RENDAS ANTIGAS: RENT INCREASE AND OWNER COMPENSATION APPROVED

by | Dec 27, 2023 | Fiscal, Owners, Rentals, Tenants

In Portugal, “rendas antigas“, or “old rentals” is the term used for residential rental contracts signed before 18th November 1990, and which are governed by special legislation, meaning that the price of the rent has basically stayed the same since the beginning, and the occupants have lifelong tenants rights.

Today, a new law (Decreto-Lei n.º 132/2023 de 27 de dezembro) was published confirming that these old rental contracts can be increased by 6.94% from January 2024, as we previously alerted here. We remind our readers that tenants have to be notified of such an increase at least 30 days in advance by registered letter, an example of which may be downloaded here.

Also, from July onwards, owners with old rental contracts may be entitled to monthly compensation, calculated using the tax value of the property, or “valor patrimonial tributário“, or VPT, which may be found on the property’s caderneta predial document.

For example, if the property has a VPT of 75 thousand euros, 1/15 of this VPT must first be calculated, which corresponds to 5000 euros. We then divide this amount by 12 months, which gives a monthly rate of 416.67 euros. In this example, if the monthly rent being paid by the tenant in 2024, after the 6.94% update, is lower than 416.67 euros, the owner is entitled to state compensation.

The compensation amount corresponds to the difference between the monthly rental amount and the amount determined in the calculation above. In other words, if the rent charged in this example is 300 euros, the landlord would be entitled to compensation of 116.67 euros per month, net, meaning no further deductions for IRS income tax or social security.

Compensation requests must be sent in July 2024 to the Instituto da Habitação e da Reabilitação Urbana (Housing and Urban Rehabilitation Institute, or IHRU), and must be repeated yearly as long as the conditions for compensation still apply.