IMPROVEMENTS - WHAT ARE THEY?

Improvements consist of expenses incurred to preserve or enhance the property. There are three types of improvements: necessary, useful, and luxurious, as per Article 216 of the Civil Code, which establishes this regime.

Necessary Improvements

They are intended to preserve the property and prevent its deterioration. They are carried out to fix problems that could lead to greater damage and compromise the habitability or functionality of the property.

In many legal systems, the property owner may be entitled to compensation for necessary improvements made by the tenant, especially if they are significant and increase the property's value. The tenant who makes necessary improvements may be entitled to reimbursement or compensation. The tenant should notify the owner and obtain authorization before carrying out major repairs to ensure that compensation will be provided.

Although these improvements preserve the property's value, they are not intended to increase it. They serve only to maintain the current state of the property and prevent further deterioration.

Some examples of necessary improvements are: roof repair, replacement of plumbing systems, and repair of electrical systems.

Useful Improvements

Useful improvements are enhancements made to a property that increase its functionality, value, or utility, but are not absolutely necessary for its preservation.

In many legal systems, the tenant may not be entitled to compensation for useful improvements unless there is a prior agreement with the owner. The owner may be required to compensate the tenant if there is a contract establishing this condition.

Generally, useful improvements made during a lease or rental contract belong to the property. After the termination of the contract, these improvements usually remain with the owner, unless the contract stipulates otherwise.

It is recommended that any useful improvement be previously authorized by the owner to avoid disputes over the ownership or compensation of these improvements.

They generally contribute to increasing the property's value, either by improving its functional or aesthetic characteristics. They are an effective way to add value and functionality to a property, enhancing the experience of its inhabitants and potentially increasing the market value of the property.

Some examples of useful improvements are: kitchen renovation, addition of a security system; closing in balconies or building a garage.

Luxurious Improvements (or Voluptuary)

Luxurious improvements (or voluptuary) are enhancements whose main objective is to beautify or make the property more sophisticated. These improvements are aimed at aesthetics and comfort, but are not essential for the maintenance or basic utility of the property.

Its main objective is to increase the visual appeal and comfort of the property, providing an aesthetic enhancement or additional comfort. They do not have a direct impact on the property's functionality, but can make the experience of living in it more pleasant.

Although they may increase the visual appeal and perceived value of the property, the return on investment may vary. The added value is not always proportional to the cost of the improvements.

Usually, the property owner is responsible for the costs of luxurious improvements. In lease contracts, the tenant is generally not responsible for these improvements, unless there is a specific agreement.

Some examples of luxurious improvements are: luxury decoration, pool with custom design, installation of air conditioning.

In summary, each type of improvement may have different implications in terms of compensation and right of retention in the case of sale or lease of the property.

It is also important to note that there is a difference between improvements and enhancements. Enhancements are changes made to improve the property's appreciation, without necessarily focusing on the needs of the tenant that need to be met.

Article by Isabel Meireles by LEILOSOC® dated October 1, 2024