The proposal to amend the urban lease regime

Legal Brief by Bárbara Figueiredo and Margarida Nascimento

Portugal’s current housing crisis, characterised by rising property prices and rents, an insufficient supply of housing and difficulties in accessing adequate accommodation, has prompted successive legislative interventions. It is against this background that Bill No. 103/XVII/1st was introduced, seeking authorisation to amend the New Urban Lease Regime (Novo Regime do Arrendamento Urbano – NRAU), the Civil Code, the Code of Civil Procedure and other related legislation. The bill was approved in principle by the Portuguese Parliament on 30 September 2026 and subsequently referred to the competent committee for detailed consideration. The proposed amendments will enter into force only after their formal approval.

With the stated aim of increasing the supply of rental housing, strengthening landlords’ confidence in the enforcement of tenancy agreements and simplifying the mechanisms available to address breaches of contract, the reform proposes changes to the rules governing rent-setting, the guarantees required from tenants, the renewal and termination of tenancy agreements, and eviction proceedings.

One of the most significant proposed changes is the removal of the limitation on initial rents for certain new tenancy agreements, currently laid down in Article 34 of Law No. 56/2023 of 6 October. Under the current legal framework, the rent payable under a new agreement concerning the same property is subject to limits based on the rent previously charged, subject to statutory exceptions. The proposal would repeal this limitation, thereby granting the parties greater freedom to determine the rent. Although the measure is intended to encourage owners to place properties on the rental market, the removal of the cap does not guarantee lower rents. In a market characterised by high demand and insufficient supply, the measure could ultimately lead to higher initial rents, despite its aim of stimulating the market.

The proposal also seeks to amend the rules governing the guarantees required at the beginning of a tenancy. Currently, Article 1076 of the Civil Code allows the parties, by written agreement, to provide for the advance payment of up to two months’ rent and limits the security deposit to an amount equivalent to two months’ rent. The initial version of the proposal would extend the permitted advance payment to three months and remove the specific cap on security deposits. Although this measure would reduce the risk borne by landlords, it could also create a significant barrier to access to housing.

With regard to breaches of contract, the proposal would reduce from three months to two months the period of rent arrears required to terminate a tenancy agreement on the grounds of non-payment. It would also strengthen the response to repeated delays in payment. In addition, it would simplify the procedures for recovering possession of the property, with a view to enabling landlords to regain possession more quickly. Although procedural efficiency is a legitimate objective, tenants must be given a genuine opportunity to defend themselves, and a distinction should be drawn between deliberate non-compliance and situations involving temporary financial hardship. Where the property serves as a tenant’s permanent residence, streamlining eviction procedures should be accompanied by effective mechanisms to prevent the loss of housing and to provide support to vulnerable households.

Another significant proposed change concerns the landlord’s right to oppose the automatic renewal of tenancy agreements. The proposal would remove the current restriction on opposing the first renewal, laid down in Article 1097 of the Civil Code. Although this change would increase contractual flexibility and strengthen landlords’ ability to recover possession of their properties, it could also reduce tenants’ ability to predict how long they will be able to remain in their homes. Flexibility should therefore be accompanied by clear and predictable rules governing the duration, renewal and termination of tenancy agreements.

The proposal also includes changes affecting tenancy agreements entered into before 1990. These agreements could be brought within the scope of the NRAU, and rents could be adjusted under certain conditions, taking into account household income and the tenant’s personal circumstances. The initial version provides for specific safeguards for certain elderly tenants and tenants with a degree of disability of 60% or more, subject to the applicable income thresholds, as well as for a transitional regime.

The reform would further extend, from two to three years, the minimum period of occupation required for a tenant to exercise a right of first refusal when the property is sold.

The reform is therefore based on the premise that strengthening landlords’ legal certainty and increasing contractual freedom may encourage the supply of rental properties. However, its impact on supply and prices should not be taken for granted, as it will also depend on property rehabilitation, construction costs, planning and building permits, financing and taxation.

An assessment of the Portuguese reform should therefore consider not only the number of properties made available for rent and the speed of eviction proceedings, but also changes in rents relative to household incomes, the upfront costs imposed on tenants, housing stability and instances of housing loss. The interests at stake — increasing the supply of residential rental properties, protecting tenants and safeguarding landlords’ interests — require proportionate measures and an assessment of their actual effects.

In other words, given the current state of the housing market, revising tenancy rules cannot, in itself, resolve the structural shortage of housing. Bringing vacant properties back into use, rehabilitating the existing housing stock, investing in public housing and simplifying construction and permitting procedures remain essential measures. The main challenge is to ensure that strengthening landlords’ confidence — a central objective of the proposal — genuinely contributes to increasing supply without exacerbating the financial barriers to accessing housing.

The effectiveness of the reform will depend not only on the legislative amendments ultimately adopted, but also on how they are integrated with public policies capable of ensuring that housing provision is affordable, stable and adequate to meet the population’s needs.