The New Regime on Urban Lease Scheme (Civil Code and Law no. 6/2006, of 27.02., amended by the Law 31/2012, of 14 August, Law No. 79/2014, of 19 December, Law No. 43/2017, of 14 June and Law 13/2019, of 12 February (hereinafter referred to as NRAU) applies to urban buildings. The Rural Lease Regime (Decree-Law 294/2009, of 13 October) applies to farmsteads.
The applicable statutory scheme to urban buildings differentiates leasing for residential and non-residential purposes. A lease for residential purposes may be for a fixed period of time (Definite Term Leases) or for an unspecified period of time (Indefinite Term Leases).
Leasing for non-residential purposes may include the leasing of industrial real estate, commercial facilities, offices or for any other legally admitted use.
The law also recognizes:
Although the Contracts for the Use of Stores in Shopping Centres regime has not yet been approved, the regime has proved to be an alternative to non-residential contracts when applied to a commercial space integrated in a set of stores and for commercial spaces administered by a managing entity.
Last modified 13 Mar 2025
The length of a non-residential lease is decided by agreement between the parties, with a maximum limit of 30 years (subject to a right to terminate on notice) and a minimum of 1 year. Should the term be omitted, the contract shall be deemed to be in force for a definite term of five years, renewable for the same period and the notice period for termination by the tenant shall be deemed to be one year. However, and regardless of the term agreed by the parties, the landlord cannot oppose to the renewal of the lease at the end of the agreed term during the first five years.
NRAU foresees a general rule for non-residential leases stating that parties may freely stipulate the length, termination and opposition to the renewal regimes, without prejudice of a set of imperative legal provisions having we already made reference above to two of them, regarding the length and the impossibility to cease non-residential leases during the first five years.
In light of the recent legislative amendments, landlords may no longer freely terminate the contract at any time, except in Indefinite Term Leases and only in two situations and under the harsh and severe circumstances imposed by the Civil Code, requiring the landlord to pay an indemnity to the tenant and to the employees of the company/establishment for the damages and losses proven to be a consequence of the lease termination.
On the other hand, in the absence of stipulation regarding the termination regime, the tenant may trigger the termination mechanism under the same conditions and notice periods provided by the Civil Code for residential leases (except if parties did not stipulate the length of the contract, case in which will be applicable the notice period of 1 year, as we mentioned above).
However, nothing prevents the parties to exclude the possibility for the landlord to terminate an Indefinite Term Contract, if it is their will to do so. The same thing applies for the right of the tenant to terminate Indefinite or Definite Term Leases: it can be excluded if parties decide so, under their contractual freedom.
The parties may agree that the contract, for all kinds of leases, will be automatically renewed at the end of its term, for the same period as before or for a different period of time (although some doctrine believe that under the recent legislative amendments, the Civil Code now imposes a 3-year minimum renewal period
The common practice for contracts falling under the Contracts for the Use of Store in Shopping Centres regime is for terms of five to ten years.
Last modified 13 Mar 2025
The general law regarding urban property is established in the Civil Code.
The law establishes specific standards for residential and non-residential leasing. The most important differences refer to the standards regarding duration, notice periods of termination and opposition to the renewal.
Legal relationships in store lettings in shopping centres or retail parks have been governed by atypical contracts, in which different provisions than the usual ones are included in the contracts.
Decree Law 15/2014, of 23 January enacted the second amendment to the regulations governing the development, operation and functioning of tourist establishments approved by Decree Law 39/2008 as amended by Decree Law 228/2009.
Decree Law 15/2014 aims to adjust and adapt the legal framework governing the activity of tourist establishments to the current economic environment and hence the need to equip the sector for greater efficiency, a reduction in costs and the removal of bureaucratic restrictions. Leases for purposes related to tourism, known as Alojamento Local, are governed by Decree-Law No. 128/2014, of 29 August, as amended by Decree Law No. 63/2015, of 23 April.
Last modified 13 Mar 2025
No, except if the tenant is covered by a special provision of the law or if such authorization was specified by the parties in the lease.
If the tenant does not return the property after the contract ends, they are under an obligation to pay the rent value until the moment of the return of the property as compensation. If the tenant is in default the compensation is double that value.
Last modified 13 Mar 2025
With the termination of the contract, the landlord may start legal action for the eviction or for the recovery of possession of the property.
With the coming into force of Law 31/2012, which amended Law 6/2006, a new legal action for recovering the possession of real estate has been created. This is called the Procedimento Especial de Despejo (Special Procedure for Eviction). It is a remedy that is intended to effect the termination of the lease, if the tenant does not vacate the leased property on the required date.
This special procedure is intended to be simpler and faster than a normal lawsuit. It is started and may conclude out of court, in the Balcão do Arrendatário e do Senhorio (Tenant and Landlord Counter), where the petition for eviction is presented. If the tenant does not put up a defence, the Tenant and Landlord Counterconverts the petition for eviction into an order requiring the vacation of the leased property. If the tenant does put up a defence, the Tenant and Landlord Counterrefers the case to the court. In court the case is considered as an urgent matter, with a faster process and shorter deadlines than in a normal lawsuit.
Last modified 13 Mar 2025
The landlord can only terminate the contract before the end of the term if the tenant defaults, thus ending the former’s obligation to maintain the contract. The law defines some of the causes that may entitle the landlord to proceed with the termination of the contract. Besides these causes the landlord may state others that might be considered as the tenant’s default. This rule applies to residential or non-residential leases.
The landlord may terminate the contract by notice in writing to the tenant, without needing to resort to court, if the basis for the contract termination is a default in the payment of the rent for more than three months, a default in paying charges or expenses, or the fact that the tenant is opposed to the execution of works ordered to be carried out by a public entity. The landlord may also terminate the contract by the same means if the basis for contract termination is a delay in the payment of the rent, for more than eight days, on more than four occasions, whether consecutive or not, within a period of 12 months.
In all other cases, the landlord will have to start a lawsuit, which is a time-consuming process (approximately two to three years).
Last modified 13 Mar 2025
Leases may be terminated by public entities in exceptional cases, such as the public interest justification, in which case the parties are entitled to compensation.
Municipal authorities and other entities to whom the law grants that right (such as urban rehabilitation companies, real estate investment funds and pension funds) may carry out works in leased buildings when the landlords do not do such works, giving notice of termination of those contracts under certain circumstances. In these situations, the tenant is entitled to be relocated and, if that is not possible, to receive compensation amounting to the value corresponding to one year's rent. The tenant should be notified of the procedures at least 30 days beforehand.
The municipal authorities and other entities that carry out the works are entitled to lease the property after the works are complete, on specific terms established by the law, in order to recover the compensation paid to the former tenants.
Last modified 13 Mar 2025
The landlord may demand in the contract that the tenant provides guarantees of proper performance, the most common being the following:
Last modified 13 Mar 2025
The purpose of the leased property has to be defined in the lease, in accordance with the type of legally permitted use for the property which is determined by the Town Hall.
The permitted use cannot be changed without the landlord’s or the Town Hall’s consent.
If the building has a residential use licence it cannot be used for any other purposes, such as commercial purposes.
The use of the property for any purpose other than that which it is licensed for is considered to be a contractual default of the tenant, constituting justification for termination of the contract by the landlord, who may apply to court to obtain the termination of the contract.
Otherwise, the letting of property for any purpose other than the one it is licensed for is void, and the landlord can be subject to pecuniary sanctions.
Last modified 13 Mar 2025
Unless a provision stipulating otherwise is included in the contract by the parties, it is up to the landlord to carry out ordinary and extraordinary repair works.
The tenant may only carry out the works when the leasing contract allows it, or when there is a written consent from the landlord unless the works are urgent. In this last case, the tenant may carry out the works and has the right to be paid for the expenses and may offset the expenses incurred in doing the works with the rent they owe under the lease.
The tenant may (and is under an obligation to) carry out small repairs in the property so that it remains adequate for its purpose.
Should the tenant carry out improvement works in the property they shall be entitled to be compensated for the works ('required improvement works') or to survey the works required ('useful improvement works') provided they do not prejudice the property. However, it is normally established in the contract that the tenant is not entitled to this compensation or to survey the improvement works.
The tenant is not entitled to receive any compensation due to:
Last modified 13 Mar 2025
In general transfers of leases to a third party require the landlord’s consent. Non-residential leases (of commercial and industrial establishments) may be transferred by conveyance without the landlord’s consent, notification to the landlord being sufficient, although the landlord has a pre-emption right.
A transfer of an establishment (a temporary and costly transfer of the use of the property together with the operation of a commercial or industrial establishment) does not require the landlord’s authorization, but the landlord should be informed within one month.
As a rule the parties establish these matters in the contract. If the consent is not required, the parties normally limit the scope within which it is possible to assign the rights, for example to companies of the same group.
The tenant cannot sublet the property, either totally or partially, without the landlord’s authorization in writing, which is a valid condition of the sub-leasing. Should this authorization not exist, the landlord may terminate the contract based on the tenant’s default.
Last modified 13 Mar 2025
Any rent updating shall be done in accordance with the legal annual coefficient that is approved by the government. However, the parties may define other ways to update the rent in the contract.
Last modified 13 Mar 2025
If the parties have contractually agreed on the rent updating scheme, the calculation of the new rent value is the one indicated in the contract.
If nothing was stipulated, then the annual legal coefficient shall be applied:
Additional updating (for older leases) is effected by negotiation between the parties, landlord and tenant, in order to agree on the updated level of these rents.
If the lessor does not accept the rent proposed by the lessee, the rent update is calculated in accordance with the annual rent update coefficient for the various types of lease, which results from the total variation in the consumer price index, without housing, corresponding to the last 12 months and for which figures are available on August 31st, calculated by the National Statistics Institute.
Last modified 13 Mar 2025
Leasing is VAT free. However, when certain requirements are fulfilled, it is possible to ask Tax Authorities for a VAT exemption waiver.
The landlord may request the exemption waiver and charge VAT in order to recover VAT values supported with expenses. The exemption waiver may only be recognized if the tenant is also a VAT taxable person.
The current VAT rate for leasing purposes is 23 percent.
VAT exemption does not comprise, among others:
Last modified 13 Mar 2025
There are several options available to the landlord depending upon the specific circumstances and what the landlord wants to achieve.
Termination: The landlords have a right to terminate the lease agreement if the tenant fails to pay the rent on time on four different months in the space of twelve months or if the tenant fails to pay one rent for three months. In the first scenario, the landlord must notify the tenant, after the third missed/ delayed payment, that if the tenant fails to pay rent, on time, again, the former will terminate the lease. After receiving a termination notice, the tenant may pay the due amounts in the space of one month and therefore avoid termination of the lease agreement.
Court Proceedings for eviction: If after the termination of the lease agreement, on the grounds of the rent arrears, the tenant has not left the premises, the landlord can start court proceedings against the tenant through a special eviction procedure which is faster than a standard procedure and if the tenant wishes the oppose the proceedings he must pay a deposit to the Court on the amount of due rents, to a maximum of six months of rent.
Recovery of Owed Amounts: The landlord can demand the tenant to pay the owed amounts, who will have to pay them with an added 20% on the amounts owed. If the tenant doesn’t pay, the landlord can request the guarantor to pay, if there is one, or the landlord can withhold the deposit.
Court Proceedings for Owed Amounts: If the landlord is still due to receive the rents, he can start court proceedings against the tenant and/ or against the guarantor. Subject to statutory limitations the Landlord may be able to use a special court procedure for the fulfilment of contractual obligations (AECOP), however the amount owed must be under fifteen thousand euros.
Insolvency of the Tenant: Insolvency of the tenant does not automatically suspend or terminate the lease agreement; however the designated insolvency administrator may choose to do so. Credits resulting from a lease agreement do not have primacy over other credits, therefore owed rent amounts may be one of the last credits to be paid. Plus, the landlord cannot make his own any of the equipment in the premises to pay out the amounts owed.
Last modified 13 Mar 2025
The tenant is responsible for the payment of charges and expenses regarding the supply of goods or services related to the property (for example: water, electricity, gas, telephone, internet).
The tenant is only responsible for other expenses if it is expressly agreed between the parties.
The landlord is responsible for the payment of the sanitation rate, insurance fees, Tax on Real Estate and the Stamp Duty of the contract.
Last modified 13 Mar 2025
The landlord is responsible for the repair and maintenance of the common parts of the building in which the property is located, except if otherwise agreed in the leasing contract.
Last modified 13 Mar 2025
The landlord is responsible for the repair of the property. However, the parties may establish in the contract that the tenant shall be responsible for these expenses.
In practice, it is usual for the landlord to bear the additional expenses of an extraordinary nature (including for the fixed asset structures), and for the tenant to bear the ordinary repair costs (with the maintenance) of the property.
If the landlord is in arrears, the tenant may carry out works of an urgent nature, being reimbursed by the landlord later on.
Last modified 13 Mar 2025
If not otherwise specified, each tenant will bear the charges and expenses related to their respective consumptions. Should it not be possible to individualize the consumptions – due to a global provision of services – mill rate allocation rules may be applied, by consumption, by area or in accordance with any other allocation criteria defined by the parties.
Last modified 13 Mar 2025
When property is split amongst various leases, the landlord is under an obligation to insure against loss by fire. Usually landlords opt to contract multiple-risk insurance, which also cover the risk of floods, storms, electrical damage, theft and robbery.
Some multiple-risk insurance policies also cover household effects, but it is not the landlord's responsibility to insure these items.
Last modified 13 Mar 2025
What is the usual length of each type of commercial lease?
The length of a non-residential lease is decided by agreement between the parties, with a maximum limit of 30 years (subject to a right to terminate on notice) and a minimum of 1 year. Should the term be omitted, the contract shall be deemed to be in force for a definite term of five years, renewable for the same period and the notice period for termination by the tenant shall be deemed to be one year. However, and regardless of the term agreed by the parties, the landlord cannot oppose to the renewal of the lease at the end of the agreed term during the first five years.
NRAU foresees a general rule for non-residential leases stating that parties may freely stipulate the length, termination and opposition to the renewal regimes, without prejudice of a set of imperative legal provisions having we already made reference above to two of them, regarding the length and the impossibility to cease non-residential leases during the first five years.
In light of the recent legislative amendments, landlords may no longer freely terminate the contract at any time, except in Indefinite Term Leases and only in two situations and under the harsh and severe circumstances imposed by the Civil Code, requiring the landlord to pay an indemnity to the tenant and to the employees of the company/establishment for the damages and losses proven to be a consequence of the lease termination.
On the other hand, in the absence of stipulation regarding the termination regime, the tenant may trigger the termination mechanism under the same conditions and notice periods provided by the Civil Code for residential leases (except if parties did not stipulate the length of the contract, case in which will be applicable the notice period of 1 year, as we mentioned above).
However, nothing prevents the parties to exclude the possibility for the landlord to terminate an Indefinite Term Contract, if it is their will to do so. The same thing applies for the right of the tenant to terminate Indefinite or Definite Term Leases: it can be excluded if parties decide so, under their contractual freedom.
The parties may agree that the contract, for all kinds of leases, will be automatically renewed at the end of its term, for the same period as before or for a different period of time (although some doctrine believe that under the recent legislative amendments, the Civil Code now imposes a 3-year minimum renewal period
The common practice for contracts falling under the Contracts for the Use of Store in Shopping Centres regime is for terms of five to ten years.
Last modified 13 Mar 2025