Tenant's Right of Preference

Pursuant to article 1091 of the Civil Code 1, the lessee has the right of preference in the purchase and sale or donation in compliance with the location leased for more than two years and in the conclusion of a new lease contract, in the event of the expiration of his/her contract. because the right or legal powers of administration on the basis of which the contract was concluded have ceased. In other words, in a case where the owner of the leased premises intends to sell it, the lessee enjoys the right of preference in this transaction, and the same applies in the case of a payment.

In these terms, a communication must be made by the owner of the property to the tenant, in which the so-called “essential elements”, the sales project and the clauses of the contract must be transmitted, so that the communication for the exercise of the right of preference be considered valid.

A particular situation occurs when the landlord intends to sell the leased premises together with other real estate assets. When this happens, the landlord must also communicate to the tenant the price that is attributed to the leased property, as well as the other values attributed to the properties that it intends to sell together.

In this case, the landlord must claim that the separate sale causes him an appreciable loss, demonstrating this, under penalty of not being able to demand the joint sale of all assets.

The tenant's right of preference is a legal right of preference and is a potestative right, the exercise of which implies that the preferor is able to participate in the business under the terms under which the owner of the property intends to sell it to a third party.

In this matter, it is important to establish a barrier between the rules in force before and after the publication of Law no. 64/2018, of 29 October 2018 2 , as the aforementioned Law amended article 1091 of the CC , regarding the preemptive right of tenants in the purchase and sale of the leased premises.

In the previous regime, the law established a period of eight days for the tenant to exercise the right of preference. Within this period, not only should there be communication of the intention to exercise the right, but also the arrival of that same communication to the landlord.

1 Hereinafter, CC.
2 Hereinafter, Law no. 64/2018.

Currently, the law provides a period of thirty days from the receipt of the landlord's communication, for the tenant, if he wishes, to exercise his right of preference. Under the old regime, the lessee would have preemptive rights in the purchase and sale or donation in compliance with the location leased three years ago. In accordance with the changes introduced by Law No. 64/2018, there is a right of preference for any tenant of an urban building, in the purchase and sale or donation in compliance with the location leased for more than two years. The changes made by Law No. 64/2018 obviously facilitate the real exercise of the right of preference by tenants.

With regard to leased buildings that are not subject to the horizontal property regime 3 , Law No. 64/2018 introduced new rules. When a lease contract for housing purposes is in question, the tenant of part of the building now has a right of preference under the same terms as those provided for the tenant of an independent fraction (article 1091, no. 8 of the CC).

The Constitutional Court declared, with general mandatory force, the unconstitutionality of the rule contained in no. 8 of article 1091 of the CC, as amended by Law no. 64/2018 4 , due to violation of no. 1 of the article 62.º 5 , that is, the right to property, in conjunction with paragraph 2 of article 18.º of the Constitution of the Portuguese Republic 6 , insofar as it excessively limited the
right to transfer properties during their lifetime, ending up not achieving the intended objective of facilitating the process of accessing their own housing for tenants.

The Constitutional Court considered this to be a limiting norm on several levels. As far as the owner is concerned, he could not, in that way, freely dispose of his assets, and the Constitutional Court considered this a disproportionate restriction on the right to property. The contractual freedom of the parties was called into question, as Law No. 64/2018 forced the existence of an agreement on the use of the common thing, to which no one would have consented, thus leaving private autonomy quite limited. The rule in question would also have a discouraging effect on investment.

3 In accordance with the provisions of article 1414 of the Civil Code, “the fractions of which a building is composed, in conditions of constituting independent units, may belong to different owners under a horizontal property regime” and of article 1415 of the Civil Code. Civil Code, “only autonomous fractions that, in addition to constituting independent units, are distinct and isolated from each other, with their own exit to a common part of the building or to the public road, can be subject to horizontal property”.
4 Judgment of the Constitutional Court no. 299/2020, Process no. 984/2018, published on September 18, 2022, in https://files.dre.pt/1s/2020/09/18300/0000600038.pdf .
5 Under this article, “everyone is guaranteed the right to private property and its transmission during life or death, in accordance with the Constitution”.
6 This article provides that “the law can only restrict the rights, freedoms and freedoms guaranteed in cases expressly provided for in the Constitution, and restrictions must be limited to what is necessary to safeguard other constitutionally protected rights or interests”.

The Constitutional Court also understood that the rule under consideration violated fair compensation, as it provided for the fixing of the value of the fraction depending on the permillage, and the degree of natural light, the level of conservation, the views, the location must also be considered. , between others. The judges of the Constitutional Court carried out a balance between the right to property and the right to housing, understanding that the right to housing is always constitutionally protected, through the contractual form, to the extent that whoever acquires it will succeed in the rights and obligations of the lessor. (article 1057 of the CC).
Finally, in accordance with paragraph 9 of article 1091 of the CC, in relation to all lease contracts for parts of buildings that are not under horizontal ownership, whatever the purpose for which they are intended, tenants who so wish, if the landlord's intention is to sell the leased building, can exercise their preemptive rights jointly, acquiring, in proportion, the entire property in co-ownership.

Regarding the scope of application of the right to lease, the Supreme Court of Justice, when called upon to rule on whether there would be a tenant's right of preference in the case of an owner who gave an urban building leased for housing to a commercial company, and the respective tenant appealed to court intending to have this right recognized, in its Judgment of 16 November 2006 (proc. no. 06B3596), it completely clarified that the tenant's right of preference exists in the strict terms provided for in the Law, or that is, in the purchase and sale or giving in payment, and only and only in these
cases, dismissing the tenant's appeal.

* This article is for informational purposes only and does not preclude the need for advice from a lawyer.