Lifetime rental contracts (Direito Real de Habitação Duradoura)

One of the most pressing real estate problems in Portugal is the rental market. The lack of supply and the existence of chronic dysfunctions in this market has led to numerous legislative initiatives, including the recent introduction of the Direito Real de Habitação Duradoura (Long-term Housing Right in Rem), an innovative instrument in our legal system, approved by the Council of Ministers last February and currently in the phase of public discussion, which has already received criticism from both tenants and landlords.
This regulation enables owners to provide a person (tenant) with the lifetime use of a dwelling as their permanent residence, when they pay a deposit and periodic contributions (rent). Such contractual relationship must be formalised by public deed or by a legalised private document. By agreement between the parties, the deposit will be established at between 10% and 20% of the average sales value per sqm of family accommodation located in the same municipality, and provides a guarantee for a period of 30 years and will serve to ensure the tenant’s compliance with their obligations.
Within the framework of this regulation, many of the landlord’s duties are transferred to the tenant’s legal responsibilities, such as paying the IMI tax (rates) for the dwelling, taking out multi-risk insurance and undertaking the necessary works to maintain at least an average level of conservation of the dwelling.
The owner may transfer ownership of the property, in return for payment or as a gift, but is prevented from acquiring any other rights on it. Only the tenant may waive the right to long-term housing, but this right is not transferable to his/her successors.
We are now looking forward to the publication of the final version of the directive and its entry into force in order to confirm whether it will serve the ambitious purposes to which it is proposed, including strengthening alternatives available in the housing market and providing an option to the standard fallback of mortgages.