Rent update 2024: How to inform the tenant of the increase?

Are you having difficulties meeting your monthly budget and paying all your expenses? Do not worry, Poupança no Minuto can help you save money with loans and insurance, lowering installments and easing your finances. But let's anticipate, first, the forecast of what will happen to rents in 2024.

Updated incomes in 2024: Will there be no limit imposition?

Without the imposition of a new limit on the increase in rents in 2024, the rise in values can reach up to 6.64% in 2024, according to data released by the National Institute of Statistics (INE).  

Note that, in 2023, the increase in rents was limited to 2%, which did not keep pace with inflation and the rules of the New Urban Lease Regime (NRAU).

Therefore, the Government has now met with tenants' and landlords' associations, the two trade unions, and DECO, in order to find a path that does not harm landlords or tenants next year.

However, Prime Minister António Costa has already highlighted that this path will not be set by a new imposition of a limit on rent increases: "To repeat the formula adopted this year, no", however "What is the measure between 2% and 6.95% that would result from the legal formula, is something we are discussing".

To understand how the calculation of rent updates is done, you should know that the coefficient in question is calculated based on the variation of the consumer price index, without housing, for the previous 12 months, with the values ​​being disclosed annually on August 31 by the INE. The coefficient is then published in the Official Gazette until October 30, and applied always in the following year.

So, based on this year's calculation, it is possible to indicate that, without a limitation on the increase in income in 2024, we may notice an increase of up to close to 7%. 

Note that, from 2018 to 2022, the maximum that the coefficient increased was to 1,0115 (1.15%) in 2019.

Calculation of rent adjustment: How to apply the coefficient?

But after all, in practice, how to apply the rent update coefficient? If we take, for example, the 2023 rent update coefficient, equivalent to 1.02 (2%), just multiply the rent value by the coefficient.  

In other words, if you pay a rent of 900 euros, 900 x 1.2 totals 918 euros. Therefore, considering the coefficient of 2023, your rent could increase at most up to a total of 918 euros.

It is important to emphasize that for rounding the value, it goes to the immediately higher cent unit: That is, if the total amounted to 918.355, the rent would be 918.36 euros.

How should the landlord inform the tenant about the rent increase?  

Faced with a new rent increase, even if the coefficient is limited again, how should the landlord inform the tenant?

The first step is to send a written communication, with a minimum of 30 days notice prior to the payment date of the new rent amount, with a specific template.

Communication must be done through registered mail, with acknowledgment of receipt, or delivered directly in person with the tenant's signature. The letter must include the amount in question, the coefficient used, and the date from which it will be applied.  

But know that: This update can only be imposed if a lease agreement has been in effect for more than a year. Be aware that if any information provided by the landlord is wrong (such as a wrong coefficient calculation), as a tenant you can (and should) challenge.

What if the landlord wants to terminate the lease agreement? The truth is that they can only do it in specific cases, such as failure to pay the rent by the tenant. There is an exception regime provided for in Law No. 19/2022, of October 21, which determines that the landlord cannot terminate the contract if the tenant challenges the rent increase.

However, the contract can also be terminated through non-renewal. In this case, it is necessary to pay attention to the deadlines for prior communication according to the type of contract, as provided by law.  

Old income, different rules

In cases where the lease contracts predate 1990, the deadlines provided in NRAU remain suspended.

Therefore, with the current regime, rents in these situations are updated according to the following conditions: 

• The updated income value has an annual limit equivalent to 1/15 of the property cost.
• Property cost must be equivalent to the appraisal value;  
• The updated income value should correspond to a specific percentage of earnings.
• And the lessee can request a new evaluation of the rented property.

Are you feeling hesitant? Talk to Poupança no Minuto and put all your concerns to rest: We can help you increase your savings by renegotiating or transferring your credits and insurance through free and personalized services!