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Will Local Accommodation end in Portugal? "No"... we explain everything

Local Accommodation (AL) had been a powerful driver of the national economy and the revitalization of the real estate in recent years, notably in the large urban centers of Lisbon and Porto, as well as the most touristy locations like as the Algarve and Madeira, until the pandemic.


Neighbors and officials condemned and disputed it at the same time. The Supreme Court of Justice (SCJ) recently ruled that local accommodation in housing buildings is no longer possible.


What comes next?


"The SCJ standardized jurisprudence for local accommodation installed in autonomous fractions in the sense that these can not work there if the fraction of this intended housing," experts stress that, according to the Supreme Court's judgment, "in the regime of horizontal property, the indication in the constitutive title that the fraction is intended for housing must be interpreted as meaning that local accommodation cannot be carried out there."


What does it mean to standardize case law?


When confronted with the same legal topic, higher courts may render contradictory rulings – known as conflicts of case law – in which judges rule in opposing directions on the same problem. Thus, if an appeal is brought before the various Courts of Appeal or even a ruling given after an appeal before the Supreme Court, there may be contradictory decisions when considering the legality of the installation and operation of an AL in an autonomous fraction designed for housing.


The appeal of standardizing case law, which may be requested by the President of the Supreme Court, the parties, or the public prosecutor, aims to end divergence of contrary decisions, ensuring equality and thereby ensuring stability and harmony in judicial decisions (that before judicial decisions involving the same law and the same question of law the parties are not confronted with different solutions depending on the region of the country).


What's on the line?


The legal issue that led to the unified judgment is neither new nor unresolved between the courts.


The legality of the an autonomous portion affecting the dwelling of a building subject to horizontal property has been questioned for a long time, given that these AL may be linked to:

• frequent guest arrivals and departures at all hours of the day and night,

• talks or conviviality,

• elevator use,

• dragging luggage into the communal areas of the building late at night


It balances the owners' right to rest and serenity, on the one hand, with the AL owner's right to monetize its autonomous portion affecting the activity's exercise, by holding a local accommodation license, on the other.

• In 2016, the Porto Relationship deemed AL activity to be consistent with the dwelling destination of a fraction. Even if it is only temporary, he understands that it qualifies as housing. The same Court ruled otherwise in 2018, stating that AL's activity in a percentage designated for housing by the foundational title was in violation of the purpose assigned to it.

• The Lisbon Relationship had already decided in 2016 that the AL installed in autonomous fractions designated for housing did not conform with the legislation because it constituted a different use than the original purpose of the fraction. However, in 2017, the Supreme Court overturned this ruling, arguing that the use of the percentage by tourists does not exclude its allocation to dwellings, thereby disqualifying this activity as commercial.


What impact does the judgment have on the Local Accommodation's operations?


It solely pertains to the case in which it was supplied. Yes, because, while case law has standardised it, it lacks the broad obligatory force that the law ascribes, for example, to some of the Constitutional Court's judgements, therefore it has no relevance outside the specific procedure and is only binding on some portions of it.


However, it should be emphasized that, in the future, unified case law would have the effect of persuasion and guidance for all courts whenever the same topic arises, ensuring some unity within the legal system and avoiding conflicting court verdicts on the same issue.


The following case law will not apply uniformly in the Supreme Court's decision on AL:

1. single-family dwellings (as defined in Article 3, no. 2 of DL 128/2014, dated August 29)

2. structures with multiple autonomous fractions owned by a single owner

3. fractions that have an impact on commerce or services.


What can we anticipate in the future?


The uniform jurisprudence does not imply that AL, which is currently lawful in housing fractions, will be outlawed immediately.


Without wishing to speculate on the future, the Supreme Court's decision does not signal the end of AL's operations, as some media may suggest.


This is because it is not the role of the courts to declare all AL in the country illegal; rather, it is the role of the legislature to establish the conditions for the registration of local accommodation, the requirements for operation and supervision of local accommodation so that it can operate on a regular basis.


Second, because judicial decisions only apply in this case, the judgment standardizing may be applied only to AL in fractions intended for housing if, in relation to all of them, illegality and, as a result, the annulment of the establishment's registration by some dissatisfied condomino were to be requested before the courts.


Solutions?


1. The most obvious is to avoid going to court and, as a result, to subject the position of the standardizing judgment to the standardizing judgment by maintaining good neighborly relations and obtaining compromises between the AL owner and the other owners, to avoid going to court and having the legality of the establishment called into question. It should be highlighted that the AL's legislation already allows for the establishment of an aggravated condominium quota for the AL to pay for the wear and tear of common parts caused by guests, which has helped to avoid problems (art. 20oa-A of dl128/2014, dated August 29).

2. In the event of a dispute, alternative solutions such as mediation may be able to resolve the matter more quickly and at a lower cost than going to court.

3. A modification in the constitutive title's allocation to the fraction in which the AL functions is a possible, albeit it would be subject to administrative procedures and fees, as well as the condominos' unanimous agreement. This entails redistributing the housing fraction to other areas, such as services.

4. A challenge to the legitimacy of a court decision based on uniform case law is also possible, particularly if the material element of the right to property is violated.


The judgment did not result in the AL's extinction, and it is up to legislators to amend the law in the same or different ways as the judgment, allowing the AL to operate in fractions affecting housing, and at least one bill to that effect has already been presented in the Assembly of the Republic by the political party Liberal Initiative after learning of the Supreme Court's decision.


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