Portugal Moves to Unlock Frozen Inheritances With Two-Year Trigger for Forced Sales of Blocked Property

Portugal approved legislation Friday allowing heirs to force the sale of jointly inherited property after two years of deadlock, a move designed to release thousands of vacant homes and building sites trapped by family disputes into the country's tight housing market.

Prime Minister Luis Montenegro announced the measure following a Council of Ministers meeting, saying Portugal cannot live with situations where inherited property remains indefinitely undivided while the country faces a housing crisis. The new mechanism for sale of undivided immovable property will permit one or more heirs to initiate a court-supervised sale when co-heirs cannot agree on how to divide or sell inherited real estate.

After two years of indivision, Montenegro explained, one or more heirs can trigger the sale of the property when there is no agreement, while other heirs retain the right to participate in the sale or match the price to acquire the property themselves.

The measure targets a uniquely Portuguese problem: properties locked in multi-generational inheritance disputes that leave buildings vacant in prime urban locations and rural land abandoned, contributing to both housing scarcity and wildfire risk. According to reporting by Observador, heirs who initiate the process must present a property valuation, with other heirs able to submit additional appraisals. A judge will set a base price and determine the sale method, with electronic auctions one possibility. Co-heirs can match the final price and acquire the property outright.

Any heir opposing the sale will have thirty days after judicial notification to file objections, with the court making a final decision. The government emphasized the reform respects property rights while addressing what Montenegro called situations where inheritances perpetuate themselves as undivided, creating de facto abandoned properties.

The measure is part of a broader housing package approved Friday. The Council of Ministers finalized the fiscal housing program, which includes income tax breaks for landlords charging moderate rents up to 2,300 euros monthly, and a reduced six-percent VAT rate on construction for sale or rental at moderate prices, including self-build projects.

The fiscal package had been authorized by former President Marcelo Rebelo de Sousa in early March through Law 9-A/2026, giving the government 180 days to draft detailed implementing regulations. Those regulations now move to new President Antonio Jose Seguro for promulgation.

Also approved Friday: exemption from capital gains tax when selling a home and using proceeds to buy another property for rental at moderate rates, rather than requiring the purchase to become a new primary residence. The measure aims to incentivize property owners to enter the rental market at government-defined affordable rates.

A separate decree reforming Portugal's urban planning and building code (RJUE) was also approved and sent to President Seguro. The reform seeks clearer rules, more predictable processes, shorter and faster timelines, according to Montenegro, who argued that faster construction means more homes for the Portuguese.

The RJUE changes represent the second major overhaul in two years, following 2024 Simplex urbanistico reforms. Housing Secretary of State Patricia Goncalves Costa and Infrastructure Minister Miguel Pinto Luz unveiled the framework in September, with Pinto Luz promising more hygiene in municipal licensing processes. The former Cascais deputy mayor noted that much of Portugal's licensing delay originates not with municipalities but with central government agencies.

The inheritance reform is expected to take effect once implementing regulations are published, with the government projecting that medium-term the measure could help unblock stalemates in both urban and rural areas. For rural properties, the reform also addresses fire risk by returning abandoned agricultural and forest land to productive use or clear ownership.

For expats: The new inheritance sale mechanism could affect foreign buyers or heirs involved in Portuguese estate settlements. Properties previously locked in family disputes for years may begin entering the market, potentially increasing housing supply in desirable locations. The measure also clarifies a path forward for anyone stuck in an undivided inheritance with unresponsive or uncooperative co-heirs.