Colliers International comment on new lease law in Portugal
The new Lease law is an attempt to solve Portugal's lease issues.
Will Portugal’s leasing market get a new boost?
The recently published New Lease Law is the most recent attempt to solve Portugal’s lease issues. Whether it was imposed by the Memorandum of Understanding or a free choice by the Government is unknown, nevertheless this is an important attempt to introduce some rationality into the lease market.
Among the main changes introduced by the new law are the ending of unexpired leases, limiting the lease transmission mechanism, but most important is the reduction of default risk, through the creation of a non-judicial eviction proceeding.
The main objective of the law is to ensure that in five years time only rents in line with market will remain, with all current inflated rents removed. If this this law is a success it ought to lead to growth in the lease market, perhaps attracting an influx of real estate investment into Portugal.
One of the most important issues of the New Lease Law is an improvement in the negotiations between the landlord and tenant, which should result in rents being reduced to a level appropriate to that property’s specific market value.
This change in the negotiation process should simplify a rather complex process, with the end result hopefully being the tenant and landlord agreeing on a price that is in line with the market value. Therefore, estimating the market rent of the property is now of the utmost importance in Portugal.
João Nunes, Valuation Director for Colliers International in Portugal, explains that “In the negotiation process, property valuation is key for both tenants and landlords. An incorrect valuation will hurt one of the parties, resulting in either rent that is too high for the tenant or too low for the landlord”.