After several decisions in different paths regarding the possibility of Local Accommodation Activities in habitational buildings, on March 22, 2022, the Portuguese Supreme Court of Justice, in a Uniform Judgement of Jurisprudence, decided that in the horizontal property regime in residential buildings – which stands for any apartment building or complex, the indication in the constitutive title that a certain fraction is intended for dwelling purposes should be interpreted as meaning that local lodging is not allowed there.

Consequently, the exercise of the activity of local accommodation (being that activity a commercial act, that arises from an economic exploitation), in a unit registered in the horizontal property incorporation title as having residential purposes, would constitute a breach of the purpose established in such title. This means that, the local accommodation should only be allowed if the unit is registered for commercial purposes.

In the grounds of the judgment, the Supreme Court of Justice concludes that it is not mandatory, in the incorporation deed of Horizontal Property, to mention the purpose of the autonomous fractions. However, it is imperative that, when indicated, it is understood as a way for the owners of the units to restrict the purpose or use of these units. The Supreme Court considers that such understanding protects, from the outset, “the legitimate expectation of each condominium member as to the conditions of use, either of the common parts, either of the respective unit, either of the others, which conditioned their will to enter into a solution of ownership with various notes of communion not only legal, but real, material” as decided by the Court of Appeal of Porto in the same case.

It should be recalled that the local lodging activity has seen, in the recent years, an exponential increase in demand and, above all, in supply, particularly in large historic centers, most of which are integrated in residential buildings under horizontal property. 

One important point is that this prohibition is not only applicable for local lodging to be created in the future, but also for the ones that already exist.

Despite this decision, the prohibition of local lodging in units integrated in residential buildings does not operate automatically. An owner must appeal to the Court to see this right become effective.

The major outcome of this decision is that the interpretation of not being allowed to operate local accommodation in residential units willallow any owner in the same building to, without the need for a resolution of the joint owners’ meeting, to request the end of the operation of a local accommodation establishment installed in a residential unit, , regardless of the registration as a local accommodation establishment, by means of prior communication addressed to the President of the municipality territorially competent and the title of opening to the public.

The decision will impact all current local accommodation establishments, regardless of the date of authorization. Therefore, it is expected large number of lawsuits requesting their closure, considering the specific conditions of time in which it will be applied, which covers all current local accommodation establishments, regardless of the date of authorization.

Despite having been approved by nearly thirty judges, two statements of vote were included in the court decision, where two judges expressed their concern about this decision, one of which points precisely to the possibility of increasing (even more) the number of lawsuits and the (in)capacity of means to reply.

Although, that decision does not have any impact on the Golden Visa Program, we think it is of major importance, given that it has impact in the conception of the real estate and its exploitation in Portugal as well as given the positive impact this decision might have to our investor, given the expected increase in the demand for accommodation in hotels, based on the expected decrease of supply for lodgings in residential building. For the near future, and in our best opinion, we do believe some amendments to the current existing legislations will be expected in order to create a regime for the operation of local accommodation establishments, after the court decision radically changed the existing legal framework.