The right to permanent housing

The right to permanent housing

The right to permanent housing (or in Portuguese ‘Direito de Habitação Duradoura’ – DHD) was created by Decree-Law 1/2020, of January 9, allowing citizens and families the right to permanent housing, for life, by leasing another’s property through fixed periodic payments.

The DHD agreement is made between the property owner and the DHD holder, through a contract signed by public deed or by private document with the signatures validated in person. The registration of the right to permanent housing in the land registry is the responsibility of the DHD applicant and must be made within 30 days from signing the contract.

Before agreeing to DHD, the owner must ensure assessment of the property by an architect or engineer. Once the property’s conservation status is certified, a contract can be signed and the right to DHD registered at the land registry.

The DHD contract must include: the application of Decree-Law 1/2020, of January 9; the down payment amount; the monthly payment amount; a declaration accepting the property’s conservation status; and the relevant addresses for the purpose of communication between the parties.

When signing the contract, a down payment is required – the amount is established by agreement between both parties, between 10% and 20% of the average value per square metre of family housing – this will depend on the location of the property and area details within the “caderneta predial” from the Finanças services.

In addition to the down payment, the first monthly payment must also be paid as per the amount agreed by both parties, as well as a date set for the periodic payments, the means of payment and the instalment payment renewal plan.

The property owner must ensure the property is handed over to the DHD holder in a reasonable state of conservation; that condominium fees are paid; that building repair costs and other expenses incurred with the property’s communal areas are settled; that there is house and contents insurance; that maintenance work is carried out; and that the amount received as down payment is available to be returned to the DHD holder in case of contract extinction.

The DHD holder must use the property exclusively as permanent residence; must pay municipal fees and property rates (IMI); allow assessment of the property’s state of conservation; bear the cost of basic maintenance work; agree to the implementation of energy and water efficient solutions; agree to works to improve mobility within the property; and allow the owner to carry out vital works to ensure the property’s conservation.

The down payment is valid for a period of 30 years, with its initial value reduced by 5% per year from the beginning of the 11th year and until the end of the 30th year.

In case of extinction of the contract by the property owner, the DHD holder is entitled to receive the down payment provided which, up to the 11th year of the contract’s duration, may mean the full return of the deposit. This will not happen in cases of non-compliance by the DHD holder, such as failing to pay the monthly instalments or failing to carry out basic maintenance work.

The Decree-Law 1/2020 regulates the termination of the contract due to forfeiture, waiver and non-compliance by one of the parties.

The contract may also be terminated upon waiver by the DHD holder, who must communicate it by means of a signed declaration validated in person, accompanied by a housing assessment form. The owner is then obliged to return the balance of the security deposit on the date of termination.

Non-payment, in whole or in part, of the monthly instalments means non-compliance of the terms of the contract.

When the DHD is extinguished, the property must be returned to the owner within three months, except in case of death of the DHD holder, when the heirs have six months to hand over the property to the owner.

By Dr Eduardo Serra Jorge
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Dr Eduardo Serra Jorge is founding member, senior partner and CEO of lawyers firm Eduardo Serra Jorge & Maria José Garcia – Sociedade de Advogados, R.L., created in 1987.
In his column, he addresses legal issues affecting foreign residents in Portugal.
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