Since we’ve been working with expats, we have noticed the gap that exists between the things that they are used to in their own country and how they expect things will work here in Portugal. So today I’m going to explain how things work here, along with common surprises to our clients, in hopes it will help other expats integrate and smoothly move to our beautiful country!
The Different Regimes - types of contract
There are 3 different property rental regimes – long term rental, special term rental and holiday rental.
Long-Term Rental is the most common for residential rentals. The minimum duration of the contract is 1 year and it’s mandatory to stay 8 months (unless early termination is agreed by both parties). Renewal must be for period of 3 or more years. By law, the warning time for termination is 3 months, but in practice it tends to be less as long as the landlord agrees.
Special Regime, for the residential rental contracts to be less than 1 year they must be under a special regime. The regime can be either “touristic purposes” or “work purposes” (related to employment terms and times). Using this regime, contracts can be from 3 months to 10 months and to be renewed they automatically pass to the residential regime (meaning minimum 1 year term). Minimum stay is usually 40% to 60% of the agreed term and always at least 3 months.
Holiday Rentals, to rent for period inferior to 3 months properties need to be registered as “Alojamento Local” (AL). This regime basically registers properties as business and has several special rules. I will go into more detail on another article but for the tenants the most relevant part is that the bills must be included and technically it’s not required to have a contract, although one can be made. The duration of the rental has no limits but it’s much more profitable to rent daily or weekly. For this reason, owners of Alojamento Local properties rarely accept stays for over 6 months, and even for this duration is usually only accepted in the low season or times of touristic crisis (like COVID).
First thing that works very differently is the listings – there is no regulation whatsoever on the rental market - prices are set by the landlord, pictures are optional, it’s mandatory to have the energy certificate but likely it will only be available in agency listings and AL properties. Most of Portuguese landlords do not use agencies, as they are used mainly when the owner is abroad or foreign. Portuguese real estate investors tend to have either property managers (that are not agencies) or manage themselves.
One of the greatest shocks from our clients from the US and Canada is climatization systems – Portuguese people tend to not have it in their homes. It is very hard to find rentals with air conditioning and/or heating systems. In places like Algarve, it is more common but it became so because of tourism. Landlords know this, so properties that are prepared for foreign rental have these commodities but tend to be priced completely outside what would be reasonable for a local.
Another shock is visitations and securals. The market is pretty much first come first served, and due to low offer and high demand landlords can, and do, take their pick. It’s not uncommon that we go make a visit for clients and when we get there the contract is being signed to someone else; or to be in the negotiation phase and things seem to be going well only to get a call saying the landlord got a better/more convenient tenant option and the negotiations are dropped.
In higher demand locations like Lisbon, ads sometimes are only up hours and get 20+ people on the “waiting list” for visitation. For these reasons, most of the rentals are offered on a “ready to move in” basis, and it is very hard to get contracts ahead – on residential rentals, be prepared to be asked to cover the months before your arrival; on AL rentals it can be easier but only if the start date is on the low season and the term is no more than 6 months.
In some locations, especially in rural areas, there is very little offer for rentals and barely any ads, as things are usually done privately within the local networks. We do this service too and have our own network of contacts by doing off market networking.
Prices in rentals are rarely negotiable, only when they are very inflated, and even so it’s rare due the overwhelming demand and lack of offer.
Many landlords refuse pets even though that is illegal by law in Portugal, having pets will cut your options in half, especially on cities.
Payments, Obligations & Legal Settings
For the initial payment and deposit, it is usually asked 1 to 3 months rent : 1 safety deposit (usually equivalent to 1 month rent but can be freely set by the landlord); 1 to 3 months rent. We do not recommend paying more than 4 months ahead, and highly discourage paying 6 months or more as you will basically be stuck there and will not see that money back if you do that.
It is legal to require payment until the end of the term in case of early termination and no substitute tenant, but a very rare demand that can be managed by finding a “replacement” tenant.
Bills can be included or not, as it is negotiated on a case-by-case basis. They can also be in the tenant’s name or landlord’s name, being more common in 1+ years rentals. Less than 1 year, they are usually either included or paid separately while remaining in the landlord’s name.
Condominium usually must be paid by the landlord but can be set in the contract otherwise. Repairs of structural problems and preexisting appliances also have to be paid by the landlord unless they are due to neglect or deliberate damage.
Taxation in Portugal is very high, rental tax starts at 28% (for under 2 years duration), which means many try to avoid it. If the contract is not registered in “Finanças” (governmental financial agency) this tax is not charged. The implications of doing this fall mainly on the landlord – there is a hefty fine, they cannot initiate eviction procedures or legally act against unpaid rent. For the tenant the main problem is that they don’t get official rent receipts that can be used for tax deduction purposes - the contract is still valid and they can denounce it.
Eviction processes are semi-automated, and take 3 months, one of the reasons many landlords ask for 3 months payment ahead.
We hope this little guide was helpful and would Like to remind our rental service is always available to help you secure your little corner of Portugal, feel free to take a look at how it works and purchase it here
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