Payments in Advance for Rental & Security Deposit

by | Sep 7, 2023 | Owners, Rentals, Tenants

In this post I will explain why it is absolutely within the law for an owner to request 6 months of rent at the beginning of a rental contract.

I’m sure we’ve all heard the horror stories about people being asked for (and paying!) 12 months rent in advance or some other ridiculous number. When something like this is posted on Facebook, there’s always a comment from some lucky tenant saying that he or she only paid 1 month’s rent and 1 month’s deposit, or comments from other people saying the law only allows this or that. So what exactly DOES the law allow? Let’s take a look…

The State Budget for 2023 (Orçamento do Estado para 2023 – Artigo 274.º – Lei n.º 24-D/2022), in effect since 1st January 2023, changed the conditions for this situation, specifically modifying Article 1076 of the Civil Code, which now reads as follows:

  1. O pagamento da renda pode ser antecipado, havendo acordo escrito, por período não superior a dois meses.
  2. As partes podem caucionar, por qualquer das formas legalmente previstas, o cumprimento das obrigações respetivas, até ao valor correspondente a duas rendas.

Loose translation:

  1. Payment of the rent can be in advance, if agreed in writing, for no longer than two months.
  2. The parties may agree to a security deposit, by any legal means, up to an amount of two rents.

So, the MAXIMUM a tenant legally pays at the beginning of the contract is a total of 4 months’ rent, right? Two months rent plus two months security deposit.

Not so fast! 🙂

The previous clause in the Civil Code, Article 1075, Number 2, says:
“Na falta de convenção em contrário, se as rendas estiverem em correspondência com os meses do calendário gregoriano, a primeira vencer-se-á no momento da celebração do contrato e cada uma das restantes no 1.º dia útil do mês imediatamente anterior àquele a que diga respeito.”

Basically, unless otherwise agreed, and if rents are paid according to calendar months, the 1st rent is due when the contract is signed, and the remaining rental payments are due on the 1st working day of the previous month.

Example: a 1-year contract is signed from 1st April 2024 to 31st March 2025, with a two-month security deposit. The contract is signed on 1st April 2024 and the tenant pays the security deposit (two months) and the 1st month of rent (April). HOWEVER, according to the clause above (Article 1075), all remaining rental payments are due on the 1st day of the previous month, which means that the rent for the month of May 2024 is due on 1st April 2024. So in this case, the tenant pays two months of rent, apart from two months for the deposit.

Note that until now, NO RENTS HAVE BEEN PAID IN ADVANCE. Why? Because the rents have been paid on EXACTLY the days they are due, NOT in advance.

In the above example, and in strict compliance with the law, the owner could ask for payment of a further two months of rent. Here the rents would indeed be paid in advance, but only these two extra payments are in advance, thus complying with the law.

Therefore, in the above situation, the tenant would pay: 2 months rent for the security deposit + the rent for April 2024 due when the contract is signed + the rent for May 2024 due on the 1st day of the previous month + 2 months rent in advance = TOTAL OF 6 MONTHS.

This is the common understanding of the law by every lawyer I have ever spoken to. We have also described how to correctly declare the security deposit for tax purposes as an owner.