How Portuguese legislation protects the buyer of an occupied property (and risks to consider)

When buying a property that is occupied by a tenant with a valid lease contract, the buyer is protected by the transparency and legal continuity of the contract. The main ‘protection’ lies in ensuring full knowledge of the new landlord’s rights and obligations, which limit the possibility of disposing of the property. Here are the main legal considerations for the buyer:

• Tenant’s Right of Preference:

  When a rented property is put up for sale, the tenant has the right of preference, meaning they must be the first to be consulted and have the opportunity to buy the property under the same conditions offered to third parties.. This means that, before completing the purchase, the buyer must ensure that the tenant has been properly notified and has not exercised their right of preference. This right only applies to lease contracts with a duration of more than two years.

• Continuity of Lease Contract:

  After the sale of the property, the existing lease contract remains in force, and the new owner assumes the role of landlord. This principle is known as ‘sale does not break rent’ and means that the buyer must fully respect the terms of the existing lease contract (duration, rent, and renewal conditions). For the buyer’s security, this information (the existence, type, and term of the contract) must be included in the public deed.

• Contract Termination and NRAU Deadlines:

  The new owner (landlord) cannot simply evict the tenant. The end of the lease can only occur under the strict conditions and deadlines defined by the New Urban Lease Regime (NRAU). Eviction is only possible in cases of just cause (e.g., non-payment of rent) or through termination mechanisms provided by law, such as:

  • The end of the contractual term;

  • Termination for Own Residence by the new landlord (Article 1102 of the Civil Code), a process that requires long notice periods, payment of compensation, and compliance with specific requirements.”

• Legal Protection for Tenants:

  Portuguese legislation tends to protect tenants, ensuring that their rights are maintained even after the sale of the property. The new owner must be aware that they cannot evict the tenant without just cause, such as the end of the contract or non-compliance with contractual obligations by the tenant.

In summary, the legislation protects the buyer through transparency and by ensuring that the lease contract will be maintained, allowing the new owner to receive rents. The greatest ‘protection’ for the buyer lies in ensuring that the purchase price reflects the restriction of having to maintain the tenant. It is essential to seek legal guidance to analyze the lease contract and the legal termination deadline, minimizing risks.