In recent years, the scarcity of housing supply in large urban centers in Portugal has led many property owners and investors to try to convert commercial establishments (stores) and office spaces into housing spaces.
Many of these intentions came up against the mandatory approval of this reallocation by the general condominium assemblies, which had to be granted unanimously. This did not stop many owners and investors from making changes to these spaces to make them suitable (in functional terms) for housing, even though they 'officially' remained as offices or shops.
However, another obstacle arose: the impossibility of using mortgage housing credit, since the allocation of the property, based on the constitution of the horizontal property of the building in which it was located, was commerce and/or services.
The big question that all interested parties ask is this: is it possible, or not, to convert a store or office into licensed housing?
The declared housing shortage in the country led to a series of government initiatives that led to the approval of Decree-Law No. 10/2024 of January 8, which changed the legal regime for horizontal property.
Since its entry into force, the Condominium Assembly does not have to be taken into consideration with regard to changing the allocation of the fraction, as long as it is for housing use. However, there are fundamentally two basic rules to follow:
The City Hall must be consulted prior to any works to convert the property into housing and check, after the works are completed, whether it complies with essential habitability conditions.
If the work requires aesthetic or architectural changes to the common parts of the building, approval by the Condominium Assembly will be mandatory (a simple majority is sufficient).
And what are the phases to reallocate a property?
Phase 1:
Change in the property's constitutive title: the change in the purpose of the property is formalized through a public deed or authenticated private document.
Phase 2:
Change of license of use: the request to adjust the license of use is made to the City Hall of the municipality where the property is located.
Phase 3:
Verification of compliance with technical and safety requirements: a detailed project must be presented, revealing how the modification of the property will be carried out and thus confirming that the established standards will be respected throughout the process.
[Note: Ordinance No. 113/2015, of April 22, in its Annex I (items 25 and 26) details this issue.]
And what else is the owner's responsibility after the legal change in the property's allocation?
Must communicate this fact to the Condominium Management within 10 days.
Must update the property's land registry.
Must present to the Tax Authority a document certifying that the changes made are in accordance with the laws and regulations in force.
Recommendations and Conclusions:
Before any initiative to legally change the property's allocation, the owner must be aware of what the Municipal Guidance Plan (PDM) establishes for the location of his property. It may happen that the PDM does not allow housing in a certain location.
Also in the embryonic stage of deciding on the legal change of the property's allocation, the owner must obtain rigorous and complete budgets regarding any works necessary to transform the property into a dwelling that meets the legal requirements to be considered as such.
We are still at an early stage of the year to be able to assess the fluidity of the processes that we want to see working with the change in the legal regime of horizontal ownership. As well as to evaluate the impact of these measures on increasing the housing supply in Portugal.
However, it seems to us that much of the fluidity of these processes will require a thorough and timely response from the City Hall services. Both in terms of prior information and in terms of post-construction inspection. If planning adequate management of resources and response procedures is made in good time, the final assessment can only be positive.
[Sources: Idealista and Diário da República (https://diariodarepublica.pt/dr/detalhe/decreto-lei/10-2024-836222484)]
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Marco Moura Marques
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