Rent Negotiations Pick Up in Brazil as Rents Rise 18 Percent on Average

RIO DE JANEIRO, BRAZIL – Those with a lease renewal due in October need to be alert. This is because the IGP-M (General Market Price Index), the index used to readjust 90 percent of rental contracts, reached almost 18 percent (17.94 percent) in the 12 months through September, according to the Getúlio Vargas Foundation. As an example, a R$1,500 rent with a contract through September would increase to R$1,769.

With the crisis triggered by the Covid-19 pandemic, at least 25 percent of contracts have been negotiated in Rio, with reductions of up to 50 percent. But this reduction lasted three or four months, and now the rental amount includes this difference for payment. In other words, it will be much more expensive.

“Landlords will find it difficult to readjust this in a scenario of seven months of pandemic. Many negotiations have already occurred due to the economic crisis,” says Leonardo Schneider, vice-president of SECOVI (Housing Union) Rio.

Flexible landlords

Irrespective of this time of instability, landlords are entitled to readjust if the current contract provides for an increase under the IGP-M every 12 months.

“There are three options. In the first, the increase is imposed and the tenant agrees and remains in the property. In the second, the increase is imposed, the tenant does not accept and vacates the premises, paying the fines provided for in the contract. And in the third, the parties negotiate and reach a value that suits both parties,” says Luiz Barreto, president of Estasa.

If the IGP-M increase is passed on to the rent, it will further complicate a new lease. But the market works by supply and demand, today the supply is tremendous, so the trend is for stability or price reduction.

According to data from SECOVI Rio, in the city of Rio there are over 13,000 residential rental offers.

For Marcelo Borges, Abadi’s condominium and rental director, landlords are very attentive and sensitive to the current moment: “We don’t believe that there will be intransigence without negotiation.”

Edison Parente, vice-president of Renascença Management, says that if landlords decide to readjust the rental amount, real estate companies will have a great demand to negotiate with tenants. “If the landlord doesn’t want to negotiate, the tenants will look for a cheaper property. This is expected to occur in December or January.”

Being a good payer helps

Marcelo Borges, Abadi’s condominium and rental director, recalls that tenants must present solid arguments when negotiating with the landlord: “Argue that there was no increase in salary, tell them if there was a reduction in income. Play clean.”

For Adriano Sartori, vice-president of Secovi-SP, if the tenant is a good payer who has proven to be experiencing hardship, it is up to the landlord to assess whether it is worth keeping the property occupied or running the risk of seeking a new tenant while the property remains vacant and incurs taxes and other expenses.

Source: Exame

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