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The Real Right of Long-term Housing: between lease and acquisition of property

SÉRVULO PUBLICATIONS 14 Jan 2020

Under the “New Generation of Housing Policies” (NGPH), Decree-Law no. 1/2020 of January 9th, which recently entered into force, creates and regulates, innovatively, the real right of long-term housing (hereafter “DHD”).

This new right, as mentioned in the preamble, intends on one hand to introduce “alternatives to the acquisition of own housing and the consequent indebtedness of households” and, on the other hand, attempts to remove some drawbacks of the lease regime that “not always leads to stability and safety”.

DHD allows contracts to be made available to “one or more private persons to enjoy the housing of others as their permanent residence for a lifetime, upon payment to the owner of a cash security deposit and periodic contributions.”

The resident provides the homeowner with a cash security deposit which varies upon the will of the parties, between 10% and 20% of the average sales’ value of the housing market, according to location and size, as it results from an update released by the National Statistical Institution (“INE”).

The provision of the cash security deposit can be seen as one of the advantages of the owner in joining DHD, as it allows the owner to keep the availability of capital, which can be monetized in other properties or investments he wants, ensuring, at the same time, a considerable pecuniary security in the event of default by the resident. However, it should be noted that if the resident decides to terminate the DHD, which can be done with a minimum notice of ninety (90) days, the owner will have to return it.

On the other hand, the resident must also pay the owner a monthly payment, the amount of which is freely established by the parties, as well as to pay directly "the municipal taxes" and delivery to the owner "the amounts related to the Municipal Property Tax".

In addition, ordinary conservation works are of the responsibility of the resident and the owner is exempted from such charges, contrary to what is also provided, for example, for the lease regime. However, the owner can secure the property in a medium state of conservation until the moment of extinction of the DHD, while receiving an amount of capital borne by the monthly payment and the cash security deposit.

Another advantage to the owner is the non-transferability mortis causa of DHD, which is not the case of the lease which does not expire upon the lessee's death.

It should be noted, however, that the owner may not oppose DHD, contrarily to the resident who may freely waive it as mentioned above.

In summary, the mentioned diploma strikes a balance between the owner's guarantee to maintain the property's conservation, as well as the payment of urban and IMI taxes at the resident's expenses and the possibility of the resident having a property, which eventually he could not acquire for a lifetime, always having the possibility of renouncing it.

It should be mentioned that mortgage creditors may equally benefit from this scheme, since in the event of default and in the context of enforcement action, the owner has the option to purchase this right using the balance of the cash security deposit. Thus, there may be a faster sale.

It is now time to wait for the reactions of the real estate market to this figure, which is nothing more than a third way / tertium genus between the lease and the acquisition of property.

Joana Pinto Monteiro

jpm@servulo.com

João Tomé Pilão

jtp@servulo.com

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Joana Pinto Monteiro