Creativity is part of the real estate business. And to avoid situations of default, to obtain liquidity to face expenses related to taxes, credits or other expenses related to the maintenance of properties, some owners ask for several months' rent in advance, some even the equivalent of a year, when signing a new lease agreement.
In exchange, some of these landlords offer a discount on the total amount to be paid by tenants, who, if they have the liquidity to take this step, are tempted to accept the agreement, due to the rising rent prices, in a context in which demand continues to exceed supply, on average.
But is this practice - common and professionalized in markets such as the USA or Australia, where up to three years' rent in advance is charged, and which is also beginning to emerge in Spain - already a trend in Portugal? And what does the law say?
Landlords can only require tenants to pay two months rent in advance plus two months' deposit.
By law, how much rent can a landlord ask the tenant to pay in advance, in addition to the deposit?
Until 2023, landlords could receive up to five months' rent at the beginning of the contract. However, with the 2023 State Budget (OE2023) this rule was changed, limiting the advance payment to two months' rent, instead of the three months previously allowed. The same legislative change also introduced a ceiling for the value of the deposit, which can now not exceed the equivalent of two months' rent.
In practice, the landlord can only demand the advance payment of up to two months' rent and the amount equivalent to two months' rent, as a deposit, based on what Article 1076 of the Portuguese Civil Code states:
The payment of rent may be advanced, upon written agreement, for a period not exceeding two months;
The parties may provide security, by any of the legally provided forms, for the fulfilment of their respective obligations, up to the amount corresponding to two months' rent.
Advantages and disadvantages of paying more rent at the beginning
When asked about the advantages and disadvantages of this ‘modus operandi’ for landlords and tenants, the lawyers consider that there are two sides to the same coin.
In favor of landlords is the fact that paying rent in advance and providing a deposit offers financial security, ensuring compliance with the tenant’s obligations and covering any damage to the property. For the tenant, providing a deposit can facilitate the negotiation of the contract, offering the landlord an additional guarantee and, in some cases, allowing for more favorable conditions.
In terms of disadvantages, on the tenants’ side, the amount to be paid can be financially burdensome, making it difficult to access the lease. For the landlord, despite the security offered, the legislation limits the amount of the deposit and the number of advance payments, which can reduce financial protection in the event of non-compliance or significant damage.
By law, landlords may be penalized if they charge more rent than permitted by law in exchange for a discount on the monthly amount to be paid. As there is no legal framework, the situation described constitutes a violation of the rules on the payment of rent and the possibility of advance payment. Given that the RAU (Urban Lease Regime) has been revoked, DL No. 321-B/90 of 15 October, the law that approved it, has not been revoked. It states, among other things, that ‘landlords who receive rents higher than those set by law (…) commit the crime of speculation (…) [article 14.º.
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Source: Idealista
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