The following are the usual forms of leases:
- Commercial leases
Most commercial offices, retail space and standard industrial space are available only through a commercial lease. Most commercial lease transactions commence with an offer to lease, which contains the business terms agreed on by the parties, including the space, term, rent and any tenant inducements. Commercial leases typically require tenants to be responsible for their proportionate share of property taxes, insurance, common operating expenses and common area utilities. Tenants are further responsible for all costs associated with their own occupancy including personal property taxes, janitorial services and all utility costs. In a retail lease (mostly in shopping center leases), a tenant may also be required to pay rent based on a percentage of its sales. In a built-to-suit type of lease, early termination by the tenant is contingent on the payment of contractual penalties not exceeding the aggregate amount of rent maturing until the end of the term originally agreed.
- Residential leases
Residential leases are regulated by federal legislation, which will override the terms of the lease contract, regardless of the intention of the parties.
Except for the matters deemed as public policy (as provided under Brazilian real estate lease law, such as the mandatory renewal in commercial leases and the right of first refusal, just to mention the most relevant ones), leases can be freely negotiated.
There is no maximum term for leases. However, if the landlord is a married individual and the lease term exceeds 10 years, the consent of the landlord’s spouse is required.
Residential leases are generally entered into for a term of 30 months, as such term grants the landlord certain termination rights. Commercial leases are generally entered into for a term of five years, as they grant tenants certain rights to renew. Some landlords try to enter into a lease of less than five years to avoid mandatory renewal.
For commercial leases with a term equal to or greater than five years (or if the sum of successive terms is equal to or greater than five years), among other legal requirements, the tenant may demand a lease extension for a term equal to the expired term.
A landlord can only terminate a lease under limited circumstances, such as if the tenant breaches the lease and the breach is not cured or if urgent repairs required by public authorities that cannot be performed with the tenant occupying the real estate. In case of a breach of payment of rent, for instance, the tenant may have certain rights to cure default as provided in the lease law. In case of residential leases entered into for a term of 30 months, after the end of the term, the landlord may terminate the lease for convenience. In case of commercial leases effective for an indefinite term, both parties may terminate the lease for convenience by means of 30-day prior notice (or the prior notice period agreed under the contract, if it is longer than 30 days). Tenants, on the other hand, can always terminate leases for convenience at any time on prior notice and payment of a penalty (in an amount agreed under the contract or fixed by a court).
Yes. Pursuant to Brazilian real estate lease law, even if the landlord is a foreigner, rent must be paid in Brazilian currency.
Rent is typically paid on a monthly basis. Rent can be required to be paid in advance; in which case the landlord cannot require a guarantee from the tenant for the payment of the rent. Temporary residential leases usually provide for the rent to be paid in advance.
Rent can be increased due to inflation every 12 months. In addition, rent can be reviewed three years after the start date of the lease if it is not aligned with market value for similar real properties in the region.
The following is usually required of landlords:
- Repair and maintain the structure of the property
- Grant the tenant the use of the property and hold the tenant harmless from disturbances in its use
- Pay for non-ordinary maintenance fees (in case of condominium)
The following are usually required of tenants:
- Pay rent on time
- Offer a guarantee to secure payment of rent
- Keep the property in good order and return it in the same condition (regular wear and tear is exempted)
- Give the landlord access (often by appointment) for inspections and landlord’s work
Tenants are generally allowed to assign the lease or sublet the premises, provided that they obtain the landlord’s consent.
If the premises are substantially damaged or destroyed by an act of God, the lease is often terminated. Rent generally abates according to the extent of the damage or destruction.
If the premises are damaged or destroyed due to causes attributed to the tenant, then the tenant may be liable for repairs or replacement.
The landlord is usually responsible for insuring the leased premises and recovers the cost from the tenant.
Tenants are granted the right of first refusal if the owner sells the leased premises. If the right is not exercised, the tenant may have the right to maintain the existing lease in effect under the following circumstances:
- The agreement establishes that it will continue in force in case of sale to third parties
- The agreement was entered into for a fixed term
- It is registered before the relevant matrícula