Tatiane Bagagí Faria and Vitor José Ferreira do Couto
Lawyers at Marcos Martins Advogados
It has become a well-known fact that the IGP-M index (FGV) had a very high variation of more than 23% last year. This variation has not been seen for almost 20 years and was generated by economic impactssuch as the devaluation of the real against other currencies, especially the US dollar, and the increase in commodity prices, which regulate the variation of this index. The situation was further aggravated by the effects of the COVID-19 pandemic.
It is also worth mentioning that the Getúlio Vargas Foundation itself, the institution responsible for publishing the IGP-M, acknowledged that the rise in this index was truly extreme, capable of generating an imbalance in various commercial relationships.
The extraordinary rise in the IGP-M (FGV) unpredictably alters the monthly value provided for in a wide range of contracts, especially with regard to rental contracts in general. This index is commonly used in the market for the annual readjustment of leases, despite the fact that the variables that make up this index are directly linked to the industrial sector. In effect, the rise in the IGP-M (FGV) will cause a sudden disadvantage for tenants, while it will become extremely advantageous for landlords, due to the onerousness caused by the application of this index.
The imbalance in contracts due to the application of the IGP-M adjustment may lead to a revision of the price contracted by the parties, in accordance with article 317 of the Civil Code, which provides for this possibility if the imbalance caused by unforeseeable reasons is proven, and in this case the high increase in the index used to adjust the contract fits in.
Even more so in the context of the pandemic, the readjustment of the rent by the IGP-M, coupled with the reduction in economic activity in general, caused by the adoption of restrictive measures in order to contain the spread of the virus, is an extraordinary fact that impacts on the balance of the relationship between the parties, considering the evident drop in turnover of the legal entities affected by the economic crisis that has arisen.
It is also important to note that although article 19 of the Lease Law provides for the possibility of the landlord or tenant requesting a judicial review of the rent, in order to adjust it to the reality of the real estate market, provided that the lease agreement has been in force for more than three (3) years, given the current context, it would be unreasonable to impose on the contracting parties to wait for this period to elapse before discussing the rent adjustment.
In situations of excessive onerousness resulting from an extraordinary event, such as the current rise in the IGP-M, article 478 of the Civil Code provides for both the possibility of terminating the contract without fault on the part of the party who is the victim of the imbalance, as well as reviewing the contractual obligations, so as not to lose the contractual relationship.
Furthermore, based on the theory of unforeseeability and in accordance with the general clause of rebus sic stantibus, whose commandment provides for the full possibility of altering the cold letter of the clauses previously stipulated by the parties, it is evidently possible to revise the contract with a view to altering the rent adjustment index in the event of a contractual imbalance. In other words, the analysis must be made on a case-by-case basis, so that the index applicable to leases cannot be automatically revised for any and all leasing relationships.
Since leases are ongoing contracts, the impact of the extraordinary and unpredictable rise in the IGP-M can be mitigated by the adoption of other monetary correction indices, especially those that are in line with the reality of the parties involved, avoiding unlawful enrichment of the landlord and excessive onerousness for the tenant.
There is nothing to prevent the definitive replacement of the adjustment index with another that better suits the reality of the rental relationship, in order to avoid contractual imbalance.
Bearing all this in mind, especially if the parties are interested in maintaining the contractual relationship, it is always advisable for them to try to find a consensual solution, with the help of their lawyers, to change the most appropriate readjustment index for the contract, before going to the courts.
As far as case law is concerned, the courts have been consolidating their view that it is entirely possible to revise the rent adjustment index to one that better suits the contractual relationship, such as the INPC (IBGE) or the IPCA (IBGE), always seeking to maintain the contractual balance and avoid excessive onerousness for either party, thus preserving the legal transaction.
In this sense, the Judiciary has acted in favor of readjusting the rent review index in lease agreements where it has been demonstrated that the contractual imbalance caused by the high index is in line with the current economic situation of companies due to the measures adopted to deal with the Covid-19 pandemic. In a recent ruling, the São Paulo Court of Appeals , in Interlocutory Appeal No. 2030888-83.2021.8.26.0000[1], granted the legal entity tenant’s request to change the remuneration index of the contract to the IPCA, justifying that it was more in line with the current economic situation.
In this way, tenants can, regardless of the expiry of the 3-year period provided for in Article 19 of Law No. 8.245/91, request a change in the rent adjustment index due to the high variation in the IGP-M over the last year, applying, provisionally or definitively, depending on the case, an adjustment index that maintains the contractual balance, in order to preserve the contract and the principles inherent in the tenancy relationship.
It is of the utmost importance to point out that the application of this understanding in relation to the alteration of the IGP-M is not general and unrestricted, as it must be analyzed in the light of each specific case, since there are several variables that can make the incidence of the aforementioned adjustment index perfectly appropriate to the specific relationship of the parties.
As an example, we have the case where the landlord, before the deadline for readjustment of the monthly amount, grants any discount to the tenant, including due to the effects of the COVID-19 pandemic. Then, when the deadline for readjusting the amount set out in the contract arrives, suppose the landlord intends to apply the IGP-M to the amount already discounted.
In this case, the use of the IGP-M is appropriate, because even though there has been an exacerbated increase in the readjustment index, the monthly rent was already out of date due to the discount granted by the landlord.
It is therefore essential to carry out a thorough and specific analysis of each case, in order to verify the real possibility of altering the adjustment index provided for in the contract, especially since it is essential to verify the actual occurrence of any contractual imbalance or excessive onerousness of the contract.
Marcos Martins Advogados is aware of this issue and is prepared to provide qualified legal advice to its clients.
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[1] TJSP – Interlocutory Appeal No. 2030888-83.2021.8.26.0000 – 30th Chamber of Private Law – Presiding Judge: Maria Lúcia Pizzotti – Judgment Date: 05/04/2021
