NRAU: Learn about the changes in the urban lease law
Find out about the new changes in the urban lease law, known as NRAU, and learn about the new benefits for tenants and landlords.
The urban lease law, known as the New Urban Lease Regime - NRAU, was created on February 27, 2006 and has since undergone numerous changes. The new changes in the urban lease law were created with the aim of correcting unbalanced situations between tenants and landlords.
In addition, the new measures aim to strengthen the security and stability of urban leases and protect the weakest tenants, such as the elderly and people with disabilities.
Where can I consult the urban lease law?
The new amendments to the NRAU can be consulted in their entirety through Law No. 13/2019, of February 12, 2019, on the Diário da República website.
What are the main changes in the urban lease law for tenants?
Protection for tenants who do not have a written lease: With the new changes, lessees who do not have a written contract are included in the indefinite lease. However, an indefinite lease will only be valid if the tenant proves that he has paid rent and has occupied the property for at least six months.
New minimum deadlines with amendments to the urban lease law:
Since the entry of the new amendments of the NRAU in Diário da República, the lease contracts have a minimum term of one year, and have as mandatory renewal a term of three years. However, the renewal of the contract can be established in other terms, as long as the two parties reach an agreement regarding another term.
Special protection for fragile tenants:
Tenants aged 65 years or over and tenants with a disability equal to or greater than 60% who have leases prior to 1990 now have special protection. Tenants who have lived in rented housing for more than 15 years cannot see their lease come to an end unless the housing is demolished or undergoes major renovation.
Tenants can prove the length of stay in the rented house with a certificate from the parish council of their residence.
This protection is linked to the lack of information or response to income update letters after the entry into force of the NRAU. Many tenants are at risk of being evicted as their leases are now for a five-year term.
Weakened tenants, with the characteristics mentioned above, who have lease agreements entered into between 1990 and 1999 cannot be evicted if they have lived in that property for more than 20 years. The lease can only come to an end in case of demolition or extensive works.
Right to reimbursement of works paid by the lessee
Tenants can carry out urgent works to the house, when the landlord does not carry out them and they are entitled to reimbursement. In addition, tenants can count on the support of the Service of Injunction on Rent Matters, SIMA, which was created to defend these types of tenants' rights.
In these cases of urgent works paid by the tenants, compensation can be made by deducting the amount shown in the monthly rents following the communication of the works or made directly by the landlord.
Affordable Lease Program
It was through these new changes in the NRAU that the affordable lease program was created. This measure aims to place affordable homes on the market, having as a reference an income value of less than 20% of market prices.
The minimum lease terms for houses included in this lease support program are three years and nine months in student leases.
The program came into effect on July 1, 2019 and, according to Jornal Público, in three months 44 lease contracts were signed. According to data up to September, 189 houses and 3618 tenants were enrolled in the program. The values of the mandatory insurance are not yet known, but the rents vary between 200 euros (T0) and 1700 (T5), depending on the municipality of the accommodation.
What are the main changes in the urban lease law for landlords?
Creation of tax incentives for landlords who promote long-term leases This measure aims to encourage long-term leases by reducing the IRS tax, which currently stands at 28%. Landlords now see the IRS rate reduced in the following terms:
2-5 year contracts: 2% reduction, leaving the IRS rate at 26%. Whenever there is a renewal, the rate reduces another 2%, with the maximum limit of 14% reduction.
From 5 to 10 years: The conclusion of a contract of this duration immediately reduces the personal income tax rate to 23%, and there is also a progressive reduction at each renewal, up to a 14% reduction.
Between 10 and 20 years old: Landlords benefit from a 50% reduction, leaving the IRS rate at 14%.
Contracts longer than 20 years: Landlords who sign these contracts will have a reduction of 18%, and will receive a 10% IRS tax.
Termination of lease agreement
Landlords now have the right to terminate a lease, after formal notice with a registered letter and acknowledgment of receipt, if they invoke the need for housing in that dwelling.
However, in other cases where the renewal of the contract is not in question, the landlord may terminate the lease for reasons of works, but only when these imply the demolition/disappearance of the house.
In the case of other works, the contract is suspended for the duration of the necessary intervention. In these cases, the landlord is responsible for guaranteeing the tenant's relocation to an equivalent house.
Tax benefits in the Affordable Lease Program
Landlords who place their dwellings in this program are now totally exempt from taxes on property income, applying to the IRS and IRC. For this purpose, landlords must have the property lease registered on the Finance Portal. Possibility of renting houses where the mortgage loan is still being paid, without prejudice to the contracted conditions.
It was already possible for a landlord to place a house for rent, even if it was being paid to the bank through a mortgage loan. However, most banking entities ended up harming landlords with a penalty on the contract spread.
Since the NRAU amendments came into force, banks can no longer penalize customers who rented the house that is being paid for through mortgage loans.
Exemption from paying IRS in damages
In cases of eviction of tenants, for legal reasons such as the need for their own housing, works or demolition of the house, the compensation paid by landlords is now exempt from IRS.