Rental support in Portugal: what will change for tenants and landlords from July onwards

Tenants who do not pay their rent to landlords will be in breach of contract.

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Photo by Ján Jakub Naništa on Unsplash
3 June 2020, Redaction

There will be changes to the extraordinary support for rental payments from July onwards in Portugal, following a proposal presented by the Government and approved in Parliament at the end of May 2020. The Executive has summarised what will changein a statement, with one of the new developments being that tenants who do not pay the corresponding rent to landlords will be in breach of contract. 

"As part of the extraordinary measures to tackle the crisis caused by the COVID-19 pandemic, the government announced a set of exceptional measures for housing leases in April. The evolution of the sanitary situation, the analysis of the impact of the measures in force, as well as the current economic and social framework of the families, led the Government to propose amendments to the measures in force to the Assembly (Proposal of Law 32/XIV, approved on 21st May)", reads the note released by the Executive.

Let's have a look at what will change from July, looking at the Government's recent communiqué in its entirety:

Loans granted by the IHRU are extended until 1st September

Tenants and landlords with a proven loss of income can resort to interest-free loans from the IHRU for rent payments. This measure, available since 15th April, has now been extended until 1st September 2020, as it is considered the most favourable and advantageous for families and landlords.

This support ensures that families have the time and conditions necessary to resume their normal lives, foreseeing that the settlement of the amount owed will be extended over time and therefore, avoiding the burden of housing charges. It also allows landlords to receive the rent they are due on time.

It should be remembered that these are interest-free loans, that the beneficiary will only pay back the first instalment in January 2021, and that the grace period can never be less than six months. The loan will be repaid in equal and successive monthly instalments corresponding to one twelfth of the monthly rent.

Flexible payment of rent ends in June

This measure, which allowed the payment of rent to be deferred for 12 months in monthly instalments, was in force only during the state of emergency (which has now ended) and the following month (June). In other words, it is not subject to extension, so from July onwards tenants must pay rent to landlords or risk penalty of breach of contract. In case of loss of income, tenants must resort to loans from the IHRU.

The Government chose not to extend this measure, since the debt to landlords required payment as from the following month, in 12 months and with higher instalments compared to the support granted by the IHRU. At the same time, landlords were left without their income. Therefore, the analysis of the impact of the measures in recent months has shown that support from the IHRU is the most advantageous measure for tenants and landlords.

Public entities maintain the possibility of reducing the value of rent

Regarding the public housing stock, and since it is home to many families in a vulnerable situation, the possibility for public entities to reduce rent for tenants who have proven to have a drop in income of more than 20% compared to the previous month or the same period of the previous year has also been extended until 1st September, when this results in an effort rate of more than 35% in relation to the rent.

In this way, the necessary legal framework is given so that municipalities and other public entities managing housing assets may make the decisions they consider appropriate in view of the specific situation of their tenant families.

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