This article was written by lawyers at CM/DS Advogados. Link to article. (April 2020)

Lease contracts for residential or non-housing purposes are contracts signed between two parties (one that leases and the other that is the leasee) and relate to immovable property. These contracts carry a series of reciprocal obligations and responsibilities between the parties. It is true to say that in a normal situation it is the tenant (s) responsibility to pay the rent in a timely manner, that is, in the exact combined terms.

The current moment is moving away from a normal situation. The economic repercussions that are already being felt as a result of the pandemic of the disease called COVID-19 (ex. closure of many commercial activities; reduction of the activities usually carried out by companies; restrictions on the way in which the most diverse bodies act; dismissal of workers; etc. .) have impacted contractual relationships and made compliance with contracts too difficult, and this impact is also a reality in leasing relationships.

In order to reduce the harmful effects on leasing relationships, Law No. 1-A / 2020, Decree No. 2-B / 2020 of 2 April and Law No. 4-C / 2020 of April 6, brought exceptional measures, in effect, related, among other contractual relations, to leases. In summary, in the course of the state of emergency, the following implications apply:

Suspension: Eviction actions; Special eviction procedures, processes for the delivery of leased property (execution for the delivery of leased property);   When the tenant, by virtue of the final judicial decision to be handed down, may be placed in a situation of lack of own housing or other imperative corporate reason;   Law No. 1-A of 19 March
Suspension: From the effects of the denunciation, from the resolution and from the opposition to the renewal, when carried out by the landlord, from the effects of forfeiture, unless the tenant does not object to the assignment;   Law No. 1-A of 19 March
  Foreclosure suspension   As long as the property constitutes its own permanent residence;   Law No. 1-A of 19 March
  Impossibility of invoking the closure of establishments and facilities for (i) contractual extinction; (ii) vacant property;   Provided that the closure took place under Decree No. 2-A / 2020 of March;   Art. 12 of Decree no. 2-B / 2020 of 2 April
  Flexibility in the payment of rents to families that suffer income losses (moratorium);   (i) Breaks must represent 20% of household income; (ii) The payment of the rent must be or become greater than 35% of the income;   Delays are not a breach of contract; Delays do not imply the payment of compensation of 20% of the rent amount; Rentals must be paid in 12 months from the end of the period; The amount due must be paid in installments of not less than one-twelfth of the total (1/12 ) together with rents that are due; Duty to inform the tenant to be in this condition (use of the moratorium); Communication up to 20 days after the publication of the law;   Law No. 4-C / 2020 of 6 April
  Use of interest-free bank loans (but not without conditions) by IHRU to pay the rent;   For tenants unable to pay rent; For guarantors of student tenants who do not earn income from work and it is because of higher education establishments that they are located more than 50 km from the permanent residence of the household; For landlords (single) with low income provided that tenants do not make use of loans, there has been a drop of more than 20% of household income, based on non-payment of rents under this scheme and the remaining disposable income of the household, for this reason, falls below IAS (€ 438.81 );   The permitted loan may be granted (i) to lessees and guarantors; (ii) the amount will be equal to the difference between the monthly income amount and 35% of the household income; and (iii) for landlords, equal to the monthly rent due and not paid by the lessee.   Law No. 4-C / 2020 of 6 April
  Suspension of rent payment to tenants with loss of income;   Commercial establishments forced to close or whose activities have been suspended under the declaration of a state of emergency;   Payment of rents may be deferred for twelve months after the end of the period; The amount due must be paid in installments of not less than a twelfth of the total (8.33%) together with the installments that are due;   Art, 7th, Law nº 4-C / 2020 of 6 April

In a normal scenario (i) the failure to pay three months’ rent, which constitutes a default by the lessee, may give rise to the need for the lessee to vacate the lease; (ii) the effect of the complaint by the landlord triggers the duty to vacate the property within the legal period (usually, in the case of lease for housing purposes) or contractual (usually, in the case of lease for non-housing purposes); (iii) the non-use of the space by the lessee serves as a basis for the extinction of the lease agreements, just as the deprivation of the right to use the leased could serve as a basis for the extinction of the relationship by the lessee; (iv) the delay in payment generates the obligation to indemnify 20% of the amount owed.

However, what is perceived at this moment is the relativeness of these consequences, to avoid the fragile situation of the tenants when they are faced with the need to change housing / facilities during the pandemic and to enable the resumption of the economy when the pandemic situation is outdated. However, without calling into question the right, after the period of suspension and in a normal situation, to serve non-payment of rents for a period of three months as a basis for the Landlord to file an eviction action.

Regardless of the exceptional measures already in place or the approval of new measures, the COVID-19 pandemic can be considered a new fact, the occurrence of which was unpredictable to most contractual relations when the respective contracts were signed. It is a situation capable of abnormally altering the contractual basis and in addition to triggering a supervening imbalance, making compliance with the contract a factor that causes damage to those who have to comply with the payment.

Under Portuguese law, demanding compliance with these amended contracts due to an external and unpredictable factor is contrary to good faith and, therefore, prohibited. Hence, as long as there is no delay (culpable default) on the part of the lessee, the renegotiation of the amended contracts is a fair measure for restoring the balance between the parties and must occur when considering the duties arising from good faith in relationships contractual terms.

Carla de Calvo Dantas |
Maria Luísa de Magalhães Barbosa


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