Bill in the House providing for index change is new emphasis in the dispute to change location in the pandemic

The pressure to drop the General Price Index-Market (IGP-M) as a standard parameter in rent adjustments has reached Congress. On Wednesday (7/4), the House of Representatives approved urgency for the processing of Bill 1.026/21, from Representative Vinícius Carvalho (Republicans-SP), foreseeing that the readjustment index foreseen in the contracts does not exceed the Amplified Consumer Price Index (IPCA).

There is still no prediction as to when the matter will be voted on in the Plenary, but the outcome is of special interest to shopkeepers and landlords, especially shopping malls, which have disputed in court changes in rents in the midst of the pandemic and the acceleration of the IGP-M. So far, the theme has yielded diverging decisions.

Lawyers who work in the real estate sector understand that the PL runs into constitutional barriers due to interference in free enterprise, i.e., the guarantee that a citizen can act autonomously in the market, without state guarantee. Free enterprise is a principle foreseen in the Federal Constitution, whose competence to analyze, when questioned, is of the Supreme Court (STF).

The Supreme Court must analyze the issue of index replacement in a lawsuit filed on April 5 by the National Confederation of Metalworkers (CNTM). The class entity says that the economic crisis "resulting from poor management of the coronavirus pandemic has made it difficult to balance the accounts and fulfill the commitments made" (ADPF 818).

Still according to the specialists, the bill goes against the Civil Code that, in the sole paragraph of article 421, provides for the principle of minimal state intervention in private contracts. They affirm that the Civil Code already provides the judge and the parties with the tools to request contractual revision based on the theory of unforeseeability and excessive onerosity, provided for in articles 478 to 480.

The concern is that this replacement, if approved, will be determined by law, which is not healthy, according to attorney José Nantala Bádue Freire, from Peixoto & Cury. For him, the measure "may represent an excessive intervention of the State in private contracts" by making constant use of an institute that should be applied in situations of contractual imbalance.

Lawyer Luis Peyser, partner at I2a Advogados, criticizes the PL by pointing out that unlike consumer or labor relations, it is not possible to say that in rental contracts there is necessarily a relationship of hipossuficiency of the tenant in relation to the land owner. "It is very possible that a property owner being the hipossuficient in a relationship with the tenant. It is possible to have a case of an individual who owns real estate leasing to a McDonald's.

The pandemic has shaken in-person sales in shopping malls. In São Paulo and Rio de Janeiro, shopping centers were closed for three months at the beginning of the health crisis, in addition to reduced opening hours during the rest of the year, and now another contingency period with no certain date to end. At the same time, the IGP-M, calculated by the Getúlio Vargas Foundation (FGV), has skyrocketed. Until March this year, in 12 months there was a 31.1% increase in the index, with a high of 8.26% only in 2021. In the year before the pandemic, until March, the variation had been 6.81%. The sum of these circumstances generated a rush of shopkeepers to court.

In general, they allege excessive onerosity of the current rent value, especially after readjustment, considering that they did not use the space fully for their activities. On the other hand, the malls claim that, even closed, they maintained costs. Just in the Courts of Justice of São Paulo (TJSP) and Rio de Janeiro (TJRJ), JOTA counted at least 25 cases in the second instance this year discussing changes in commercial rent costs due to the situation, mainly involving stores and shopping centers - and with favorable preliminary court rulings sometimes for one side and sometimes for the other. There are similar situations in other states as well.

One of the changes sought has been the adoption, in the calculation of the adjustments, of the IPCA, which presented an increase of 6.1% in the last 12 months until March. The contrast with the official inflation generated a discussion about the need to abandon the IGP-M in rents. This has already happened in residential rents, indicated by the lower increase in the cost of housing, of 4.63%, in the 12 months to March, as indicated by this item in the Consumer Price Index (CPI). The index is one of the items that make up the IGP-M, corresponding to 30% of it; there is also the Broad Producer Price Index (IPA), with a weight of 60% and which takes into account variations in commodities and is impacted by the dollar; and the National Index of Construction Cost (INCC), with 10%.

Andrea Navarro, partner at Alario Navarro - Soluções por Acordo, is conducting several out-of-court negotiations and told JOTA that there is a strong movement of retail companies to renegotiate, as a way to not depend on court decisions. "It has been the most efficient way to find solutions that are balanced and sustainable in the long term, preserving the relationship of the parties," she says. She believes that pandemic has brought "value from good business relationships cultivated between landlord and tenant."

The National Confederation of Store Managers (CNDL) has been guiding its members to negotiate before going to court. "As the contracts are signed privately, the idea is that the parties resolve among themselves if they intend to change from IGP-M to IPCA," says Karoline Lima, a specialist in Institutional and Governmental Relations at CNDL. The entity has as one of its priorities that the bill 1.026/21 be approved.

The attempt of tenants in court has been to extend the change from IGP-M to IPCA to commercial leases more broadly, as has happened via negotiation in residential leases. Thus, the Union of Retailers of Porto Alegre filed a public civil action in the Court of Justice of Rio Grande do Sul (TJRS) for the change in contracts signed between tenants and three shopping centers in the city. An injunction in their favor determined that the shopping centers had to change the index used. The shopping centers appealed, stressing that due to the pandemic scenario, they adopted measures to reduce rents and charges of tenants, "always considering the liberality and autonomy of each relationship and the peculiarities of each commercial operation. The rapporteur of the case, Judge Ergio Roque Menine, from the 16th Civil Chamber of the TJRS, signed a decision unfavorable to the tenants on April 1st.

In general, in the recent cases observed, based on the significant increase in inflationary indices, this has been the position of the judges, not accepting the change. In a case involving the tenant Antix against Jundiaí Shopping and the shopping center chain Multiplan, the change in the adjustment index was denied. The judges of the 5th Civil Court of the Ribeirão Preto District of TJSP understood that there was no "apparent illegality in the application of the readjustment index provided for in the contract", in a decision dated March 15.

The opposite path has also been taken. In a collective decision from the 40th Civil Court of the Central Forum of TJSP, it was determined to replace the adjustments by the IPCA, in order to be "more consistent with the current situation in Brazil, as a form of composition of the purchasing power of money," as wrote the rapporteur Maria Lúcia Pizzotti, in a dispute between Martins da Costa & Cia and JK Iguatemi. It was also determined a 50% discount in the rents until the matter has a definitive judgment. The temporary replacement was also authorized for a shoe store (TL Faria Lima) in the Iguatemi shopping center, in São Paulo, by judge Francisco Occhiuto Júnior, in the 32nd Chamber of Private Law, in February.

Evidently, the situation is atypical and not foreseen in the contract, which is why prior negotiation for contractual revision between tenants and landlords has been more advisable, especially when it comes to requests for changes in inflation correction indexes. "Even more so at this moment, one cannot say that contracts should be immutable. But, even for the sake of greater legal security, there are already some points that are common ground in not granting a revision, such as loss of employment or even inflation", explains attorney Angelo Prata de Carvalho, partner at Ana Frazão Advogados.

In relation to the IGP-M specifically, there is also some convergence. One of the decisions along these lines that has ruled courts is by Minister Carlos Alberto Menezes, from the 3rd Panel of the Superior Court of Justice (STJ), in 2002 (Special Appeal 403.028), understanding that the index is a fair parameter for rents.

In addition, Law 8.245/91 - which deals with urban real estate leases and would be altered by PL 1.026/21 - establishes, in its article 18, that "it is lawful for the parties to fix, by common agreement, a new rent value, as well as to insert or modify a readjustment clause"; but, afterwards, it affirms that, if there is no agreement, a judicial review may be requested after the contract has been in effect for three years. The point is that, not only has time passed, but the pandemic has created an exceptional situation that defies what had been agreed upon.

In an article published by JOTA in March, Ana Beatriz de Alcantara and Caiã Lopes Caramori, of MAMG Advogados, state: "The contractual adjustment was thought of as a way of keeping the contract balanced, contextualized and alive. However, what we have observed in recent months is the termination of contracts due to the atypical increase in the IGP-M. They recommend that the contractual review should be based on actual cases, and cite as alternatives to a substantial increase the broad contractual review to specific renegotiation of economic clauses or remodeling of the contract's financial structure.

In addition to requests for changes in the adjustment rates, there are also rulings that provide for rent reductions in periods when the malls were closed or discounts for the year 2020. The total exemption, requested in some cases, has not been sustained.

In Rio de Janeiro, on March 24, the judges of the 27th Civil Chamber of the TJRJ accepted an appeal by BPS Shopping Center, responsible for Botafogo Praia Shopping, after a toy store owner (Safira and Esmeralda Comércio de Brinquedos) obtained a 50% reduction in the rent of her store in the middle of the pandemic. Initially, she had asked for a complete exemption of the values, although the mall had already offered discounts on the rents from April to October 2020, reaching 90%. Thus, the tenant returned to the proposed payments for the period.

There are similar situations in São Paulo. The Praiamar shopping center administrator in Santos, on the coast of São Paulo, after a tenant's request, should receive half of the rent in the second half of 2020, according to the decision of the judges of the 27th Chamber of Private Law of the Court, on March 23. Angela Lopes mentioned that the decision "met the principles of reasonableness and proportionality, without being too burdensome to the parties, and allowed the continuity of commercial activity. Now, the continuity of the discount for 2021 would be in dispute.

Also after a request for rent exemption during the pandemic, the 32nd Chamber of Private Law of TJSP determined the reduction of 50% of the lease payment - the dispute was between Casa de Animais Santa Clara São Francisco and the administrator Vipasa. The argument for not zeroing the rent considers that the "lessor was also affected by the unforeseen situation", as stated by the rapporteur Luis Fernando Nishi, in a decision dated March 19.

In general, in the São Paulo decisions in the first months of this year, shopping centers have obtained situations, if not in the middle, more favorable, under the argument that the pandemic has affected all agents.