by the Civil Code (CC), approved by DL no. 47344/66, of November 25th, and by the New Urban Lease Regime (NRAU), approved by Law no. 6/2006, of February 27th.
Laws governing rental agreements provide an annual rental update coefficient connected to the total variation of the consumer price index (without housing) of the previous 12 months. The Government sets this coefficient according to the increase in the standard and average cost of living. The coefficient is published in the Official Republic Gazette until October 30th each year.
In the past, coefficients were set at 0,43% in 2022 and 0% in 2021 due to the pandemic.
An expected 5,43% increase coefficient for 2023 led to the enactment of Law 19/2022, of October 21st, thus establishing rent’s increase must be capped at 2%. The cap applies to all rents, residential or commercial.
The Government will compensate landlords with Personal Income Tax and Corporate Income Tax rebates.
In the aftermath of the new law, several cases of landlords refusing to renew leases were reported. This course of action would allow landlords to renegotiate new leases at market price and avoid the cap entirely.
The Association of Tenants of Lisbon (AIL) received complaints of rental hikes above the 2% cap. Other cases included tenants opposing the renewal of rental agreements due to the limits on rent updates.
Most of these cases are out-of-time oppositions or lack the legal grounds for termination of the lease.
Laws governing leases provide a complete framework of mandatory provisions that contracting parties cannot agree on otherwise. Therefore, contractual clauses may be deemed null and void.
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