TJ of São Paulo orders company to replace IGP-M by IPCA in rental contract

The paint manufacturer Sherwin-Williams got in court the replacement of the IGP-M (General Market Price Index) as a correction index of its lease agreement with a real estate investment fund.

Starting this year, the rental agreement valid until 2029 will be adjusted by the IPCA (Broad National Consumer Price Index), the official inflation calculated by the IBGE (Brazilian Institute of Geography and Statistics).

The decision of the 29th Private Law Chamber of the São Paulo Court of Justice is one of the first judgments in the second instance and may set precedents for other tenants’ lawsuits. In 2020, with the escalation of the IGP-M, tenants sought the judiciary after they were unable to negotiate their contracts.

In May of this year, the 12-month accumulated IGP-M hit 37%, a peak in the historical series of the Getulio Vargas Foundation, which calculates the index. In the same period, official inflation was 8%. Until November, rent inflation was 17.89% in 12 months. The November IPCA will be released this Friday (10). In the 12 months until October, it was at 10.67%.

For judge Silvia Rocha, rapporteur of the case at the 29th Chamber, the rise of the IGP-M made him stop “measuring only inflation, the purpose for which it was intended, generating imbalance” in the contract.

Despite favoring the request to replace the indexer, the judge ruled that the sentence would not apply retroactively and could only be applied from the next readjustment, scheduled for December – the decision was taken in early November.

As a result, ​Sherwin-Williams was unable to revise the 20.92% increase applied at the end of last year, when it went from a rent of R$ 203.7 thousand to R$ 246.3 thousand, according to the ruling.

The lawyer who represented the paint manufacturer, Renato Moraes, from Cascione Pulino Boulos, says he has filed an appeal so that the decision also applies to the 2020 readjustment, since the action was initiated days before the base date. “I don’t see any legal basis for not applying it retroactively, so we question the legal basis for the limitation,” he says.

The fund that owns the property also filed an embargo with the TJ-SP. The expectation among lawyers who work with real estate law is that the first decisions on the merits (those that are not preliminary and, therefore, temporary or provisional) will start to come out in the first half of 2022.