Transposition of AML V Directive: prevention of money laundering and terrorism financing (Law no. 58/2020)

Legal Alert no. 127

On September 18th, 2020, the Ruling no. 299/2020 of the Constitutional Court was published in Diário da República, declaring, with general mandatory force, the unconstitutionality of the rule set forth in article 1091, number eight of the Portuguese Civil Code, which read as follows:

"8 - In case of a lease agreement for housing purposes relating to part of a building not constituted as horizontal property, the tenant has the right of first refusal under the same terms as the autonomous fraction tenant, to be exercised under the following conditions:

a) The right is relative to the share of the building corresponding to the permillage of the property covered by the lease contract for the proportional value of that share in relation to the total value of the transmission;

b) The communication contemplated in Article 416 (1) shall indicate the values referred to in the previous subparagraph;

c) The acquisition by the preferred party is carried out with affectation of the exclusive use of the share of the building to which the lease corresponds.”

The Constitutional Court has declared unconstitutional the aforementioned paragraph 8, of the article 1091 of the Portuguese Civil Code, which guaranteed the exercise of the right of preference by tenants in a building not constituted on horizontal property.
The unconstitutionality of the declaration stems from the infringement, by the aforementioned provision, of the provisions on the right to private property, enshrined in Article 62 of the Constitution of the Portuguese Republic, in conjunction with Article 18(2) of the said law, which prevents the restriction of rights, freedoms and guarantees in cases not envisaged in the Constitution
The decision rendered by the Constitutional Court was based, inter alia, on the following conclusions "(...) the special regime of preference contained in Article 1091(8) excessively sacrifices the right to free transmissibility of the building, without satisfying the objective of housing stability" and, even though "the sub juditio rule, by disproportionately limiting the landlord's right to private property, violates the provisions of Article 62(1) of the Constitution"

In fact, and in accordance with the applicable legislation, the unconstitutionality declared by the judgment in question to be of general binding force has taken effect since the entry into force of Law 64/2018 of 29 October.
Finally, it should be noted that the Constitutional Court's decision was not unanimous and deserved defeated votes based, namely, on the fact that the unconstitutionality of the rule under analysis treats housing as a financial asset and not as a social good.

To access the full text of the law please click here.