Compensation for pre-1990 lease contracts approved
Portugal’s Council of Ministers approved on November 29, compensation for landlords with lease contracts predating 1990 and not subject to the New Urban Lease Regime (NRAU). According to the Council of Ministers' statement, a decree-law was approved that "establishes the mechanism for compensating landlords, up to 1/15 of the Taxable Asset Value of the leased property, for lease contracts for housing concluded before November 18, 1990, following the non-transition of these contracts to the New Urban Lease Regime."
A day earlier, property owners' and tenants' associations stated that the Government had, in a meeting of the National Housing Council, ruled out providing compensation to landlords with rents predating 1990.
On November 22, a study on lease contracts not subject to the New Urban Lease Regime (NRAU) was released by the Institute of Housing and Urban Rehabilitation (IHRU) in conjunction with the report on Residential Leasing in Portugal. The study aimed to characterise the number of families with so-called "old rents" (prior to 1990) and contribute to estimating the amounts needed to implement support for this type of contract.
Landlords' compensation capped at 1/15 of the Taxable Asset Value, as outlined in the approved decree.
The document presented calculations for various scenarios based on legislation, including the "Mais Habitação" package and the decree-law in 2015 that advocated subsidies for tenants with lower incomes, the elderly, or with disabilities after the transitional regime ended.
According to the study, the support amount provided in the "Mais Habitação" package, which came into effect in October of this year and prevents the transition to NRAU for so-called old residential rents, would vary depending on the adopted solution. Compensating landlords for old rents could cost 653 million euros, assuming this corresponds to the difference between the average value of current rents and a rent based on the median value per square meter of new lease contracts.
The study also considered other scenarios, including one based on the provisions of the "Mais Habitação" decree, estimating a monthly cost of around 2.2 million euros (26.6 million euros annually). In this case, the calculation assumed that the tenant pays rent according to the effort rates specified by law (based on the corrected gross annual income - RABC of the household) and compensates the landlord for the remaining 1/15th of the taxable asset value of the house, when this exceeds the rent paid.
This study, outlined in the State Budget for 2022, was conducted by the Housing, Leasing, and Urban Rehabilitation Observatory (OHARU) in partnership with PlanAPP, in collaboration with INE and the Tax and Customs Authority (AT).
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