Prevalence of mortgages over retention rights

Decree-Law 48/2024 of July 25 amends the legal regime for real estate retention rights, limiting the situation in which it prevails over previously registered mortgages.

Objective? To strengthen the mortgage creditor’s position

The objective of this amendment is to strengthen the mortgage creditor’s position and speed up insolvency and company recovery proceedings in the context of the Recovery and Resilience Plan.

What are the limits to the prevalence of retention rights over mortgages?

The new regime establishes that the holder of a real estate retention right can only be paid preferentially over the debtor’s other creditors, including the mortgage creditor, if the holder’s claim guarantees the reimbursement of expenses incurred to preserve or increase the value of the property. It is only in this case that retention rights prevail over mortgages (even if the mortgage was registered previously).

When does the amendment enter into force?

Decree-Law 48/2024 enters into force 30 days after its publication on August 24, 2024, and applies to retention rights created after that date.

What is the practical effect of this amendment?

The amendment introduced in article 759 of the Civil Code has a significant impact since mortgage creditors will see improved security and the payment of their claims being prioritized over the claims of holders of retention rights that do not involve expenses related to property value preservation or increases.