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Over the years, Portugal has become a favored destination for expats seeking the country's picturesque landscapes and vibrant cities. Major cities, with their lively atmosphere and greater opportunities for employment and education, are a natural choice for relocation.

However, due to rapidly increasing rental prices, many are exploring options in lesser-known, yet charming towns.

While it's possible to rent directly from the owner, as an expat, it's often easier to go through a real estate agent who speaks English, Spanish, French, German, or Italian since there are usually many multilingual professionals in the sector and they are familiar with the area. Most expats prefer major cities like Lisbon and Porto or head south to the Algarve. Listings offer a mix of furnished (mobilado) and unfurnished (sem mobília) properties. Even unfurnished properties typically come with a kitchen equipped with appliances (cozinha equipada).

If you're planning to rent a house, there are essential considerations to keep in mind before formalizing the contract, especially in Portugal's dynamic real estate market, taking into consideration several practical and legal matters.

Let's dive deeper into the key considerations when renting a property in Portugal.

Choosing the Right Home

  • Location Matters
    Besides personal preferences, factors like safety and proximity to your workplace or school are crucial. A house far from these points may result in additional transportation costs, such as monthly passes. Opting for a location near train stations, metro stops, or bus terminals can be convenient but might come with a slightly higher rent. However, the convenience often outweighs the cost.

  • Budget & Rent Value
    Assess the impact of rent on your monthly budget. The rule of thumb is that housing expenses, including rent, shouldn't exceed 35% of your monthly income. To reduce this financial burden, consider sharing a house with someone else, whether a roommate or a friend.

  • Property Type
    If the property has multiple rooms or a separate apartment within, it's easier to share it with others. This approach helps divide not only the rent but also utility costs, such as electricity, water, gas, internet, and cleaning expenses.

  • Furnished or Unfurnished
    Furnishing a house from scratch can be expensive. Opting for a furnished property can save you the initial costs and effort of buying furniture. However, be aware that landlords usually charge a bit more for fully furnished properties. Additionally, any furniture or appliances that were provided with the rental need to be in the same condition when you finish your rental period.

Intensive Search

  • Exploring Options
    Don't hesitate to explore numerous rental listings. Several online platforms offer advanced search filters, allowing you to refine your search by location, rent price range, property type, and more.

  • Seek Recommendations
    Reach out to friends, family members, or acquaintances who might know of available rental properties. Personal recommendations can often lead to finding a suitable place quickly.

  • Student Resources
    If you're a student, many universities and colleges have bulletin boards where students can post ads for rooms or apartments available for rent. This can be a valuable resource for finding student-friendly accommodations.

Visiting Potential Homes

  • Physical Inspection
    When you visit potential rental properties, physically inspect them to ensure they match the images and descriptions provided in the advertisements. Check for any discrepancies in the condition of the property compared to what was advertised.

  • Property Condition
    Pay close attention to the overall condition of the house or apartment, including the state of the electrical system, plumbing, and the condition of any furniture if the property is furnished.

Document Verification

  • Essential Documents
    Before signing any rental agreement, request all necessary documents related to the property and the landlord. These may include the property certificate, tax records, usage license, energy certificate, proof of mandatory fire insurance, and the landlord's identification.

  • Agency Assistance
    If you're renting through a real estate agency or property management company, these formalities are typically handled on your behalf, making the process more straightforward.

Scrutinizing the Contract

  • Clear Rental Agreement
    Ensure that the rental agreement is in writing and clearly specifies all essential elements, including the identities of the landlord and tenant, property details, rental amount, payment details, deposit, rental duration, and notice periods.

  • Rent Adjustment
    Confirm how the rent adjustment mechanism works. If the contract doesn't specify, Portuguese law mandates an annual rent adjustment based on government coefficients published in the Diário da República until October 31st of each year.

Guarantees, Deposits, Advanced Rents, and Receipts

  • Guarantees
    Understand the types of guarantees the landlord requires. This often includes a deposit and advanced rents. In some cases, landlords may also ask for guarantors.

  • Deposits
    Deposits serve to cover potential damages to the property. By law, they can't exceed the equivalent of two months' rent. If no damages occur, the deposit should be returned at the end of the rental period.

  • Advanced Rents
    These should not exceed the equivalent of two months' rent.

  • Guarantors
    If a guarantor is required, they are legally obligated to pay the rent if the tenant defaults on payment. This is crucial to understand, especially if you're sharing the property with another person.

Electronic Receipts

  • Digital Receipts
    Rental receipts are typically issued electronically. You can access them through the tax authority's website. This electronic process ensures transparency and ease of record-keeping for both landlords and tenants.

Renting, A Market Overview

More than 75% of people opt to buy a house in Portugal. However, not everyone can afford a mortgage, so many turn to the rental market. In 2018, 25.2% of the population chose to rent. Following the COVID-19 pandemic, more families considered renting over buying a home. Indeed, in the second quarter of 2021, rental leases went up 49.3% compared to the same period in 2020.

Despite the rising costs, renting a house in Portugal continues to be a viable selection for families, especially in an era where acquiring a house has become less accessible due to surging property prices, mortgage credit interest and a rising cost of living. Rental prices for houses in Portugal saw an increase of 2.6% in August 2023 alone, with the median cost surpassing the threshold of 15 euros/m2 for the first time, standing at 15.4 euros/m2.

The rental landscape exhibits variation across the different regions. An analysis of representative district capitals exhibited rental price increases for housing in several cities between July 2023 and August 2023 - Faro leading the way with a 9% rise, followed by Viana do Castelo (7.2%), Viseu (5.3%), Porto (4.6%), and Lisbon (2.7%) among others. However, rental prices fell in Leiria, Setúbal, and Évora, whilst remaining steady in Funchal during the same period. Despite these regional variations, Lisbon retains its position at the apex as the city with the highest rental cost at 20.7 euros/m2.

On the other end of the spectrum, the most economical locations for renting a home in Portugal include Castelo Branco, Viseu, Leiria, and Santarém, attesting to the availability of more affordable options beyond the major urban centers.

Insights from the HousingAnywhere International Rent Index for Q2 2023 provide deeper understanding into Portugal's rental domain. Portuguese cities, particularly Lisbon and Porto, continue to grow in popularity propelling rental prices. One-bedroom apartments in Lisbon and Porto recorded significant quarterly boosts of 15.8% and 22.5% respectively - indicative of the appeal of these cities to various demographics.

Lisbon led the charge in the increase of annual rent for rooms with a significant 29.4% year-on-year (YoY) rise. Moreover, Lisbon saw a staggering YoY increase of 70.3% in the studio category, outperforming other European metropolises like Budapest, The Hague and Utrecht which also registered substantial growth. Similarly, Porto again exhibited strong desirability, with quarter-on-quarter (QoQ) increase of 22.5% for apartments.

Despite Portugal's escalating rental prices, the country continues to offer a range of attractive options for prospective tenants. The data underscores the importance of staying abreast of changes in rental market dynamics to make informed decisions when contemplating a move to Portugal. Particularly, cities like Lisbon and Porto, whilst becoming more expensive, show a sustained growth trajectory in the rental market due to their continued popularity and demand.

Renting Property: The Process

Renting a property in Portugal follows a process akin to that of many other European countries, offering two primary avenues: through real estate agencies or directly from private landlords.

For those opting to utilize the services of a real estate agency, acting swiftly is paramount due to the high demand for rental properties. These agencies play a pivotal role in facilitating the transaction, simplifying the process for tenants. To initiate the rental process, prospective tenants should express their interest promptly when they find a suitable property.

When dealing with agencies, certain essential documents will be required for due diligence. These typically include obtaining a tax identification number (known as NIF), presenting proof of identity, showcasing bank statements, tax returns, or evidence of employment. Additionally, tenants should be prepared to provide an advance rent payment, often referred to as "renda antecipada," typically amounting to approximately three months' rent. Alongside this, a security deposit, known as "caução," is also commonly requested to secure the rental arrangement.

Alternatively, individuals may opt to rent directly from private landlords. While this approach offers a more direct relationship, language barriers may pose challenges, particularly if the landlord is not proficient in the tenant's native language. Similar documentation requirements apply, ensuring that all parties are protected and the rental process progresses smoothly. Thus, whether through an agency or a private landlord, renting in Portugal necessitates careful attention to detail and adherence to the established procedures.

Portugal's Rental Law: Key Points

• Minimum Lease Duration of 1 Year.
• Deposits and Advance Rent Permitted.
• Tenant's Usage Can Validate Unwritten Contracts.
• 20% Compensation for Tenant's Late Payments.
• Landlord Must Notify Termination via Registered Letter.
• Lease Automatically Renews for 3 Years.
• Landlord Must Renew First Contract.
• Tenant Relief for Extreme Circumstances.
• Landlord Must Justify Property Renovations.
• Tenant's Right of First Refusal After 2 Years.

Rental Costs & Assistance

  • Rental Costs
    Rental costs in Portugal are generally non-negotiable, and losing a deal is possible if someone offers more. Costs to consider include:
    - Rental deposit—Usually three months' rent paid upfront.
    - Agency and administration fees—Typically charged to the landlord.
    - Utility costs—Tenants are responsible for electricity, internet, water, and gas bills, totaling an average of €100 per month.

  • Assistance Programs
    - Portugal offers benefits to help cover rental costs, such as the Porta-65 Jovem program for renters aged 18-35.
    - Subsidies are available for pensioners and the unemployed, requiring registration at local employment centers (Centro de Emprego).

Social Housing & Tenancy Contracts

  • Social Housing
    - Portugal has social housing managed by the Instituto da Habilitação e da Reabilitação Urbana (IHRU).
    - Both locals and expats with permanent residence can apply for rental aid (arrendamento apoiado), tailored to financial capacity.

  • Tenancy Contracts
    - Tenancy contracts in Portugal can be fixed-term (contrato com prazo certo) or open-ended (contrato por duração indeterminada), often lasting at least one year.
    - A standard contract should include details like names, property address, rent cost, and payment due date.

Tenant and Landlord Rights & Dispute Resolution

  • Tenant Rights
    - Rental contracts in Portugal automatically renew unless terminated by either party.
    - Tenants must give at least two months' notice before vacating.
    - Modifying fixtures is usually allowed but subject to the contract.
    - Landlords can retain the deposit for damages.

  • Landlord Rights
    - Landlords must provide two months' notice, often with a valid reason, to terminate a contract.
    - Non-payment of rent for three months may trigger eviction proceedings through the Balcão Nacional do Arrendamento.

  • Dispute Resolution
    - Organizations like Associação dos Inquilinos e Condóminos do Norte de Portugal and Centro de Apoio do Novo Regime de Arrendamento Urbano (NRAU) offer support.
    - Legal recourse and aid through Social Security are available.

Utilities and Moving In/Out

  • Utilities
    Utilities like electricity, internet, water, and gas are typically not included in rent.
    Internet and TV connections may need to be set up separately.

  • Moving In/Out
    - After signing the rental lease and paying the deposit, tenants can move in on the agreed date.
    - Furnished apartments may include an inventory list.
    - Moving out early requires adherence to the notice clause, often with a two-month notice.
    - Landlords may conduct inspections and refund the deposit, minus any damages.

Obviously, we can't predict the future of property law and market undulations, so the better action to take is to always be well informed. By considering the factors highlighted in this guide, you'll be better equipped to make informed decisions when renting a property in Portugal. From choosing the right home and conducting thorough inspections to understanding rental contracts and legal aspects, staying knowledgeable is your key to a successful and secure rental experience. Whether you're seeking the energy of city life or the tranquility of smaller towns, Portugal offers a diverse range of rental options to suit your lifestyle and preferences.

Related Articles:
Impact of New Legislation (Mais Habitação) on Portuguese Short-Term Rentals (urbamarkt.com)
Renting vs. Buying Property in Portugal (urbamarkt.com)
Buying Property in Portugal Steps And Considerations (urbamarkt.com)

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Marisol Ferreira