Economic and legal impacts of coronavirus on the rental sector
The pandemic situation experienced in Brazil and worldwide and the containment measures adopted to curb the transmission of the virus directly affect hygienic, political, commercial, economic and legal issues. In this scenario, the most varied doubts in the business sectors have been raised and the lack of judicial precedents generates extreme legal uncertainty.
At the same time, the Executive Branch has made use of its powers and issued measures aimed at regulating certain sectors, among which real estate stands out.
Considering the paralysis of all market branches, there was a considerable affectation of the economic chain and, as already expected, certain commitments will not be borne by the consumer, including the payment of rent instalments.
The main concern in the lease business is as follows: once the businessman who leases a property for his activity stops his production, which is the guarantee of his source of income, how will he be able to afford the rents previously agreed?
A plausible ground that justifies the tenant's breach of contract and the possible requirement for an adjustment in the amount agreed upon is the invocation of the Excessive Onerosity Theory, which occurs due to the absolute absence or considerable reduction of the tenant's income, creating a contractual imbalance, with a clear need for a readjustment in the amount of the rents.
Another argument consists in the allegation that the tenant may operate as an exclusion of liability for the losses it has been suffering, since they result from unforeseeable circumstances or force majeure and that the injured party was not responsible for them.
In this sense, it is also possible to bring this discussion to the deterioration of the faculties of the leased property, since the commercial lease is intended to ensure the lessee the use, enjoyment and benefit of the property for the development of its business activity, and there is an inviolable causal connection between the purpose of the lease and the leased property. Therefore, taking into consideration that the businessman-lessee is compelled to interrupt its activity by determination of the State, the commercial lease agreement suffers an imbalance that must be brought back to a reasonable provision or even its cancellation.
An example of an establishment that is already suffering the drastic effects of the current scenario in the renting business are shopping malls, which in some states have been forced to close temporarily.
Even in locations where the shopping centres are open, the impact on consumer movement will cause a decrease in revenues for both tenants and shopping centre administrators, since most of the lease contracts establish variable rent according to tenants' turnover.
In this case, it is considered that tenants may seek the suspension of rent payments for a certain period of time, until the situation is normalised. This claim may be based either on the application of article 393 of the Civil Code (fortuitous event or force majeure), or on article 22 of the Lease Law (Law 8.245/91), which provides for the landlord's obligation to guarantee the peaceful use of the property.
On the other hand, the administrators of the shopping malls that closed them by determination of the public authorities are also affected by the fortuitous event / force majeure. This way, both sides would have the same allegation in the case of a lawsuit, reinforcing the understanding that it is not possible to apportion blame at this time, and that it is more appropriate to seek alternative means of resolving the conflict through an agreement. This understanding encompasses all non-residential rental properties.
Moreover, it should be noted that the property owners are also suffering from the turbulent times. In addition to the delay in rent payments, they are bearing the burden of breaking the contracts of those who have already given up trying to maintain business activity.
Aware of the instability in the rental sector, Senator Antônio Anastasia created Bill 1179 of 2020, which is awaiting approval in the Chamber of Deputies and provides for the Emergency and Transitional Legal Regime of Private Law legal relations (RJET) during the period of the Coronavirus pandemic (Covid-19).
This bill brings a brief regulation for urban real estate leases (residential and commercial) and makes the following provisions:
Art. 9 No preliminary injunction to vacate urban real estate will be granted in eviction proceedings referred to in Art. 59 of Law No. 8.245, of 18 October 1991, until 31 December 2020.
§ Paragraph 1 The provisions of the caption of this article apply only to lawsuits filed as from March 20, 2020.
§ Paragraph 2. - The right to repossess the real estate in the events set forth in Article 47, Items I, II, III and IV of Law No. 8.245 of October 18, 1991, is assured, the restrictions in the main Section of this Article not applying to such events.
The legislator was concerned about sparing the tenant from being evicted without the meritorious analysis of the request, prohibiting the eviction order only with the examination of the preliminary injunction request, in the cases of lawsuits filed after March 20, 2020.
This is the only official measure already indicated that evidences the possible measures that will be taken in the lease business and, considering the absence of a provision on the possibility of reduction and/or suspension of the collection of rents, in principle, one can see a concern of the legislator in not "helplessness" of the landlord, who is also suffering damages with the situation, without failing to ensure the tenant's right to property.
In contrast to the devaluation movement, the rental of logistics warehouses has been experiencing high demand, mainly because they are used for the storage of goods for online sales, a market that has grown with the confinement.
According to Cesar Nasser, president of the Goodman Brazil Logistic Partnership (GBLP) fund, the increase in demand is already being felt:
"We should lease areas, in the next 15 days, that would take six months to lease in a normal situation"(https://valorinveste.globo.com/mercados/renda-variavel/empresas/noticia/2020/03/25/coronavirus-acelera-demanda-por-galpoes.ghtml)
The Brazilian Association of Electronic Commerce (ABComm) conducted a survey between 16 and 20 March and found that some online shops registered an increase of over 180% in transactions of products in the categories of food and health.
In the current scenario, virtual commerce is expected to grow significantly and, as a result, the renting of warehouses will be encouraged, going against other types of real estate.
In principle, these are the legal answers that can be given with the scarce elements and information about the effects and duration of this pandemic. Despite the difficulty in outlining solutions due to the instability of the scenario, it is necessary to seek to clarify the information so that measures can be taken that will contribute to the stabilization of the rental sector during and after the crisis.
Patrícia Teodoro
Post-graduate student in Civil Law at the CEDIN Faculty