Selling a property with a tenant: What you can (and cannot) do in Portugal

What Portuguese law says about selling tenanted properties

In Portugal, the sale of a tenanted property is perfectly legal. The owner has the right to sell their property regardless of whether it is occupied by a tenant. However, that right is subject to a set of legal obligations that cannot be ignored.

The main obligation is to notify the tenant of the intention to sell. This notification must be made in writing, with sufficient notice for the tenant to exercise their right of first refusal, and must include all the terms of the sale, namely the price and the payment conditions.

Failure to comply with this obligation can have serious consequences: the tenant has the right to bring legal proceedings to be placed in the buyer's position under the same terms as the transaction that took place without their knowledge. This can unwind a sale that has already been completed, with all the costs and complications that entails.

The tenant's right of first refusal

The right of first refusal is one of the most important concepts to understand in this process. In simple terms, it means that the tenant has the right to be the first to buy the property they are renting, on equal terms with any other buyer.

The tenant has eight working days from receipt of the owner's formal notification of the sale terms to exercise this right. During this period, the owner cannot complete the sale with any third party.

If the tenant does not exercise the right of first refusal within this period, or expressly states that they have no interest in buying, the owner is free to proceed with the sale to any buyer. In this case, it is advisable to keep documentary evidence of the notification and the tenant's response, to avoid future disputes.

There are situations in which the right of first refusal does not apply, namely when the property is sold together with other properties under co-ownership arrangements, or in certain situations involving sales to first-degree relatives. These exceptions have specific requirements, however, and must be verified on a case-by-case basis with legal support.

Property viewings with a tenant in place

One of the most delicate practical issues in this process is arranging viewings of the property by potential buyers while it is occupied. The tenant has a right to privacy and to the peaceful enjoyment of the space they are renting, and this right cannot be overridden by the owner's intention to sell.

Ideally, viewings should be agreed with the tenant in advance and scheduled at times that do not disrupt their routine. There is no legal obligation for the tenant to accept viewings, so cooperation depends heavily on the relationship between the parties and on how the process is communicated.

One of the most effective ways to manage this aspect is to involve an experienced property consultant from the outset, someone who knows how to communicate with the tenant professionally and can create the conditions for viewings to take place smoothly for all parties. The experienced property team at Engel & Völkers has extensive experience in supporting the sale of tenanted properties, knowing exactly how to handle these situations effectively and respectfully.

The tenancy agreement and its effects on the sale

One aspect that many owners are unaware of is that the sale of the property does not automatically extinguish the tenancy agreement. The new owner acquires the property with the existing tenancy in place, and remains bound by the terms of the contract until it reaches its natural end.

This means that if the tenancy agreement still has several years to run, the buyer will take on that obligation. This factor can influence the property's value, the profile of interested buyers and the negotiation strategy. For this reason, before putting the property on the market, it is essential to be fully familiar with the terms of the tenancy: its duration, the monthly rent, the renewal conditions and any specific clauses.

For a property valuation that accurately reflects market value taking into account the existence of an active tenancy, it is essential to work with a professional who knows the market and can weigh all the relevant factors. A tenanted property with good rental yield and a reliable tenant can be worth more than a vacant one, particularly for buyers with an investor profile.

When the owner can reclaim possession of the property

There are situations in which the owner may wish to recover possession of the property before selling it, for example in order to sell it free of any tenancy, which may be preferable for certain buyers. In such cases, legal mechanisms exist, but all of them come with specific timescales and conditions.

Terminating the tenancy on grounds of owner occupation or occupation by a first-degree relative is one available route, but it requires at least five years' notice for contracts that have been running for more than two years, and is subject to specific conditions that must be fully met. Failing to meet any of those conditions can render the termination invalid.

Another possibility is a mutual agreement with the tenant to end the contract. In this case, it is common to offer financial compensation in exchange for the voluntary handover of the property. This type of agreement is often faster and less contentious than a unilateral termination and can be a pragmatic solution when both parties are willing to cooperate.

In either case, specialist legal support is indispensable. Procedural errors can invalidate the process and force the owner to start again, with additional costs and further delays.

The impact of the tenancy on the sale price

The existence of a tenant inevitably has an impact on the sale price, but that impact can be positive or negative depending on the context.

For buyers with an investor profile, a tenanted property with a market-rate rent, a tenant with a good payment history and a contract still with some years to run is an attractive asset. Buying a property that is already generating income, without the need to find tenants and without the risk of a void period, has real value that investors recognise and that can support a higher price.

For buyers who intend to live in the property, an active tenancy is generally perceived as an obstacle, which can reduce interest and push the price down. The sales strategy must be adapted to the most likely buyer profile for that specific property, and this strategic positioning is one of the key contributions of an experienced property consultant.

Before settling on a price, request a professional property valuation that takes into account the tenancy situation, the contract terms and the market profile of potential buyers. A rigorous valuation is the starting point of any successful sale.

The importance of communicating well with the tenant

A cooperative tenant can be a fundamental ally in the sales process. An uncooperative tenant can make the process considerably more difficult, delaying viewings, failing to maintain the property in good condition and creating a negative atmosphere for potential buyers.

The way in which the owner communicates the intention to sell to the tenant has a direct impact on the tenant's attitude throughout the process. Communicating transparently, respectfully and with sufficient notice is the best strategy. Explaining the process, clarifying the tenant's rights and showing a willingness to find solutions that minimise the impact on their daily life are approaches that, in most cases, generate goodwill and cooperation in return.

If the relationship with the tenant is strained or if there are situations of contractual default, it is even more important to have a professional team alongside who can manage these interactions with neutrality and competence.

Why professional support makes all the difference

Selling a property with a tenant is not impossible, but it is significantly more complex than selling a vacant property. The legal dimension, managing the relationship with the tenant, setting the right price and identifying the right buyer profile are all variables that require specialist knowledge and market experience.

Working with an Engel & Völkers property consultant means having alongside you a professional who understands the legislation, knows how to position the property in the market, manages viewings professionally and accompanies the entire process through to completion. If you want to sell your property with the security and efficiency that an operation of this complexity demands, the first step is to speak with a specialist who knows the market in depth.

The team of property consultants at Engel & Völkers is ready to analyse your specific situation, guide you through the available options and accompany you at every stage of the process, from the initial assessment through to the closing of the deal. Do not let the complexity of a sale with a tenant become an obstacle: with the right professionals by your side, it can become an opportunity.

What to do before putting the property on the market

Regardless of the complexity of the situation, there is a set of steps that every owner should take before starting the process of selling a tenanted property.

The first is to review the tenancy agreement in full: understanding the timescales, the renewal conditions, the notice obligations and any clauses that might affect the sale. The second is to assess the condition of the property and identify whether any works or interventions are needed that might influence its value or attractiveness to potential buyers.

The third step is to consult a solicitor specialising in property law to confirm that all procedures for notifying the tenant are carried out in a legally correct manner. And the fourth is to contact a specialist property consultant to obtain a market valuation and define the sales strategy most suited to the property's specific situation.

These four steps, taken with sufficient advance planning, save time, prevent errors and significantly increase the likelihood of a successful sale. If you are ready to start this process, begin the sale of your property now with the support of those who know every detail of this journey.

Frequently asked questions

Can the tenant prevent the sale of the property?

No. The tenant has no power to prevent the sale of a tenanted property. What the law grants them is the right of first refusal, meaning the possibility of buying the property on equal terms with any other buyer. If the tenant does not exercise that right within the legal period of eight working days, or expressly states that they have no interest in buying, the owner is free to proceed with the sale to third parties. The tenant may make the process more difficult by refusing viewings or failing to cooperate, but they have no legal capacity to block the transaction itself.

Can the rent be changed before the sale to make the property more attractive to investors?

Changing the rent requires compliance with the rules set out in Portuguese urban tenancy law, which establishes specific mechanisms for updating rents and sets limits on increases. It is not possible to increase the rent unilaterally outside those mechanisms, even if the intention is to make the property more profitable for the sale. The best approach is to present the tenant's payment history and the property's current yield transparently, allowing the market to assess the asset on the basis of real data. A specialist property consultant can help position the property appropriately for investor buyers.

What happens to the tenancy agreement if the property is sold to a buyer who wants to live there?

The sale of the property does not automatically extinguish the tenancy agreement, even if the new owner intends to live in the space. The buyer acquires the property with the active tenancy in place and remains bound by the contract's terms. To recover possession, they will need to wait for the natural end of the contract or use the legal termination mechanisms, such as termination for owner occupation, which involves long notice periods. This is a factor that any buyer intending to live in the property must be aware of before formalising the purchase.

Is the owner required to inform the tenant of the sale price?

Yes. The formal notification to the tenant for the purposes of exercising the right of first refusal must mandatorily include all the terms of the sale, including the price and the payment conditions. This notification should be documented, preferably by registered letter with acknowledgement of receipt or another means that provides proof of delivery. If the notification is made incompletely or without stating the correct price, the tenant may argue that their right of first refusal was violated, which can have legal consequences for the validity of the transaction.

Can the property be put on the market before notifying the tenant of the intention to sell?

It is not advisable. Although the law does not expressly prohibit advertising the property before formally notifying the tenant, the correct process requires notifying the tenant with the terms of the sale before concluding any deal with third parties. Proceeding with viewings and negotiations without this step can create legal complications if the tenant subsequently invokes their right of first refusal and considers that they were prejudiced. Having an experienced property consultant alongside is essential to ensure the sequence of steps is carried out in a legally correct manner.

What can the owner do if the tenant refuses to allow viewings?

The tenant has no legal obligation to permit viewings, so a refusal does not constitute a breach of contract. The best approach is to try to negotiate viewing conditions that are acceptable to both parties, involving the property consultant as a neutral intermediary if necessary. As a last resort, there are alternative tools for presenting the property, such as virtual tours and detailed photographic materials, which can be used to attract buyers without relying exclusively on in-person viewings of the occupied property. This flexibility is one of the advantages of working with a professional team.

Can the owner sell the property to a relative without notifying the tenant?

It depends on the degree of kinship and the conditions of the sale. The law provides for some exceptions to the right of first refusal in cases of transfers between spouses, ascendants and descendants, but these exceptions have specific requirements and do not necessarily remove the obligation to notify the tenant. It is essential to verify on a case-by-case basis, with legal support, whether the specific situation falls within one of those exceptions before proceeding. Assuming that an exception applies without the proper verification can result in legal disputes that compromise the transaction.

What are the tax implications for the owner when selling a tenanted property?

The sale of a tenanted property is subject to the same general rules on property capital gains taxation as any other property transaction. The capital gain is calculated based on the difference between the acquisition value and the sale value, with the appropriate adjustments. The existence of an active tenancy does not in itself create a different tax situation, but the rental income already declared and the eligible costs associated with the property may influence the final calculation. It is always advisable to consult an accountant or tax specialist before completing the sale.

How long does it typically take to sell a property with a tenant?

The process tends to take longer than selling a vacant property, mainly due to the period for the tenant to exercise their right of first refusal and the greater difficulty in organising viewings. Under normal conditions and with good cooperation from the tenant, the process can proceed within the usual timescales for a property sale in Portugal. For a realistic perspective on the timeline and the stages of the process in your specific case, request a valuation and assessment of your property's situation from a specialist consultant who knows the local market.

Is it possible to sell a tenanted property with rent arrears owed by the tenant?

Yes, it is possible to sell the property even if there are rent arrears, but this situation must be managed carefully. The existence of the tenant's debts is a factor that can affect the property's attractiveness to potential buyers, particularly investors, and should be communicated transparently. From a legal perspective, the rent arrears are a matter between the current owner and the tenant and do not automatically transfer to the new owner unless agreed otherwise. In any event, proceeding with a sale in these circumstances requires careful legal support to protect the owner's interests.