Security Deposits in Commercial Leases in Portugal

In the robust commercial real estate sector and leases dedicated to industries and retail commerce in mainland Portugal and the Islands, the paradigm regarding the collection and limit of monetary safeguards transitions away from constraints towards almost full and total negotiating freedom at the contract drafting table. The NRAU provides landlords in these contractual frameworks with vast shelter from the rigid protectionist civil rigor of traditional singular housing.

Absence of Formal Maximum Caps from the Civil Code

Instead of being obligatorily supported and halted by the formal or rigorous limitation in the code to the insurmountable and strict ceiling of the common and literally applicable 2 (two) months of rent fundamentally outlined as a deposit in the Portuguese residential sphere, the framework in its essence on Portuguese soil does not impose any obligatory base ceiling that is immutable to the flows agreed upon in operations with goals in Non-Residential transactions (Stores and Services).

Landlords are free, in the validated consensual drafting subscribed by the corporate team of their industrial and merchant tenants who will occupy the atypical factory properties or bulky logistics buildings on a large scale, to vigorously require a ratio often equated to the budgeted cycles in balance sheets of six, eight, or up to twelve monthly balances of the final invoice.

Typical B2B Fiduciary Security Instruments

Given the enormous volume in bank flows, the usual Individual C.C or NIF Personal Guarantors give way to other corporately mitigated premises from the disadvantage of their organic bankruptcy or death/default in associative domains, using:

1. The "On First Demand" Bank Guarantee (Garantia Bancária À Primeira Solicitação): An instrument issued solely by the national bank branch with formal authorization that gives authority to owners (Landlords) under an agreed limit to unconditionally or at the slightest declared refusal discharge funds effectively over consolidated balances for faults, or covering the heavy infractions caused and expenses resulting from extraordinary and untimely works. Its term, inherent costs with sealing the maintenance of annual commissions, and the exact frozen amount that will be provided totally depend on free clauses and agreement of the guarantor entity.
2. Mother-Company Corporate Guarantee (Aval Corporativo da Casa-Mãe): Where recourse is frequently had to fiduciary corporate responsibilities transposed or spread transversely without prohibition in legal subordination to the foreign holding company controlling shareholders or original parent company over the tiny local Portuguese commercial representations ("Lda") and newly created branches that lease and are headquartered in the leased building.

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