Algarve AL units worth €980 million

AL bombshell: apartments in residential buildings cannot be rented to tourists

Supreme Court ruling affects apartments already within AL regime

A decision by the Supreme Court has blown a surreal hole in the AL (short-term tourist-lodgings) sector.

As of today, no property owner can rent out a property ‘destined for habitation’ within the AL regime, even if they have a licence to do so and are full of bookings for the future.

Público is running this story as an exclusive, but it is being picked up by other media sources – the simple reason being this could create a tidal wave of issues.

The Supreme Court decision was unanimous, with almost 30 judges supporting it.

Leading judge Paulo Rijo Ferreira has admitted that the number of cases likely to come denouncing ‘illegal’ AL activity will snowball – while there are real ‘economic risks’ on the horizon.

If people cannot legally rent out apartments they purchased in good faith for this kind of ‘investment’, they may well chose to rent them out illegally – meaning the State could stand to lose hundreds of thousands, if not millions, of euros in tax revenue.

Be that as it may, this is a judicial ruling. It follows two others: the first , by the appeal court of Porto, which ruled in favour of people who live in a building and find themselves obliged to share it on a daily basis “with strangers” who frequently cause noise beyond the ‘normal hours’; and the second (Lisbon Court of Appeal) which ruled that owners can opt to rent out their properties to whomever they chose.

The Supreme Court ruling overrules both previous court rulings.

Judge Rijo Ferreira has been cited as expecting “significant disruption” within the “not inconsiderable (AL) sector” – while Eduardo Miranda, president of Portugal’s AL association, has done his best to say ‘none of this will matter’.

According to ECO online, Mr Miranda fears “the consequences of media coverage of the decision” much more than the prospect of an “avalanche of cases” in the courts.

“What this ruling says is that in conflicts that end up in court, preference will be given to condominiums”, he told the online. “But in the law of 2018 this issue ended up being largely bypassed. In order to avoid conflicts in court, the law created a mechanism, called ‘opposition’, which allows the condominium to make a request for cancellation (of an AL), which is simple, free and relatively easy”, he said.

And yet even with this mechanism, there have been very few requests for cancellation.

“In four years we have had around 50 requests – the majority of which have been solved through mediation”, said Miranda. “The number of cases that go to court are derisory…”

According to the association’s books, AL goes on in around 60,000 apartments throughout Portugal.

Coming the day after perceived failings of the country’s Justice system were given new airing, Eduardo Miranda concludes: “Very few cases get to court because they carry elevated costs, they take a long time and the condominium itself has a quicker way to make opposition. I believe there is a normalisation of AL in the majority of condominiums”.

natasha.donn@algarveresident.com