PORTUGAL LAW AND PRACTICE Contributed by: João Gonçalo Galvão, Carolina Cardoso Alves and Miguel Paquete, CS’Associados
It is not uncommon in commercial leases for the parties to establish a rent update criterion purely based on inflation variation (including housing), or other metrics based on predetermined esca - lating values or a mechanism designed to align the rent with market values (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, tax - payers are allowed to waive the VAT exemp - tion 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 prop - erties 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 permitted 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 perfor - mance of the lease agreement, including unpaid rents and other costs, potential damage to the property, etc. Pursuant to applicable legal provi - sions, the value of the security deposit cannot exceed the value of two monthly rents. Security deposits are usually provided as cash collateral 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, maintenance and use of the common parts of a building subject to a condo -
minium regime where the premises are located (if applicable), including areas such as parking lots or gardens, as well as of services of com - mon interest (such as cleaning or security). Without prejudice, as further detailed in 6.4 Typical Terms of a Lease , the landlord and the tenant may agree that certain maintenance and repair costs are to be fully or partially covered by the tenant. 6.10 Payment of Utilities and Telecommunications By default, the tenant shall bear all costs relat - ing to the supply of goods and services (includ - ing utilities and telecommunications). Typically, these expenses are not included in the rent amount and are paid directly to providers by each tenant individually based on their respec - tive consumption levels. In multi-tenant spaces, utility costs may be dis - tributed between tenants based on an equal cost-allocation criterion (each tenant paying an equal share regardless), or based on their respective consumption levels (either directly measured, if technically feasible, or estimated based on a determined criterion such as the number of occupants or area). Some landlords may offer “all-inclusive” rent schemes that already comprise utility fees. This is more common in student housing, co-living spaces or short-term rentals. 6.11 Payment of Property Taxes Pursuant to law, landlords are responsible for payment of property taxes owed in respect of leased properties, although this cost may be contractually allocated to tenants.
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