PORTUGAL Law and Practice Contributed by: João Gonçalo Galvão, Carolina Cardoso Alves, Miguel Paquete and Mafalda Oliveira Cordeiro, CS’Associados
Renewal Except if stipulated otherwise, agreements shall be automatically renewed for periods of time equal to the initial duration (or five years, if shorter). Maintenance and Repair Unless the parties agree otherwise, the landlord shall be responsible for performing ordinary and extraordi - nary maintenance and repair works, as well as works required by mandatory law or by the purpose of the lease. However, common practice is for the tenant to be responsible for ordinary maintenance and repair, as well as for works required by the lease purpose. Rents Rents correspond to a periodical payment, and though they may be determined on an annual basis, payment is made in monthly instalments. Unless agreed oth - erwise, the first rent is due with the execution of the agreement and the following at the beginning of the month preceding the month to which it refers. The parties may agree on the advance payment of rents corresponding to a period not exceeding two months. Termination The parties may freely determine terms for lease ter - mination via break option or objection to renewal. If no express stipulation is made, upon the lapsing of one-third of the initial term, the tenant may terminate it at any time with a 120-day or 60-day prior notice (in case the initial duration, respectively, is equal to or exceeds one year or is lower than one year). Pre-Emption Right The tenant is entitled to a legal pre-emption right in case of sale of a premises leased for more than two years. 6.5 Rent Variation Rent may vary according to pre-negotiated criteria, including any rent exemption periods and/or value adjustment causes or milestones. The parties may also freely establish the intended rent update regime
the National Statistics Institute as published yearly in the official journal and applying to the following year. This index is based on CPI variation (excluding hous - ing) for the past 12 months up to 31 August. The first rent update is capable of enforcement by the landlord one year from commencement of the lease agree - ment, and the following successively one year as of the previous adjustment. It is not uncommon in commercial leases for the par - ties to establish a rent update criterion purely based on inflation variation (including housing), or other met - rics based on predetermined escalating values or a mechanism designed to align the rent with market val - ues (as determined, for example, by experts), though this latter option is more common in long-term leases. 6.7 Payment of VAT Leasing is a VAT-exempt activity. However, taxpay - ers are allowed to waive the VAT exemption on lease agreements provided that legally required subjective and objective criteria are met. Property-wise, waiver of VAT exemption is only allowed in the case of lease of urban properties or autonomous units thereof, and where the leased premises have been constructed or subject to major transformation or renovation works. Waiver of VAT exemption on subleases is only permit - ted regarding industrial properties. 6.8 Costs Payable by a Tenant at the Start of a Lease The tenant may be required to provide a security deposit to the landlord to secure proper performance of the lease agreement, including unpaid rents and other costs, potential damage to the property, etc. Pursuant to applicable legal provisions, the value of the security deposit cannot exceed the value of two monthly rents. Security deposits are usually provided as cash col - lateral or as an autonomous bank guarantee. 6.9 Payment of Maintenance and Repair The parties may freely determine the rules regarding allocation of certain costs and charges related to the leased premises. By default, the landlord is liable for any charges arising from the management, mainte - nance and use of the common parts of a building sub -
(see 6.6 Determination of New Rent ). 6.6 Determination of New Rent
The most widely used rent update criterion – which applies by default – is the official index determined by
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