By Eva Krauland on September 16th, 2024 - 3-4m. reading time

The new measures, announced by the government under Prime Minister Luís Montenegro, aim to balance the interests of various stakeholders, including property owners, investors, and those seeking housing while addressing the concerns of condominium residents.

Fundamental Changes in the Legal Framework

One of the most significant changes is the alteration of how condominium owners can oppose Local Accommodation. Previously, a two-thirds majority of owners within a condominium could vote to prohibit LA activities. However, under the new rules, this process has become more challenging.

Condominium assemblies must now achieve a two-thirds majority representing the building's overall ownership percentage to ban AL operations successfully. Moreover, this prohibition will only apply to future LA registration requests made after the condominium's decision. Existing LA businesses are mainly unaffected by new prohibitions, providing more stability to current operators.

Additionally, condominium owners must provide evidence of repeated disturbances or actions that significantly disrupt the building's everyday use for a prohibition to be considered. If such evidence is presented, the request to prohibit AL must be submitted to the local mayor, who will have the final say. The mayor's decision could involve inviting all parties to reach an agreement rather than ordering an immediate cessation of the AL activity.

Repeal of Previous Measures

The new regulations also reverse several controversial measures introduced by the previous Socialist government. Most notably, the extraordinary property tax on AL establishments, a 15% levy that was widely criticized, has been repealed. This repeal is retroactive to December 31, 2023, offering financial relief to property owners involved in AL.

Furthermore, the setting of the vetustez coefficient, which applied to local accommodations for the assessment of Municipal Property Tax (IMI), has also been removed. This change simplifies the tax obligations of AL operators and could encourage more investment in this sector.

Introduction of a Local Accommodation Mediator

Another critical element of the new law is the creation of a mediator role within municipalities. This mediator will help manage disputes between residents, AL operators, and condominium owners. While the introduction of a mediator is currently optional for municipalities, it has been welcomed by industry groups such as the Portuguese Association of Condominium Management and Administration Companies (APEGAC). They argue that in areas with a high concentration of AL businesses, having a compulsory mediator could be beneficial for resolving conflicts efficiently and fairly.

Impact on Property Owners and the Housing Market

These changes reflect the government's broader strategy to decentralize decision-making and adapt regulations to local contexts, ensuring that each area's specific needs and dynamics are considered. By shifting the power back to local councils and creating mechanisms for mediation, the government aims to create a more balanced approach that respects the rights of AL operators and residents' concerns.

Additionally, the law introduces tax incentives for homeowners. Capital gains from the sale of a property that are reinvested in purchasing a permanent residence will now be exempt from IRS, providing a financial incentive for individuals to invest in stable housing. Furthermore, workers who relocate more than 100 km from their current residence can deduct the cost of their new rent from their taxable income, easing the financial burden of moving for employment.

Conclusion

The newly introduced laws significantly shift how Local Accommodation is regulated in Portugal. By making it more difficult for condominiums to oppose AL and repealing controversial taxes, the government is attempting to balance the interests of all parties involved while ensuring that local needs are met. The introduction of a mediator role and the return of decision-making power to local councils are steps towards a more localized and nuanced approach to managing the impact of AL on communities.

Understanding these changes is crucial for property owners, investors, and residents alike to navigate the evolving landscape of Local Accommodation in Portugal.