Although the Tenancy Law (nº 8.245/91) assures them of this right, in practice, few tenants exercise it. Extremely careful in the research and negotiations that lead them to a new lease, many end up abandoning the contract due to simple monetary correction, without going back to the market to find out if, after thirty-six months, the corrected value is above or below that practiced.
If there were a stricter correlation between price formation in the corporate real estate market and inflation, generally measured by the IGP-M or IPCA (indexes that annually correct contracts), this oversight would not harm tenants, but this is not the case.
In order not to contaminate the reflection with extraordinary circumstances, such as the Covid-19 pandemic, let’s go back to 2012: in that year, the rent value per square meter in a specific AAA corporate building located in the Av. Paulista, a prime area of the city of São Paulo, was R$57.00. In 2015, this value jumped to BRL 125.00, falling, in 2018, to BRL 89.00. Corrected by the IGP-M, the R$57.00 in 2012 corresponds to R$68.43 in 2015 and R$81.46 in 2018. If you, the tenant, were the holder of this contract, signed in 2012, you would certainly have been summoned by its landlord in 2015 to discuss this over 100% appreciation with him. Now, if you had contracted this space in 2015, at R$125.00/m², in 2018, it would be in your interest to invite the landlord to negotiate and try to achieve this savings of almost 30% in your occupancy costs. You, renter, would not pass up this opportunity, right? And if you knew that, that same year, in a building next to yours, newly built and also AAA, leases were being closed at R$ 75.00 and with such a grace period that your costs with a possible relocation would be zero or even negative, even taking into account the termination fine, what would you do?
Perhaps the most important question is: how would you, the renter, know all this?
What do you need to know to negotiate your contract?
Briefly, the vacancies, the asking prices and, above all, the last values transacted in the building it occupies and in others in the same region. But how to obtain such information?
The renter can, on his own, resort to the major real estate portals. However, if you do, you will soon realize the difficulties and limits of research conducted in this way. Try it out: enter one of these sites and search for “commercial rooms/sets” and “corporate slabs/floors” with “area of 1,000 m²”, say, in “Vila Olímpia, São Paulo”. Such a search would yield, if done today, more than 615 results. Digging into them, you will first discover that several of these properties, in fact, are not located exactly in Vila Olímpia: advertisers are generous with their properties, making their location more or less flexible to make them appear in the neighboring neighborhood, if the demand for it is greater. Knowing the exact location of advertised properties, incredible as it may seem, can be a challenge: owners and their representatives, that is, brokers, do not always disclose the complete address (with numbers) and the name of the buildings where they are located, so to force a contact, thus inevitable. By the way, not only inevitable for that reason: most of these advertisements are vague with regard to the characteristics of the property and, above all, the infrastructure and amenities offered by the condominium that houses it – price and area are, in general, all that you can find it there, in addition, of course, to the advertiser’s telephone number… If you want to know if there is central air conditioning or an emergency generator in the building, you will have to call; to find out if the ceiling is modular, drywall or monolithic, you will have to call; to find out if the floor is raised and what type of elevation it is, you will have to call. Unfortunately, you’ll have to call, because when you’re negotiating a revision of your lease with your landlord, they’ll rightly only agree to compare your property with other equally well-located properties in buildings of the same class. In the face of so much work, the disorganization and opacity of the offer in this market will have on you, the lessee, the effect that they are strategically destined to produce, that is, the hiring of a professional or company in the field to carry out the necessary research for the negotiation of your review.
What precautions should you take when hiring third parties to assist you in revising your contract?
The first thing to ask yourself is whether the company or professional has easy access to information that you, the renter, would have such a difficult time obtaining on your own. We, at Ocupantes, maintain a database, regularly updated, with all the technical information, vacancies and commercial conditions of all the corporate buildings in the main Brazilian metropolises – which would take you weeks from aggregator websites and a good amount of time. of our competitors, thanks to the tools we have developed over almost 20 years of activity, it costs us a few hours. Other large companies in the industry maintain similar databases, however, the knowledge of third parties, ours or our competitors, will only help the lessee if it is imparted to him in an impartial manner. Ocupantes is not a traditional real estate company: we do not sell, either through sale or leasing, corporate spaces; we are a real estate consultancy dedicated exclusively to the representation of occupants, that is, end users, tenant companies, and that is why we are so effective. Such negotiations must take place in a sensible manner, but it is not convenient to disguise the antagonism between the parties: the landlord wants to earn more, the tenant wants to pay less. We at Ocupantes, as we do not represent owners, do not shy away from being combative. Most of our competitors, on the other hand, can very well sit next to you at that table, but in others, they will sit or are already sitting next to the landlord, as their representative. The lessee must therefore ask himself whether this ambivalence does not generate an insurmountable conflict of interests, which, in turn, weakens his representative’s commitment to him, making him more of a partial, excessively conciliatory “intermediary”, when what he, or better, you, renter, need someone who exclusively defends your interests.
Richard Pacey | Real Estate Director
He has been with Ocupantes since 2007 and has more than 20 years of experience in the corporate real estate sector. From 2001 to 2006, he worked for the international real estate consultancy Jones Lang LaSalle, in the Tenant Representation area.
He holds a degree in Marketing from Universidade Anhembi Morumbi and is a native speaker of English.
Phone: +55 11 99975-5322
E-mail: richard.pacey@ocupantes.com.br
