New rental rules: what changes for landlords and tenants

The measures were approved in the Council of Ministers on July 9, 2026, and are part of the Building Portugal strategy. The Government's stated objective is to restore the confidence of property owners, bring more houses to the market, and ensure that the protection of vulnerable families is supported by the State.

However, it is important to clarify an essential point right away: these changes are not yet in effect. What was approved by the Government still needs to go through the respective legislative process, and it may undergo changes before the publication of the final version.

The Portuguese rental market has been experiencing a difficult balance for several years:

On one hand, there are few houses available, and rents have been increasing in high-demand areas.

On the other hand, many property owners remain hesitant to put their properties on the market due to regulatory instability, the duration of eviction processes, and the risk of accumulating overdue rents.

The Government intends to address this issue through four main ideas: more freedom in contract negotiation, greater enforcement of compliance, faster judicial processes, and more direct State intervention in situations of social emergency.

Below, I present a summary of the intentions that have been disclosed.

End of the 2% limit on rents for new contracts

One of the most impactful changes is the early end of the limit applied to rents of certain new contracts.

Currently, when a house has been rented in the previous five years, the rent value of a new contract is conditioned by the last practiced rent, the legal update coefficient, and an additional margin of 2%.

The Government intends to eliminate this limit before 2029, allowing the rent value to be freely negotiated between the property owner and the tenant when entering into a new contract.

This does not mean that the landlord can freely increase the rent during an existing contract.

In current contracts, the rules agreed upon by the parties remain in effect. When the contract does not establish a different regime, the update continues to follow the legally published coefficient annually.

It is an important distinction: the freedom to set applies to the rent of a new contract and not to increases decided unilaterally during the existing contract.

Up to 3 rents may be paid in advance

In future contracts, the property owner and tenant may agree on the advance payment of a maximum of 3 rents. Currently, the advance is limited to 2 months.

The new rule allows more freedom in negotiation but does not require the tenant to pay 3 months in advance in all contracts. It is a possibility that must be accepted by both parties and duly recorded in the contract.

The Government admits, for example, that the advance of more rents can be negotiated as a counterpart for a longer contract or a lower monthly value.

Deposits can be negotiated with greater freedom

The deposit should also cease to be subject to the current limit equivalent to 2 rents. The value can be defined by the parties at the time of contract execution, considering the property, the duration of the lease, the existing furnishings, and the associated contract risk.

The deposit should not be confused with rent. It is a guarantee intended to cover potential debts, property damage, or other unmet obligations.

At the end of the contract, the value should be returned to the tenant unless there are duly justified amounts to deduct.

This change may provide greater security for some property owners, but it may also make access to renting more demanding. A family that has to support 3 rents in advance, a high deposit, and other moving expenses may need several thousand euros to move into a house.

Therefore, it is important, even for the property owner, that the value of the guarantees remains proportional and reasonable. It is good not to forget that for each month the house stays on the market, unrented, is a potential rent that the owner loses. Add up this value after 2, 3, 4 months, and it will be easy to understand that too many restrictions will harm the owner's interest.

The landlord can more easily prevent automatic renewal

The reform aims to eliminate some barriers currently applicable to opposing the automatic renewal of contracts.

The property owner can communicate that they do not intend to renew the contract, provided they respect the notice period provided by law and the conditions agreed upon.

This does not mean that the landlord can terminate the contract whenever they want. The initial duration remains and must be fulfilled.

What changes is the possibility of preventing renewal at the end of the term, without some of the restrictions that currently extend certain contracts beyond the initially planned period.

Communications by email

Landlord and tenant may agree that communications related to the contract are made electronically.

This possibility can simplify notices of rent updates, communications about renewal, and other notifications related to renting.

Even so, it is advisable that the contract clearly identifies the email addresses to be used and that important messages are sent by a means that allows verifying the content, the date of sending, and receipt.

A simple informal exchange of messages may not be sufficient when a communication with legal effects is at stake.

The right of first refusal does not disappear

The tenant will still be able to exercise the right of first refusal in the purchase of the rented house, when the conditions provided by law are met.

The reform aims, however, to adjust this right in situations where its exercise may cause significant harm to the property owner, especially when it concerns the sale of an entire building.

Even in cases where the tenant cannot exercise the right of first refusal, the lease contract remains and will be transferred to the new owner. In other words, the sale of the property does not, by itself, determine the end of the contract.

Eviction can proceed after 2 months of overdue rents

Another of the most relevant changes concerns the failure to pay rent. The Government intends to allow the landlord to terminate the contract when there are 2 months of overdue rents. Currently, the law requires a longer grace period.

This change does not mean that the tenant is immediately removed from the house after 2 months. The property owner will have to follow the legal procedure, communicate the termination of the contract, and resort to appropriate mechanisms to obtain the property's vacation.

What changes is the moment from which the landlord can initiate this process.

Frequent delays may also lead to the end of the contract

The reform also intends to make the regime applicable to repeated delays more demanding. According to the measures presented:

The contract may terminate when the tenant is more than 8 days late in paying the rent more than 3 times, consecutive or interpolated, over a period of 12 months.

The termination of the contract may also occur when there are more than 4 delays over a period of 18 months.

This rule seeks to address situations where rent ends up being paid, but the delay is repeated systematically, creating instability for the property owner.

For both parties, it will become even more important to keep receipts, bank statements, and communications related to payments.

Simpler and faster eviction processes

The Government wants to reduce bureaucracy in eviction procedures, eliminate repeated notifications, and concentrate decisions related to property delivery and recovery of overdue rents in the same process.

Norms that have led to different interpretations from court to court should also be clarified. The intention is to allow faster property recovery when there is a clear decision and no relevant doubts about non-compliance.

Tenants who comply with the contract maintain their protection. The simplification is mainly directed at situations where there is non-payment, repeated non-compliance, or a court decision determining the property's vacation.

The State may ensure rents during the process

The reform provides that the State may ensure rent payment during the Special Eviction Procedure and when there is a request for legal aid that suspends or delays the process.

The intention is to prevent the property owner from continuing to accumulate losses while awaiting a decision or the conclusion of legal procedures.

The specific conditions of this mechanism still need to be known, including the moment from which payment is made, the value covered, and how the State can later recover the amounts in debt.

What happens to contracts prior to 1990?

Old rents are one of the most sensitive matters of this reform. Portugal still has about 150,000 contracts prior to 1990, many of them with rents significantly lower than current market values. It is known that a significant portion of these contracts is occupied by elderly people or households with reduced income.

With this package, the Government sought to create a differentiated solution based on the tenant's age and income:

Tenants under 65 - When the tenant is under 65 and the household's annual income is less than 64,400 euros, the rent should remain protected for a period of 5 years. If the annual income exceeds that value, the rent may be updated up to the limit corresponding to 1/15 of the property's Taxable Patrimonial Value (VPT). For example, in a property with a VPT of 180,000 euros, the annual limit would correspond to 12,000 euros, or a monthly rent of 1,000 euros.

Tenants aged 65 or older - When the tenant is 65 or older, the contract should not transition to the New Urban Lease Regime. However, if the household's annual income exceeds 64,400 euros, the rent may be updated up to the limit of 1/15 of the Taxable Patrimonial Value.

Tenants with disabilities - Tenants with a degree of disability equal to or greater than 60% should benefit from similar protection to that provided for people aged 65 or older. In old contracts covered by these situations of greater vulnerability, rent updates can only occur when the household's annual income exceeds the defined limit.

These rules still depend on the final wording of the legislation and the transitional norms that may be approved.

Major renovations and relocation

The Government also intends to simplify the termination of contracts when the property requires a major intervention.

In old contracts where the tenant is over 65 or has a disability equal to or greater than 60%, the property owner will still be obliged to ensure relocation under similar conditions.

In other cases, when there is no agreement between the parties, compensation should be paid.

The objective is to allow the recovery of degraded properties without removing protection from the most vulnerable tenants.

Limitation on the transfer of old contracts

A limitation on the transfer of contracts prior to 1990 is also planned.

Over the years, some of these contracts have been transferred to the original tenant's family members, extending for several generations rents very far from current values.

The reform aims to restrict these transfers, although specific cases and exceptions can only be assessed after knowing the final version of the law.

Emergency Housing Fund

This reform is accompanied by the creation of the Emergency Housing Fund, which will be managed by the IHRU-Institute for Housing and Urban Rehabilitation in coordination with Social Security and other public entities.

The Emergency Housing Fund is intended to support people and families who lose their homes and do not have an immediate solution, including victims of domestic violence.

The support may take the form of a direct and non-refundable payment for accommodation or relocation expenses, temporary or permanent.

According to the information presented, the decision to help should be automatic and communicated within a maximum period of 10 days after the request is submitted.

A support for accommodation or relocation expenses up to a limit of €2,300 per month, for a maximum period of 6 consecutive months, was also mentioned. The access criteria, the amounts actually paid, and the necessary documents will have to be confirmed in the diploma to be published.

What changes for property owners?

For property owners, the reform represents a recovery of some contractual freedom. There will be more room to negotiate the rent of a new contract, deposits, advance rents, and the duration of the contractual relationship.

The reduction in the time needed to react to non-compliance and the simplification of eviction procedures aim to reduce the risk of placing a house on the market.

However, greater freedom also implies greater responsibility. Clauses must be clear, communication deadlines must be respected, and amounts withheld from the deposit must be duly justified.

And for tenants?

For tenants, the initial access to a house may become a financial challenge. Paying 3 rents in advance, plus a high deposit, may represent an added difficulty for many families, even when they have sufficient income to support the monthly rent.

There will also be less tolerance for repeated delays and greater ease for the property owner to prevent automatic renewal.

On the other hand, current contracts cannot suffer free and unilateral increases. The rent will continue to be updated according to what is provided in the contract or through the legally defined coefficient.

The most vulnerable tenants, particularly the elderly, people with disabilities, and families in a housing emergency, should continue to benefit from special protection mechanisms.

Will these measures lower rents?

It is still too early to answer. Rents do not decrease just because a law changes.

The price depends, above all, on the number of houses available, demand, location, family incomes, and the costs borne by property owners.

The Government believes that more predictable rules and faster processes will convince more property owners to rent out houses that are currently vacant. I also think so. If the supply increases significantly, there may be greater price moderation. But this effect will not be immediate and will hardly be the same across the country.

In areas like Lisbon, Oeiras, and Cascais, where demand remains high and available land is limited, the pressure on rents should persist, at most stabilize, until there is a housing supply compatible with needs.

When do the new rules come into effect?

The measures approved in the Council of Ministers on July 9, 2026, are not yet in effect.

• The rental regime reform will have to proceed to the Assembly of the Republic, where it will be discussed and voted on. During this process, parties may present amendment proposals, and the wording initially approved by the Government may undergo modifications.
• After parliamentary approval, the diploma will have to be sent for promulgation by the President of the Republic, published in the Official Gazette, and come into effect on a date to be defined.
• The creation of the Emergency Housing Fund may follow its own legislative path, depending on the nature of the approved diploma. In this case, publication will also be necessary for the support to start being granted.
• Some measures may still depend on additional regulation, including the definition of necessary documents, application procedures, eligibility criteria, and responsible entities.

As we can see, there are many conditions until the final diplomas are published, and until then, the current rules continue to apply. Landlords and tenants should not alter contracts or make decisions based solely on the announcements made after the Council of Ministers.

A reform that seeks to restore confidence

In my opinion, there is a principle in this reform that makes sense:

social protection should be ensured by the State and cannot indefinitely depend on the financial capacity of a private property owner.

It is also understandable that a landlord wants to recover the property when there are several months of overdue rents or repeated contract non-compliance. But balance will be crucial.

A deposit without a reasonable limit may deter families who would have the capacity to meet the monthly rent. A faster eviction process will only be fair if there is an equally rapid public response (social security) for those who have lost income for reasons beyond their control.

The true outcome of this reform will thus depend on three factors:

• if more property owners put houses on the market,
• if judicial procedures start functioning more quickly, and
• if the Emergency Housing Fund can respond to families before they are left without a roof.

For now, we know the reform's orientation. The definitive assessment will only be possible when the legislation is published and starts being applied in real life.

PS: This article is for informational purposes only and is based on the measures presented by the Government after the Council of Ministers on July 9, 2026. The final wording, entry into force dates, and applicable norms may be altered by the political and legislative process.