Rental Agreements (COVID-19)

Rental Agreements (COVID-19)

The exceptional and temporary regime for situations of late payment of rent arising from residential and non-residential urban lease contracts, within the scope of the COVID-19 disease pandemic, was approved by Law no. 4-C/2020 of 6 April, which entered into force on 7 April 2020.

This regime is applicable to: (i) rents falling due as from 1 April 2020; and (ii) other contractual forms of operation of real estate, with the necessary adaptations.

It should be noted that, in the event of termination of the contract at the initiative of the tenant who has benefited from a deferment of rents under the present exceptional regime, the immediate payment of all rents due and not paid becomes due, as from the date of termination.

Support measures in the context of housing rental agreements

Lessees wishing to benefit from this exceptional regime must demonstrate cumulatively:

a)    A drop of more than 20% in the income of their household compared with the income of the previous month or the same period in the previous year; and

b)    A tenant’s household effort rate, calculated as a percentage of that household’s income for rent payment, of more than 35%;

Deferral of the rent payment obligation

In the situation described above, the tenant who is unable to provide for the payment of rent due in the months in which the State of Emergency is in force and in the first month thereafter may not suffer any negative consequences (such as termination of the lease or payment of an indemnity).

For that purpose, the tenant must pay, within a period of 12 months from the end of the month following that in which the Emergency State ceases to exist, the rent due during that period in monthly instalments of not less than one twelfth of the total amount due, paid together with the rent due in each month.

Financial support from the Instituto da Habitação e Reabilitação Urbana, I.P. (IHRU)

There is also the possibility of granting a loan without interest to support the difference between the amount of monthly rent due and the amount resulting from the application to the household’s income of a maximum effort rate of 35%, in order to allow payment of the rent due. The need to ensure that the household’s remaining income is not less than € 438,81 (value of the Social Support Index – IAS) is foreseen.

This loan to be requested from the IHRU is intended:

  • To housing tenants who have demonstrably suffered the above-mentioned loss of income and are unable to pay the rent for their permanent home;
  • Student tenants (including, in the case of those who do not earn income from work, their guarantors) who have demonstrably suffered the above-mentioned loss of income and are unable to pay the rent of the tenant where they live, due to attendance at an educational establishment located more than 50 km from the permanent residence of the household.

The financial support does not apply to tenants whose loss of income leads to a reduction in the amount of rent due by them, under the terms established in special rental or income regimes, such as the supported rental, the supported rent and the social rent.

It should be noted that the financial support may also be applied for by landlords, the following cumulative assumptions being verified:

a)    A drop of more than 20% in your household’s income compared to the income of the previous month or the same period in the previous year;

b)    That percentage of the loss of income is caused by the non-payment of rents by the tenants under the terms of this law;

c)    The disposable income of the landlord’s household falls, for that reason, below the value of the IAS;

d)    The respective tenant has not made use of the IHRU, I.P. loan.

Tenants who are unable to pay the rent and who therefore wish to benefit from this exceptional regime are subject to the duty to inform the landlord, in writing, up to 5 days before the due date of the first rent they wish to have covered (the deadline is up to 27 April 2020, in the case of the rent due on 1 April 2020).

Support measures in the context of non-housing rental agreements

This regime provides that the non-housing tenant may defer the payment of the rent due in the months in which the state of emergency is in force, as well as in the first subsequent month, to the 12 months after the end of that period, in monthly instalments not less than one twelfth of the total amount, paid together with the rent for the month in question, being applicable to the latter:

a)    Establishments open to the public which are engaged in retail trade and service activities which have closed or suspended their activities:

  • This includes cases where tenants continue to provide e-commerce activities, or provide services at a distance or through an electronic platform;

b)    Catering, restaurants and similar establishments, including where they continue to be active solely for the purposes of making up for off-premises consumption or delivery to the home.

Failure to pay such fees may not therefore be invoked as a reason for terminating, terminating or otherwise terminating a contract, or as a reason for an obligation to vacate property. Similarly, tenants will not be required to pay any other penalties based on delay.

Credit and Thanks to: TP&A (https://www.tpalaw.pt/en/highlights/news/COVID-19-Rental-Agreements/238/)