What’s In Your Lease?

If it’s January, it must be time for us to move  

Our current lease ends at the end of the month, so since early December we’ve been looking for a new apartment.  While we were in the US at Christmas, we traded emails with a real estate agent in Lisbon and two weeks ago we signed a lease for a newly renovated apartment in the city.  

Now we’re busy preparing for the move.  It’s more complicated this time, because we’re moving from a furnished apartment to an unfurnished one.  That means we have to buy some furniture. 

The whole experience of negotiating a lease in Portugal was interesting to me.  Several aspects seemed different from what we might have experienced in the US, and those are the subject of today’s post.  But first, two caveats.

1. I am not a lawyer or a real estate professional.  I am an educated lay person, having done several for-sale-by-owner house sales.  Also, I have an unnatural compulsion to read all the fine print in contracts before I sign them.  If I don’t understand something, I’ll research it and ask questions.  Sometimes it seems like I’m more detail-oriented than the professionals I deal with.¹ 
   
   
2. My only recent experience with residential leases has been here in Portugal.  The last time I had a residential contract in the US was over 40 years ago.  In recent years I helped negotiate a couple commercial leases for a non-profit organization I worked with.  Those were a different animal, though there are some similarities to the process for residential leases here in Portugal.  

So I realize that my observations here may, in fact, not be unique to Portugal.  They may not even be correct.  Please comment if you see that what I’m saying is painfully obvious or completely wrong.  

And if you are planning to rent property in Portugal, you should seek professional guidance.

OK.  You’re forewarned.  Here are my impressions.

#1.  My lease is bilingual, even though I am not

Our current lease for the apartment in Parede and our new lease for Lisbon were both prepared with side-by-side text in Portuguese and English.  This is probably a convenience for Americans, Brits, and other residents who don’t speak Portuguese, but it is a real help.  It’s hard enough to puzzle out the terminology in English!

Since the Portuguese version takes precedence, I review that wording in critical clauses and do my own translation just to make sure both versions are similar.

#2.  We can get out early if necessary

By law in Portugal, we can terminate the lease after ⅓ of the term has passed.

Our goal when we came to Portugal was to move around and experience life in multiple places. One year contracts seemed to provide the flexibility we needed. But with this opt-out feature, it makes sense to agree to a longer term.  

This new lease is for 4 years. But after 16 months, if we’re not happy or are ready to move on, we can give 4 months notice and be out in less than two years.  If we move without giving notice, we’ll be liable for all the rent for the remaining term of the lease.

But if we’re satisfied, we don’t have to move every year!

#3.  The landlord can terminate the lease if he needs the apartment!

This is also spelled out in Portuguese law and it stopped me in my tracks.

Say what?!

I had to ask some questions about this clause.  It reminded me of stories I’ve heard about renters in the Algarve region of southern Portugal who had to vacate their rentals during the high season so the owners could have a vacation.

So I dug into the Civil Code and followed a trail.  Article 1097 referred to Article 1102 which referred to Article 1103, sections 1, 5, and 9.  Each article had been amended multiple times; those were rabbit holes I chose not to go down. 

But, armed with a bit of dangerous knowledge, I could raise a question with the real estate agent:  How much notice would we get if the lease was terminated?  He responded with a citation showing we’d get 6 months notice. 

<Deep sigh of relief.>

#4.  Annual rent increases are limited by law 

Yes, our rent will increase every year, but it cannot be raised by an exorbitant amount. Annual rate increases are set by an “annual update regime”, one part of the Novo Regime do Arrendamento Urbano (New Regime for Urban Rentals or NRAU.).  The NRAU is a series of laws passed in 2012 in order to stabilize the rental market and provide different protections for renters and landlords.

In 2023, the increase is capped at 2%. This is the largest increase since 2013, when the rate was 3.3%.  Our first increase will come in 2024, and we’ll hope for a similarly small amount. 

#5.  There is lots of room to negotiate  

This is where the process seemed similar to negotiating a commercial lease in the US.  You look at an apartment, decide if it suits you, and then you make an offer. 

The monthly rent, the term of the lease, and even improvements to the property are all fair game.  The apartment we rented has just been remodeled, so there were no improvements we could think of. We did negotiate a slight decrease in the monthly rent and the term of the lease.

One minor surprise: During our walk through, we noticed that most of the rooms had wires hanging from the ceiling, but no overhead lights. When we asked if they would be installed, we learned that the custom here is that the tenant provides the light fixtures, and removes them when moving out.

Conclusion

After almost 50 years together, we still haven’t found the perfect place to live.  There are a couple things about this apartment that are not ideal, but it has most of what we were looking for.  It has just been completely renovated, so all appliances and finishes are brand new. It’s in a quiet neighborhood, but is close to shopping (3 grocery stores within a 10 minute walk, 12 minutes to the Campo Pequeno event venue and shopping center). We’re located between two metro stops and buses are everywhere. 

Also nearby is the Jardim Mário Soares, the largest city park in Lisbon, where we hope we can play frisbee with Sox.

We’ll tell you more about the apartment, the neighborhood, and our experiences living in Lisbon proper in future posts. Stay tuned for updates.

Until next time / Até a próxima vez

Mike

The Writer

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Notes

¹ I do not, however, read the Terms & Conditions for software applications.  Nobody does that.  Who knows what we’ve signed away to Microsoft, Apple, Google, Instagram, Facebook, and all the rest? Certainly any right to privacy, attention, and probably drilling rights for the oil under our feet.

² The featured image at the top of the post is by Mohamed Hassan on pixabay.com.

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What’s the most unusual thing you’ve found buried in a contract? Share the fine print in the comments below or with a note via the Contact Us form.

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