Forced lease regime and property tax increase for unoccupied buildings

The Draft State Budget Law for 2019 includes legislative authorizations aimed at "promoting the rehabilitation and use of degraded or unoccupied properties" ¹. In other words, the proposed diploma aims to increase supply in the housing market by launching the following:

Designation of the word “devoluto” - unoccupied

The Government has requested permission to extend the definition of "devoluto"/unoccupied to also include "housing policies, urban planning and urban rehabilitation" ¹. Next, it proposes the identification of these properties by defining an electricity and water "minimum consumption level" ¹ to confirm whether the building is or isn’t being used. Another way to confirm occupation of the property is by conducting an inspection.

Definition of “urban pressure areas" and Property Tax (IMI) increase

This classification will depend on market rental prices, household income and housing shortages. It will be the responsibility of the City Council to classify “urbanistic pressure areas" and to decide the Property Tax (IMI) increase. Thus, it is proposed that "all urban buildings or autonomous fractions that have been vacant/unoccupied for more than two years, located in areas of urban pressure" ¹ increase their IMI up to 6 times, and an increase of 10% more in each subsequent year (up to 12 times in total). This tax increase profit is intended to finance housing policies.

Forced lease of unoccupied buildings

This law already exists, but it will be reinforced to all owners who don’t ensure the maintenance of their property. The Government intends to take administrative possession of properties which don’t present secure conditions in order to rehabilitate them – a coercive rehabilitation. In order for the Government to be compensated for this and for the possible re-accommodation of the tenants, two options are foreseen in the law: the total payment of expenses by the owner or the "forced lease" of the property,  the revenue will be used to pay the debt of the works: "There is a possibility of the municipality moving towards forced sale or lease", ¹ states Jorge Moreira da Silva, Minister of Environment and Territorial Planning. Furthermore, after the period of forced lease, if the owner doesn’t express in writing the interest in taking possession of the property, then the chamber will place the property in the rental market.

Administrative processes associated with urban planning are simplified

The Government intends to simplify administrative procedures so that some building permits are no longer required but only a simple previous communication. This applies "in cases where information is already detailed", explains Jorge Moreira da Silva.

If rehabilitating and reducing unoccupied buildings in cities is one of the main objectives of the 2019 State Budget, many consider these proposals unfair to owners: "the degradation and abandonment of real estate assets in urban centers (...) are due to more than a century of freezing of incomes ... and now they have to pay additional taxes on what little is left, "says Luís Menezes Leitão, of the Lisbon Association of Owners (ALP).

¹ Transcript of document delivered by the Government in Parliament on the 15^th of October 2018.