Our Portuguese Dream Condo Became a Full-Time Airbnb: The Legal Loophole We Never Saw Coming
- itllbefunretiremen
- Aug 15
- 6 min read
We Did Everything Right... At Least We Thought We Did
We researched, we hired a fantastic real estate agent, we studied the laws, and we moved to Portugal with a dream of becoming part of a community. Today, instead of neighbors, we have a revolving door of tourists. Our residential building has become a de facto hotel, and it all happened legally, right under our noses, despite the very laws designed to protect us.
This isn't just a complaint; it's a warning. It’s the story of how even the best-laid plans can be undone by a single, overlooked detail.
The headlines about Portugal’s housing crisis are real. In the years leading up to our move, rents in cities like Lisbon had skyrocketed by over 65%. In response, the government launched its “Mais Habitação” (More Housing) program in 2023, a sweeping set of reforms aimed at returning properties to the residential market. For locals and for future residents like us, it felt like a lifeline. The law promised to curb the explosion of short-term rentals, known as Alojamento Local (AL), that had consumed so many neighborhoods. We, like many others, breathed a sigh of relief. We felt protected.
The Due Diligence We Thought Was Enough
Our sense of security wasn't based on wishful thinking. We worked with an excellent real estate agent who was incredibly thorough. We spent hours discussing the legal landscape. She covered the current laws and, critically, the potential new laws of the “Mais Habitação” initiative that were being debated but had not yet passed.
We talked all about how ALs worked. She explained that under the proposed changes, a condominium would have more power. We specifically discussed the fact that commercial units, like the storefronts in the building we were considering, could potentially be converted into ALs because they are also considered a commercial activity.
The most crucial part of our discussion was the new rule that would allow the condo association to vote an AL out with a 50% majority. We looked at this as our ultimate safety net. We figured if an owner ever became a problem, the rest of us could simply vote them out. We felt safe.
But here is our single biggest mistake, the oversight that unraveled everything: We focused on the rules, but we missed the math.
We didn't focus on the fact that the building only had 20 units. In our minds, 50% was a clear majority of owners. We never stopped to calculate how few people it would take to become that majority. That was the blind spot.
The Takeover: When a Building Becomes a Business - Full-Time Airbnb
We bought our apartment in a building with a clean slate. It had been through a bankruptcy and had no pre-existing condo rules, which we saw as an opportunity to build a great community from the ground up.
While we were getting to know our new neighbors, a few other units were sold. Quietly, two local investors, working as partners, began acquiring them. Within a year, they controlled over two-thirds of the property. When you own that much of a 20-unit building, you don’t need to ask for permission. You are the majority.
The meeting we expected, where they would ask for a vote to turn their units into ALs, never came. They didn’t need it. The tourists just started arriving.
The Loophole in Plain Sight: How the Law Actually Works
We were stunned. How could this happen when the law gave us the power to vote? We quickly learned the devastating reality of the legal fine print.
Starting an AL is Easy: For a new license, an owner doesn't need proactive condo approval. They simply file a “mera comunicação prévia” (a simple prior notification) with the government. The license is granted almost automatically. The vote we were counting on was never required to begin with.
Stopping an AL is Nearly Impossible: The "50% vote" rule we put our faith in is real, but it's purely reactive. It only applies to challenging an existing license that is causing proven problems. Here’s how it actually works:
The vote requires a majority representing more than half of the property's total ownership value (permilagem), not just half of the owners. In our case, the two investors held 67% of the value, making it mathematically impossible for the rest of us to ever win a vote against them.
You must provide documented proof of repeated disturbances (noise, damage, etc.).
Even with a majority vote and proof, the condo's decision is not final. It is a formal request sent to the city's mayor, who then has the ultimate discretion to cancel the license—or not.
We were in a legal checkmate before we even knew we were playing the game.
Our Hard-Won Lessons: An Action Plan for Future Buyers
We still love Portugal, but this experience has been a harsh education. If you are considering buying a condo here, please learn from our oversight. Go beyond the rules and analyze the vulnerabilities.
Scrutinize the Condo Constitution (Título Constitutivo). This is the building’s founding legal document. If it does not contain a clause that explicitly forbids Alojamento Local, you must assume it is allowed. An absence of a ban is not protection.
Do the Ownership Math. Don't just ask your agent about the rules; ask for the official ownership ledger (permilagem). See if any single person or entity holds a significant share (20% or more). A high concentration of ownership is a major red flag.
Consider the Building’s Size. This was our critical mistake. In a small building of only 20 units, it only takes one or two investors to gain control. In a building with 100 units, a hostile takeover is far more difficult and expensive. The smaller the building, the greater your risk.
Demand Pre-Existing Bylaws. A building with a long-established condo association and a detailed set of rules is a much safer bet than a "blank slate." Look for a history of residential stability.
Check All Zoning. Confirm with the local city hall (câmara municipal) that ground-floor commercial spaces are not easily converted into more tourist rentals, which can further erode the residential character of your building.
Our Next Chapter: Turning a Nightmare Into an Adventure
Our Next Chapter: Turning a Nightmare Into an Adventure
So, what did we do? After realizing our situation was untenable, we didn’t give up on our Portuguese dream. We just closed the book on that chapter. We put our condo on the market and turned a frustrating end into an exciting new beginning. We went shopping for our next adventure! (And don't worry it all worked out financially as well.)
It was incredible. We traveled all of Portugal alongside our real estate team. They put together showings all across Madeira, and since we were open to adventures galore, our journey continued from Lisbon up the coast to the very top of Portugal. Hopping from B&B to B&B, we weren't just looking at houses; we were learning the areas, finding the best local groceries, mapping out the hospitals, and exploring fun little towns. It was truly fun and fantastic.
Instead of the horrid, piecemeal way things can be done in Europe, we made a crucial decision that changed everything. We partnered with one dedicated team, LCL Real Homes, and let them handle all the details. They did all the scheduling, helped find the properties, and ensured every potential area had all the things we wanted close by—including a good golf course, since this is our newfound hobby.
We wouldn't have done it any other way and completely recommend the team we worked with.
Our Final, and Most Important, Piece of Advice
This brings us to the last great piece of advice we can offer in this article. Work with one great real estate team. Exclusively.
Don't jump around. Let someone get to know you, your hopes, and your dreams for your new life. When you build that relationship, it becomes a true partnership where everyone has skin in the game, and your agent becomes fiercely dedicated to your success.
This brings us to an important point of etiquette and ethics. Agents in Portugal invest an immense amount of time, travel, and resources into helping you find your home. Their livelihood depends on the commission from the final sale. If you are using their time to shop, explore, and learn, then close the deal through them. Using an agent's expertise only to cut them out at the last minute is not just unfair; it undermines the very system of trust that makes a great partnership possible. As we all know, none of us work for fun.
By trusting one team, we turned a potential disaster into the adventure of a lifetime. We learned from our mistakes, found the right partners, and are now continuing on the path to the Portuguese dream. Now it's just bigger and better.