Long-term rental housing in Portugal in 2025

Renting a permanent home is becoming an increasingly popular option for both the Portuguese themselves and for visitors, not only because of the increase in the price of purchasing a home on the national market, but also because of the inability to raise the amount needed for a down payment on a mortgage. Long-term rentals are governed by various rules set by law that you, as a renter, should be aware of. We are going to talk about them today.

From a legal perspective, in Portugal, the interests of the tenant are protected by laws and regulations, including the Urban Lease Law (Lei do Arrendamento Urbano) and the Novo Regime do Arrendamento Urbano (NRAU).

Rising prices in the housing market, rising interest rates and even a banal shortage of houses for sale in some cases, have led to an increase in the number of renters of permanent housing, which is also associated with numerous attractions, namely fewer worries: because when you rent, you don't have to worry about paying IMI and other taxes related to its purchase, you don't have to pay condominium fees and you don't even have to worry about maintenance and repair costs, not counting damages from negligent or improper use. What's more, you can deduct the rent from your income tax (although the deduction doesn't exceed 600 euros per year, but that's nice too). Finally, you don't have to worry about Euribor rate increases and their impact on your mortgage repayments.

But it is also worth noting the main disadvantage of renting a home, which is that every month you invest money in something that you cannot rightfully consider yours, and there is always a hypothetical possibility of early termination or non-renewal of the lease agreement by the landlord for one reason or another. Therefore, knowing your rights is a reliable way to avoid surprises in the future, which may not always be pleasant, and, of course, to protect yourself and your loved ones.

Rights of tenants in Portugal

Having a lease agreement is a right that a tenant should not give up, and let us remind you that a lease agreement must be in writing and describe the property being rented in detail. It should include the identities of the tenant and landlord, the term of the agreement, the amount of rent, a description of the property, and other important items. The tenant is also entitled to a receipt for each rent payment, and if the landlord decides to cheat and does not register the agreement with the tax office, the tenant can do so.

As for the contract, the tenant is entitled to extend it - in practice this is the case in many cases, although there are exceptions: legally, the automatic extension rule can be excluded if both parties have previously agreed otherwise.

The rented accommodation must have decent living conditions, including basic infrastructure such as sewage, water, electricity and possibly gas. The landlord is obliged to ensure that the accommodation is in a habitable condition and to repair any defects that occur.

Preservation of privacy: the landlord may not enter the rented accommodation without the tenant's consent, except in cases agreed upon in advance or in emergencies. It should be noted that the landlord may inspect the state of repair of the dwelling, but must notify the tenant.

The tenant must be notified in the event of works that may affect their home. Depending on the type of work and the extent of the work, the tenant may be entitled to relocation or a reduction in rent for the duration of the work.

Unless the contract provides otherwise, professional activities are allowed in the leased premises, provided that no more than three persons are employed therein.

Tenants have the right not to be discriminated against based on race, religion, gender, sexual orientation, marital status, disability or any other unlawful reason.

Furthermore, a nice bonus is the right of first refusal after the tenant has lived in the rented house for at least two years, in case the landlord decides to sell the property, but only if the purchase is made for their own residence.

Responsibilities of a tenant in Portugal

Renting a dwelling entails duties and/or obligations for tenants, the failure to comply with which entitles the landlord to terminate the contract and evict them. These obligations are spelled out in the already mentioned Urban Rent Law, Law No. 6/2006 of February 27 (Lei nº 6/2006, de 27 de fevereiro), and subsequent amendments. They include:

• timely payment of rent within the terms specified in the lease agreement.
• use of the property only for the intended purpose (changes can only be made with the landlord's permission).
• the tenant is obliged to keep the property in good condition and use it responsibly. If the property has any defects or damages that are not caused by the tenant's careless use, the tenant must notify the landlord. In case of damage caused by the tenant's negligent use of the property, the tenant must repair the damage.
• the only exception is urgent conservation or repair work, provided that the landlord has been notified in advance and the work is not necessary.
• if the rental unit is part of a residential building, the tenant must abide by the condominium rules and not create a nuisance for other tenants.

Rents are set to rise by 2.16% in 2025. As 2025 approaches, many tenants in Portugal are preparing for rent changes to comply with the new regulations. To adapt to this scenario in advance, it is important to understand how to calculate the new rent and how these changes may affect your monthly budget.

The main change for 2025 is related to the consumer price index (índice de preços ao consumidor (IPC), which will be used to adjust the value of rental agreements. Rent increases will be calculated based on its change because it reflects inflation and changes in the cost of living in Portugal. The country's inflation rate is 1.9%. At the same time, the inflation rate used for rent increases, for example, was 2.16% in August 2024. This is the average of price changes (excluding house prices) over the last twelve months. If this estimate holds true, landlords will be able to update rents at a factor of 1.0216. For example, a rent of €1,000 could rise to €1,021.60 from January 2025.

Rent increases: what rights do landlords and tenants have?

With the current rental market dynamics, rent increases can be a critical issue. For renters, rent increases can be a critical factor in the household budget (and sometimes even make living in rental housing unaffordable). On the other hand, a landlord may want to raise rents to keep up with prices in the area, and thus be able to monetize their investment in the property. From both the landlord's and tenant's perspective, remember that there are legal restrictions and that any rent increase must follow certain rules.

Can the landlord raise the rent whenever he wants? Unless otherwise specified in the agreement, the landlord can raise the rent once a year, following the current renewal rules. The first rent increase may not be made until one year after the lease begins. Thereafter, subsequent rent increases can only occur one year after the previous renewal. For example, imagine that Rita began renting an apartment in May 2024. Rita's landlord would not be able to update the initial rent until May 2025. And thereafter, in May 2026. Although annual rent updates are required by law (Novo Regime do Arrendamento Urbano - NRAU), the landlord may not have to raise the rent. Please note: The landlord must give the tenant at least 30 days written notice (by letter) of any rent increase.

Is there a minimum or maximum threshold for rent increases? Again, it is important to understand whether the contract spells out specific terms for rent increases. If the agreement does not provide for any specific treatment, then rent increases must be subject to a statutory renewal factor that varies from year to year. This coefficient is the value used to calculate the rent increase and is set in line with inflation (consumer price index for the last 12 months, as of August 31 of each year). In 2024, the established coefficient is 1.0694, representing an increase of 6.94% over 2023. In 2025, according to August inflation data, rents could increase by 2.16%, but the multiplier is still undetermined. Increases beyond the planned coefficient - and not stipulated in the contract - can only be made with the explicit consent of the tenant.

Rent adjustment factor history: 2024 - 1.0694; 2023 - 1.02; 2022 - 1.0043; 2021 - 0.9997; 2020 - 1.0051; 2019 - 1.0115.

How do I calculate the rent increase with the multiplier? To calculate the updated rent, simply multiply the current rent by the multiplier in effect this year. Current rent x effective multiplier = updated rent = updated rent. For example, a rent set at €900 and due for renewal in 2024 should be calculated as follows: €900 (current rent) x 1.0694 (multiplier in 2024) = €962.46 (updated rent). In this example, this means that the rent of €900 can be increased by €62.46. In the written notice of increase, the landlord must specify the updated multiplier and the new rent.

If the rent has not increased every year for several years of the lease, can the landlord decide to give a higher increase "as compensation"? There are times when the rent has remained the same for several years. In that case, can the next rent increase be higher than this year's multiplier? The straightforward answer is yes, but with certain limitations. The law provides that a landlord can apply prior years' ratios as long as no more than three years have passed. For example: imagine a €600 rent that has not been updated since November 2021. In this case, the landlord can sequentially apply the 2022, 2023 and 2024 factors to update the rent. However, he may not want to get more from a rent that has already passed. In other words, the increase only applies to future rents. As with annual rent increases, the landlord must give at least 30 days written notice of the increase, specifying the new rent and the calculation factors used.

Can a tenant refuse a rent increase? When a tenant receives a rent increase notice from the landlord, the tenant should analyze what is stipulated in the lease and how much the increase is.  The tenant can challenge the increase if it is not in accordance with the terms of the agreement, if the wrong factor has been applied and the landlord's calculation is incorrect. He or she can also challenge an increase proposed after less than a year (unless it is stipulated in the contract). To object to a rent increase, the tenant must do so in writing within 30 days of receiving the letter from the landlord. Seeking legal advice can be an important step for tenants and landlords in asserting their rights in the best way possible - and don't underestimate the power of amicable negotiations between both parties if conditions are favorable.

Termination periods for lease agreements

To terminate the agreement, it is sufficient to notify the landlord of the date of termination by registered letter with return receipt. Naturally, the tenant must pay the rent by the end of the last month in which he/she lives in the house. However, it should be remembered that the notice period depends on the type of agreement.

Deadlines for termination of a fixed-term agreement at the landlord's initiative (or failure to agree to an extension):

• 6 years and more - 240 days
• 1 to 6 years - 120 days
• 6 months to 1 year - 60 days
• less than 6 months - 1/3 of the contract term

The time limits within which a tenant may terminate a fixed-term agreement (or oppose its renewal):

• 6 years and more - 120 days
• 1 to 6 years - 90 days
• 6 months to 1 year - 60 days
• less than 6 months - 1/3 of the contract term

At the end of one-third of the initial term of the agreement (or any extension thereof), the tenant may terminate the agreement by repudiating it, provided that he does so with the following notice period:

• 120 days if the contract term is one year or more;
• 60 days if the contract term is less than one year.

Contracts with indefinite duration. A tenant may terminate the agreement after six months without cause. However, he or she must notify the landlord of his or her intention at least 120 days before the proposed termination date if the agreement lasted one year or more at the time of notification. If the agreement lasts less than a year, the period is reduced to 60 days. 

In welcome news, the IRS tax deduction for rent will be raised to 800 euros by 2027. Realizing the great pressure on tenants and landlords and to eliminate asymmetries in the market, the government has adopted measures to support rentals, which, on the one hand, are designed to ensure the stability of rental contracts, making them more affordable for families, and on the other hand, to promote the affordability of rental properties by reducing the tax burden on landlords' real estate income. As a reminder, the longer the lease lasts, the lower the tax rate applied to the rent received, i.e., the stand-alone tax rate of 25% is reduced depending on the length of the lease. If the lease is for five or more years but less than ten years, the 15% rate applies. If the agreement is renewed for the same term, a 2% reduction is applied for each renewal (up to a maximum of five reductions. For leases with a term of 10 or more years and less than 20 years, a 10% rate is applied. Contracts with a term of 20 years or more are eligible for the maximum subsidy: in this case the rate is 5%. The reduced rate applies in cases of new leases or renewals of leases from October 7, 2023 (the effective date of the measures from the Mais Habitação package).

If the lease is terminated by the landlord before the expiry of the fixed term, the right to reduce the rate is terminated - the original rental rate is retained. If the contract expires after renewal, the rate in effect before the last renewal is retained. For contracts entered into after January 1, 2024, the autonomous rate reduction applies only if the rent does not exceed the prices established in the Rental Support Program (Programa de Apoio ao Arrendamento) by 50%. New leases entered into after October 7, 2023, which benefit from the preferential rate, are subject to an additional 5% reduction if the rent of the previous lease (of the same property) was lower than the previous one by at least 5%.

The so-called tenancy harassment law generally aims to prevent situations of imbalance between tenants and landlords by protecting cases of particularly vulnerable tenants (e.g. ripping out mailboxes) to force them to vacate the dwelling can now be punished. The law prohibits so-called harassment in rental housing If a tenant feels harassed, he or she is entitled to demand that the landlord take the necessary measures to put an end to such behavior or to ask the relevant local authority to inspect the housing to identify situations that may threaten the enjoyment of the accommodation. 

The updated lease regime provides for 14 clauses:

1. Registering the lease with the tax office (Autoridade tributária e aduaneira). It is the landlord's responsibility to register the contract, but the tenant can also register his contract if the landlord has not done so. The same applies to the sub-landlord in the case of a sublease.
2. Mandatory written form of agreement. Agreements must be in writing unless the tenant is not at fault for its absence and will be able to prove that he or she used the property with the landlord's consent and paid rent for at least six months.
3. Rent for new residential leases. Until December 31, 2029, the rent for new residential leases cannot exceed 2% based on the most recent lease. In other words, the rent for new leases can only increase by 2% over the previous lease.
4. 1 year is the minimum term of the lease agreement. If the agreement is concluded for a shorter term, it is automatically extended to the minimum term.
5. Auto-renewal of a lease agreement for three years. A contract entered into for a period of less than three years, and unless the contract provides otherwise, is deemed to be automatically renewed for a minimum of three years. Contracts of more than 3 years shall be renewed for successive periods of equal duration. The landlord may not object to the renewal of the lease for the first three years, unless he or she needs your home for his or her own permanent residence.
6. Provided for automatic extension of the contract. But, in practice, this is quite rare, as the rule applies in the absence of any other conditions stipulated in the contract (and usually something is stipulated there).
7. Deposit and Prepayment. The deposit cannot exceed the amount of two rent payments. It is also possible to pay rent in advance (contractual prepayment), but not more than two months in advance.
8. Penalty for late payment of rent. Rent is typically paid by the 8th day of the calendar month, and if late, the landlord may demand 20% of the amount owed as a penalty. If payment is not received for more than 90 days and the tenant has a guarantor, the guarantor must be notified immediately.
9. Termination of the agreement in case of late payment. The lessor has the right to terminate the agreement if the rent is overdue by more than 8 days, more than four times within 12 months, by notifying the lessee by registered letter with acknowledgement of receipt after the third month of delay.
10. The possibility for the tenant to terminate the lease at any time. Normally within the statutory time limits, but there are some exceptions (see next paragraph).
11. Assistance to the tenant in extreme situations. In the event of involuntary unemployment, permanent disability or death of the tenant or a person with whom the tenant has been living together for more than a year, the tenant may terminate the agreement without paying the rent corresponding to the notice period.
12. Restricting a tenant's right to visit their property. The landlord has the right to inspect the condition of the property only with the tenant's prior consent, limiting the visit to aspects related to the property only. When the end of the lease is approaching, unless the lease is renewed, the tenant must make showings to all interested parties for three months before the end of the lease at hours agreed upon with the landlord (keep in mind that unless you agree to a different schedule, the viewings will have to be held on weekdays from 5:30 p.m. to 7:30 p.m. and on Saturdays and Sundays from 3:00 p.m. to 7:00 p.m.).
13. Right of first refusal to buy the house from the landlord. A tenant can exercise the right of first refusal if the landlord wants to sell the house after two years of living in the rental property.
14. IRS rent deduction with a cap of 700 euros as early as 2025. Currently, renters can deduct from their income tax (IRS) 15% of the rent paid during the year, with a maximum limit of €600. In 2025, the maximum deduction will increase to €700. The changes take effect at the beginning of the year and will affect tax returns filed in 2026. In 2026 and 2027, the deduction will gradually increase to €750 and €800 respectively.

I hope you found this article interesting and useful, thank you for reading to the end! This article was intended to refresh your knowledge concerning long-term rental real estate in Portugal. In general, on the topic of real estate we have written many articles, including on various aspects of renting and not only. And I, as always, by tradition, I want to wish all readers good luck! And I hasten to remind you about our encyclopedia of knowledge, which we have been passionately collecting for you for many years!