Residential Lease Agreements Pre-dating 1990: What Are Your Options?

Categories:
Residential lease agreements signed before the implementation of the Urban Lease Regime (RAU), as sanctioned by Decree-Law no. 321/90 on October 15, were commonly dubbed “lifetime” leases due to their perceived immutability regarding rent adjustments and seeming impossibility of termination.

Initially, it is imperative to ascertain whether the landlord has transitioned the lease to comply with the NRAU, as outlined in Law no. 6/2006 dated February 27.

If the landlord has not executed this transition, they are precluded from doing so under the following circumstances:

  • When the Corrected Annual Gross Income (RABC) of the tenant’s household is less than five times the Annual National Minimum Wage (RMNA).
  • When the tenant is 65 years of age or older.
  • When the tenant can provide evidence of a disability with a documented degree of incapacity equal to or exceeding 60%.
  • When the tenant can substantiate that their spouse, civil partner, or first-degree relative with a confirmed disability equal to or exceeding 60% has resided in the property for more than five years, and the household’s RABC is less than 5 RMNA.

In the situations outlined above, rent adjustments are restricted solely to the legal coefficients applied annually to the existing rental value. There exists no other legally sanctioned method for updating these rents.

What recourse does the landlord have in these circumstances under the Pacote Mais Habitação?

A compensation mechanism for landlords with leases under the so-called “lifetime” contracts was approved by Decree-Law no. 132/2023 on December 27. This provision will be effective from July 1, 2024, allowing landlords to apply for financial support, which will be administered by the Housing and Urban Rehabilitation Institute.

To qualify for this support, landlords must meet the following requirements:

  • The rent must not exceed the amount defined on the date of entry into force of the decree-law, with annual adjustments permitted based on legal coefficients.
  • The monthly rent for contracts falling under this law must not exceed 1/15th of the taxable value (VPT) of the leased property, divided by 12 months.

The compensation will function as a monthly, non-refundable subsidy, calculated as the difference between the monthly rent due on the date of the decree-law’s enactment and the amount equivalent to 1/15 of the VPT, divided by the 12 months of the year.