New Changes to Portugal’s AL Licensing Laws: What You Need to Know as a Property Owner or Investor

If you’re an international buyer or property owner in Portugal, especially in popular regions like the Algarve and Vilamoura, recent updates to Portugal’s Local Accommodation (AL) laws are essential to understand. The Portuguese government, through Decree-Law No. 76/2024, has introduced changes that bring new flexibility to the AL licensing system, which will officially take effect on November 1, 2024. This blog post will break down what the new laws mean, how they impact property ownership, and what buyers and sellers should consider in this shifting real estate landscape.

What Has Changed?

Earlier reforms under the Mais Habitação program in 2023 introduced restrictions that aimed to balance tourism demands with housing needs for locals. But many of these limitations have now been rolled back. With the 2024 reforms, municipalities gain control over local accommodation activity, allowing them to shape policies according to the specific needs and dynamics of their regions. This shift provides investors with a more stable and predictable environment for short-term rental properties, although it's essential to note that restrictions may still apply depending on the local area.

Key takeaways:

1. Municipal Autonomy: Municipalities have one year to establish their own regulations for AL licensing.
2. Greater Licensing Flexibility: The new law reverses several restrictions on license renewals, transfers, and approvals.
3. New Rules for Property Use: Capacity limits for AL properties have been adjusted, and older properties can now accommodate commercial use, provided they meet certain criteria.

Reversal of Key Restrictions

The recent changes remove six key limitations introduced in 2023, which could positively affect current and prospective AL operators.

Key Restrictions Repealed

1. Suspension of New Registrations: Previously halted in some areas, new AL registrations can resume without overarching central government restrictions.
2. License Expiry Conditions: Inactive licenses are no longer automatically canceled.
3. Non-transferability of Licenses: Licenses can now be transferred to new property owners, enhancing the property’s investment value.
4. Mandatory 2030 Review: The 2023 requirement for a blanket review of all licenses in 2030 has been removed.
5. Five-Year Renewals: Licenses no longer need renewal every five years, reducing administrative burden.
6. Condominium Veto Rights: The veto rights for condo residents have been limited to hostels, meaning other types of AL units are less restricted by resident objections.

What the New Law Means for Property Buyers and Sellers

A More Attractive Market for Buyers

For international buyers, these changes make Portugal a more appealing investment destination. The Algarve, particularly towns like Vilamoura, is known for its appeal among tourists and expatriates due to its beautiful beaches, golf courses, and mild climate. AL properties in these areas tend to attract a steady flow of rental income, and the relaxed regulations provide greater security for investors.

Increased Property Value for Sellers

The newfound ability to transfer AL licenses means sellers can offer properties as ready-to-rent investments, a feature that appeals to potential buyers and could lead to higher sales prices. However, each municipality may still set its own restrictions, so consulting local regulations is essential.

New Role of Municipalities: Localised Control with Potential Restrictions

Municipalities now have the authority to define containment and sustainable growth areas where AL activities might face limitations. This means that while the national restrictions have been rolled back, some municipalities may still choose to enforce stricter AL regulations. Municipalities can also freeze new AL applications in specific areas for up to a year to avoid sudden influxes that might affect housing markets or local communities.

If you're considering purchasing an AL property, it's worth checking local regulations to understand any planned changes in the municipality’s rules. For instance, Vilamoura might have different standards and restrictions compared to a quieter village in the Algarve.

The Introduction of the Local Accommodation Ombudsman

To help manage disputes between property owners, residents, and third parties, municipalities will establish a Local Accommodation Ombudsman. This new role is meant to address complaints, mediate conflicts, and provide guidelines to help ensure that AL properties operate smoothly within their communities. If you’re operating or investing in AL, the Ombudsman could be a helpful resource to resolve any issues related to property management or resident concerns.

Adjusted Capacity Limits for AL Properties

The recent decree has also introduced updated capacity limits:

• Room Rentals and Hostels: These are restricted to a maximum of 9 rooms and 27 occupants.
• Convertible and Supplementary Beds: Properties can now install convertible and supplementary beds, though they must not exceed 50% of the fixed bed count.

This allows AL operators to be more flexible in accommodating guests, especially for properties in high-demand areas like the Algarve, where larger groups of tourists may be interested in short-term stays.

Opportunities for Older Properties

Under the new AL laws, properties built before 1951 can now host commercial establishments, provided they meet legal requirements. This creates opportunities for properties with historical value, especially in cities and towns with a strong heritage appeal. International buyers interested in renovation projects or mixed-use buildings may find Portugal’s AL market more accessible and attractive with this added flexibility.

Final Takeaways for Investors and Homeowners

If you’re looking to buy or sell property in Portugal, understanding the nuances of AL licensing is crucial. Here are some final pointers:

• Consult with Local Experts: Given that municipal regulations will vary, it’s wise to work with a local real estate agent or legal advisor familiar with the latest AL regulations.
• Stay Updated on Local Rules: Municipalities have one year to establish their regulations, so changes may come gradually across different regions. Keep an eye on your chosen area’s local government announcements for updates.
• Consider the AL Market’s Long-term Value: With increased flexibility and the repeal of restrictive policies, the AL market offers promising opportunities. Properties with AL licenses are likely to remain high-value assets, particularly in high-tourism areas like Vilamoura and the Algarve.

By staying informed about local regulations, international buyers and sellers can navigate Portugal’s AL landscape with greater confidence, capitalising on the potential of one of Europe’s most appealing real estate markets.

For more information on the recent legal updates, you can review the Decree-Law No. 76/2024 here or connect with legal experts to better understand how these changes might affect your investment.

In a landscape as dynamic as Portugal's real estate market, these new rules signify a promising era for the AL sector, making it a fantastic time to consider property investments in this scenic country.