Article by Miriam Sequeira - Lawyer at International Atlantic Services

For investors entering the Portuguese real estate market, understanding the legal framework governing lease agreements is essential. Portuguese rental law offers flexibility, but it also imposes specific rules—particularly regarding contract duration and termination—that can significantly impact an investment strategy.

Types of Lease Agreements in Portugal

In practice, lease agreements in Portugal are best understood based on their duration and purpose, as each category follows a distinct legal regime.

1. Long-Term Residential Leases (More than 1 year)

These are the most common agreements for residential investment purposes.

• Typically concluded for periods exceeding one year, often between 1 and 5 years
• Usually subject to automatic renewal, unless otherwise agreed
• Provide greater stability and predictability of rental income

As a general rule, Portuguese law establishes a minimum duration of one year for standard residential lease agreements, reinforcing their long-term nature.

2. Short-Term Residential Leases (Up to 1 year)

These contracts are designed for temporary housing needs.

• Duration of up to one year
• Common in situations such as relocation, studies, or transitional stays
• Offer greater flexibility, but less income stability for landlords

From an investor’s perspective, these contracts may involve more frequent tenant turnover and management. However, they can also be particularly attractive for investors who have already acquired property in Portugal but are not yet residing in the country. In such cases, short-term leases may serve as an effective way to generate income and optimize the use of the property until the investor relocates permanently to Portugal.

3. Touristic and Non-Permanent Purpose Rentals (e.g. Airbnb)

These are not traditional residential leases and follow a different legal framework.

• Intended for tourism, short stays, or temporary purposes
• Typically operated under the Alojamento Local (short-term rental) regime
• Not subject to the same tenant protection rules as residential contracts

This category is particularly relevant for investors focused on short-term rental yields, but it also involves specific licensing and regulatory requirements.

Termination and Notice Periods

One of the most critical aspects for investors is understanding how and when a tenant may terminate a lease.

Under Portuguese law, in fixed-term residential lease agreements, the tenant has the right to terminate the contract early, subject to two key conditions:

• One-third of the initial contract term must have elapsed; and
• The tenant must provide at least 120 days’ prior written notice to the landlord.

Practical Example

This rule has important practical implications:

• In a 12-month contract, one-third corresponds to 4 months
• Only after these 4 months can the tenant give notice
• The notice period itself is 120 days (approximately 4 months)

As a result, the tenant will effectively remain bound to the contract for a minimum of approximately 8 months.

This mechanism aims to balance flexibility for tenants with predictability for landlords—an important consideration when projecting rental income.

Key Considerations for Investors

When structuring a lease agreement in Portugal, investors should carefully assess:

• Contract duration and its impact on income stability
• Applicable legal regime (residential vs. touristic use)
• Termination rights and notice periods
• Regulatory requirements, particularly for short-term rental activity

Portugal remains an attractive market for real estate investment, but lease agreements must be approached with careful legal analysis. A well-structured contract—aligned with the investor’s objectives and compliant with Portuguese law—can significantly reduce risk and enhance long-term returns.

Within IAS, there is a department entirely dedicated to real estate investment — SMARTMOVE. For further information, please contact smartmove@iaservices.pt.