Portugal's new rental law: what may change and what is already in force

A news story about the «new rental law» can bring together quite different things: a proposal to change tenancy agreements, a tax benefit that has already been approved, or an affordable rent scheme with its own conditions. For anyone who has a property let, or is considering putting one on the market, telling these situations apart is the first step towards deciding with confidence.

As at 18 October 2026, Government Bill No. 103/XVII/1 on the reform of urban leases had been approved in general terms on 30 September and referred to the parliamentary committee for detailed discussion. This approval does not mean that the proposed changes have come into force. [1]

Meanwhile, Decree-Law No. 97/2026 of 20 May has already approved tax measures and the Simplified Affordable Rent Scheme, whose rent limits were later set by Ordinance No. 454/2026/1 of 13 October. These are separate processes. [6][7]

Article 1076 of the Civil Code currently allows rent to be paid in advance, by written agreement, for a period of no more than two months. It also allows the contractual obligations to be secured by a deposit of up to two months' rent. [2]

The text accompanying the parliamentary bill proposes increasing advance rent to three months and removing the specific two-month limit on the deposit. For now, this is a proposed change, not a rule that can be applied as if it were already in force. [3]

Consider a two-bedroom flat in Quarteira with a hypothetical monthly rent of €1,200. The example is not a market estimate. Two months of advance rent amount to €2,400; three months would amount to €3,600. The difference would be €1,200 in advance rent, if the proposal were approved on those terms.

This calculation is not necessarily the total due on signing. Rent that is already due and the deposit are treated separately. Advance rent and a deposit are also not the same thing: one brings a payment forward; the other secures obligations. [2]

In Magnólia's view, greater contractual freedom, if it comes, should not replace careful judgement. Asking for more money at the outset is no substitute for assessing whether the applicant can afford the rent throughout the tenancy. What matters is finding terms that are clear, proportionate and compatible with a lasting relationship.

Among the grounds for termination due to late payment set out in Article 1083(3), the current rule refers to three months. The bill seeks to reduce this period to two, without removing the legal safeguards that allow the situation to be regularised. [3][4]

It is essential to distinguish the grounds for terminating a tenancy from the procedure needed to recover the property. A shorter period of arrears does not mean that, once it has passed, the property is automatically handed back to the landlord. There are notices, formalities and means of defence that cannot be ignored. [4]

For an owner, the practical consequence should not be the expectation of an instant solution. It should be well-organised follow-up: recording payments, identifying arrears, keeping correspondence and seeking legal advice before acting. The clearer the paperwork, the better the appropriate response can be assessed.

For the tenant, it is equally important not to treat a news story as a substitute for reading the agreement or the notices received. Difficulty in paying deserves timely attention, not only once a dispute has arisen.

The bill provides that, unless otherwise agreed, fixed-term agreements renew for periods of the same length. It also proposes repealing the rule that, in certain circumstances, delays the effect of the landlord's first objection to renewal until three years have passed. [3]

This should not be read as meaning that a one-year agreement now allows the property to be recovered at the end of that year. The decision requires reading the agreement and the applicable law. Any future change will also have to be assessed in the light of the final wording and the rules on its application over time.

Another announced measure seeks to remove restrictions on setting the rent between one agreement and the next. It should not be confused with permission to increase the rent of an existing agreement unilaterally, at any time. The Government's own clarification distinguishes the two situations. [5]

When assessing a property as an investment, we therefore recommend separating three questions: what rent has been agreed, when a legally permissible review may take place, and under what conditions the agreement may end or renew. An income forecast that treats these dates as guaranteed may create an expectation that the documents do not support.

The reform provides for notices by email where an electronic address for service has been agreed. This does not mean that any informal message is sufficient for every legal purpose. [5]

It also includes changes concerning agreements signed before 1990, while keeping specific protection for vulnerable tenants. As for the tenant's right of first refusal, the bill does not abolish it in general: it proposes making it conditional in certain joint sales that would cause the owner significant loss. [5]

These matters call for an individual review. Before promising a property free of occupants and belongings, announcing a rent change or assuming that a tenant no longer has a particular right, the specific situation must be checked. A general description of the reform is no substitute for that check.

Decree-Law No. 97/2026 introduced a special 10% tax rate on rental income from exclusively residential leases that meet the moderate rent limit, unless a more favourable rate applies. The rule takes effect from 1 January 2026 and covers income received up to 31 December 2029. The limit is 2.5 times the minimum monthly wage set for 2026. [6]

This should not be presented as a universal rate for any income connected with a property. When comparing ways of generating income from a property, it is important to confirm the purpose of the agreement, the income category and the owner's tax position. The reduced rate should also not be confused with the exemption for eligible affordable rent agreements. [6][8]

A simulation should compare what is actually left after costs, not just the advertised rent or the tax rate on its own. A lower rent may be worthwhile in some circumstances; in others, the tax reduction may not make up the difference. The conclusion has to come from the property's own numbers.

The Simplified Affordable Rent Scheme (RSAA) allows rental income from agreements that meet the legal requirements to be exempt from personal or corporate income tax (IRS or IRC). On 14 October, IHRU, the national housing institute, launched the «Investir-Arrendar» platform, where landlords can check the limits and submit agreements. [8]

Ordinance No. 454/2026/1 came into force on 14 October. For the municipalities below, it sets the following base monthly limits, before any applicable increases: [7]

The ordinance provides for cumulative increases of 10% for private parking and 10% for an energy rating of A or above, supported by a valid certificate. Taking parking alone, the base limit of €917 for a two-bedroom flat in Loulé would become €1,008.70. [7]

These figures are not a general ceiling for the whole rental market. They are the limits of this scheme. Nor is it enough to take 20% off a price chosen by the owner: compliance is checked against the legal table and the conditions that apply to the property. [7]

For permanent residence, the RSAA requires a minimum term of three years. The submission to IHRU must include the agreement and proof that it was reported to the Tax Authority, by 15 January of the year after it was signed. The scheme has its own conditions for temporary residence, which should not be confused with short-term holiday letting (Alojamento Local). [6]

Before joining, we recommend comparing the permitted rent with the owner's objectives, the intended term, expected costs and the tax outcome. Being able to benefit from an exemption does not remove the need to check the obligations required to obtain and keep it.

At Magnólia, we believe the analysis should start with the property and the existing agreement, not with a general promise linked to the reform. It is important to know the term, the renewal conditions, the rent, the guarantees and the state of the paperwork before projecting changes in income or availability.

For anyone about to sign a new agreement, the priority should be to prepare a clear relationship: written terms, realistic expectations, organised communication and legal and tax advice where needed. For those whose property is already let, a news story should not trigger hasty changes.

The key question is not only what the new law promises to change. It is knowing which rule is actually in force, whether it applies to that agreement, and what consequences it has for the people involved.

[1] Portuguese Parliament – Government Bill 103/XVII/1: progress and vote of 30 September 2026
[2] PGDL – Law 24-D/2022, Article 274: wording of Article 1076 of the Civil Code
[3] Portuguese Parliament – Bill 103/XVII/1: annexed draft decree-law, Articles 1076, 1083, 1096 and 1097
[4] PGDL – Civil Code, Articles 1083 and 1084: termination of the agreement
[5] Government of Portugal – Rental reform: presentation of 9 July 2026
[6] Diário da República – Decree-Law 97/2026 of 20 May, as corrected on 13 July: Article 45-C of the Tax Benefits Statute and Annex III (RSAA)
[7] Diário da República – Ordinance 454/2026/1 of 13 October: RSAA rent limits and increases
[8] IHRU – Investir-Arrendar platform: announcement of 14 October 2026