Rental Agreements – Protective Measures Due to Covid
Rental Agreements – Protective Measures Due to Covid
Due to the pandemic, the Portuguese Government has implemented exceptional measures to mitigate companies’ and individuals’ financial impact.
Framework: Law 1-A / 2020 of March 19 and Law 4-C / 2020 of April 6
Concerning rental agreements and mortgage payments, since mid-2020, several moratoria are in place, providing for:
- A temporary halt on the termination of rental agreements
- A halt on foreclosures on properties that constitute the principal dwelling of the debtor
- A specific framework for delays in payment of rents of commercial leases
For the moratorium to apply to a residential rental agreement, the tenant must prove a 20% decrease in household income compared to the same period during the previous year. A stress rate exceeding 30% is also required.
Each landlord can defend against the moratoria if his/her income decreases by 20% due to defaulting tenants. Landlords are also entitled to terminate the lease due to failure to pay rents during the state of emergency, if they are not paid within the next 12 months*, in monthly installments of not less than on twelfth, in addition to the current rent.
Tenants and displaced students whose original households are located more than 50 km from educational institutions can access an interest-free loan provided by the Institute of Urban Rehabilitation. Conditions apply.
Moratoria regarding commercial leases apply to retail and services establishments closed due to Covid related rules, in addition to other service providers including e-commerce, catering, or equivalent. Covid related defaults on payment cannot be considered grounds for termination of contract or to collect late payment penalties.
*At the time o publication of the original legal diploma.
Alterations Implemented by Law 75-A /2020 of December 30 and Law 75-B / 2020 of December 31
The Portuguese Government added the following additional benefits for tenants and landlords of residential properties:
- Extended moratoria until mid- 2021;
- Tenants can extend the term of rental agreements of establishments closed due to legal restrictions in March 2020 to January 2021 for an equal period. Tenants must be up to date on rent payments since the establishment’s reopening.
- Tenants can apply to reduce rents of stores and other establishments open to the public in shopping centers. The reduction is proportional to revenue decrease compared to the previous year period, up to 50%.
- Non-refundable aid for retail/services establishments open to public or catering establishments that have been closed due to legal restrictions.
- Non-refundable aid in the amount of: a) up to 30% of the rent (capped at Eur 1200), assuming a minimum 25% revenue reduction, b) up to 50 % of the rent (capped at Eur 2000), considering a minimum 40% revenue reduction.
The Portuguese Government is frequently reviewing the legal framework relevant to these affairs.
Should you require our assistance regarding these matters, please contact us.
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