Rent review action: how to adjust the rent to the market price?

Lease contracts last for years — and, over that period, the market changes. One neighborhood appreciates, another loses traffic; the economy fluctuates. The result is common: the rent agreed long ago no longer matches what is charged today for comparable properties. When this happens and there is no agreement to adjust it, there is a solution: the rent review action.

It serves both sides: the landlord who sees their rent fall behind can seek an increase; the tenant who pays above the market can seek a reduction. In this guide, you will understand what the rent review action is, when it applies, what the term is, how the provisional rent works and how it differs from the renewal action — with a practical example.

What is the rent review action?

The rent review action allows the rent to be adjusted to the market price when the parties cannot reach an agreement. The basis is art. 19 of Tenancy Act 8.245/1991: “where there is no agreement, the landlord or tenant, after three years of the contract or of the previously made agreement, may seek a judicial review of the rent in order to adjust it to the market price”.

Note two points. First, it is a two-way route: both the landlord (to increase an outdated rent) and the tenant (to reduce a rent above the market) can bring it. Second, it applies to residential and commercial leases. The aim is simple and fair: to make the rent reflect the reality of the market, rather than an old and outdated snapshot.

What is the difference between the rent review action and the renewal action?

These two actions are often confused, but they have distinct purposes:

• The rent review action (art. 19) only adjusts the rent to the market — without changing the term of the contract, which remains in force.

• The commercial lease renewal action (art. 51) renews the contract itself for a new period, protecting the business premises (goodwill) — and, in that process, the rent may also be renegotiated.

In short: if the contract remains valid and the problem is only the price, the route is the rent review action; if the contract is coming to an end and the business owner wants to secure continued occupation of the premises, the route is the renewal action. In some situations, the strategies connect — so it is worth analyzing the stage of the contract and the goal (adjust the price, renew, or both) before deciding.

When can I request a rent review?

The rent review action requires that a term be met: three years of the contract or of the last agreement/review. But there is a decisive subtlety, already settled by the courts:

• A mere annual adjustment by an index (IGP-M, IPCA) does not restart the three-year term — after all, it only corrects for inflation, it does not change the real value.

• Whereas an agreement that increases the rent in real terms (above mere inflation correction) restarts the count of the three-year period.

That is, to know whether the three-year period has already been met, the contract history must be analyzed: when it began, what adjustments and agreements there were, and whether any of them represented a real increase. This calculation is the starting point of the rent review action — and getting it wrong can lead to dismissal of the action for failure to meet the requirement.

How does the provisional rent work?

One of the most useful aspects of the rent review action is the provisional rent. Upon receiving the action, the judge may immediately set a provisional amount, of up to 80% of the claim, due as of the service of process (art. 68, II, of Tenancy Act 8.245/1991).

In practice, this means that, while the case proceeds and the expert appraisal is carried out to determine the market value, an intermediate amount already takes effect — closer to the market than the old rent. In the end, the definitive rent set in the judgment is backdated to the service of process (art. 69), and the differences (between the provisional and the definitive amounts) are settled between the parties. This mechanism prevents the disadvantaged party from being stuck for years at an outdated amount during the proceedings — a point that often weighs in the decision to file the action.

Practical example: Dona Helena’s restaurant

Dona Helena owns a property in São Paulo, leased to a restaurant for R$ 8,000 a month. The contract was signed five years ago, and since then there have only been annual adjustments by an index. Over that period, the area appreciated considerably, and comparable properties on the same street are leased today for around R$ 14,000. The tenant, however, will not agree to revise the amount amicably.

Since more than three years have already elapsed and the adjustments were only by an index (with no real increase that would restart the three-year period), Dona Helena can file the rent review action. With an appraisal demonstrating the market value, she requests the review up to R$ 14,000. The judge sets a provisional rent (up to 80% of the claim), already due as of the service of process, and orders the expert appraisal. In the end, once the new amount is set, it is backdated to the service of process, and the differences are settled. Dona Helena corrects a gap of R$ 6,000 a month — which, over the years, represents a great deal of money.

The most common (and costly) mistakes

• Calculating the three-year period wrong. Confusing an index adjustment with a real increase leads to filing the rent review action too early.

• Failing to prove the market value. The rent review action depends on solid evidence (appraisal and expert examination); without it, the claim is weakened.

• Forgetting the provisional rent. Failing to request it means giving up the chance to adjust the amount during the proceedings.

• Confusing it with the renewal action. Each action serves a purpose; using the wrong one undermines the strategy.

• Passively accepting the gap. Both the landlord and the tenant can correct an unfair amount.

Checklist: before filing the rent review action

• Check whether three years have already elapsed since the contract or the last agreement with a real increase.

• Compile the history of adjustments and agreements of the contract.

• Gather evidence of the market value (appraisal, comparables for the area).

• Set the amount sought and prepare the request for provisional rent.

• Assess whether the case is one for a rent review action (price) or a renewal action (renewal/premises).

• Structure the action with a Business and Real Estate Law attorney.

Frequently asked questions about the rent review action

What is the rent review action?

It is the action that allows the rent to be adjusted to the market price when there is no agreement between the parties. It is set out in art. 19 of Tenancy Act 8.245/1991: where there is no consensus, the landlord or tenant may, after three years of the contract or of the last agreement, seek a judicial review of the rent. It serves both the landlord seeking to increase an outdated rent and the tenant seeking to reduce a rent above the market. It applies to residential and commercial leases.

What is the difference between the rent review action and the commercial lease renewal action?

They are distinct actions. The rent review action (art. 19) only adjusts the rent to the market, without changing the term of the contract. The commercial lease renewal action (art. 51) renews the commercial lease itself for a new period, protecting the business premises (goodwill) — and, in it, the rent may also be renegotiated. In short: if the contract remains valid and the only problem is the price, the rent review action applies; if the contract is coming to an end and the business owner wants to secure continued occupation of the premises, the renewal action applies.

When can I request a rent review?

When there is no agreement and three years have already elapsed since the contract or the last agreement/review (art. 19 of Tenancy Act 8.245/1991). An important detail: a mere annual adjustment by an index (IGP-M, IPCA) does not restart this three-year term; whereas an agreement that increases the rent in real terms (above mere inflation correction) does restart the count. For this reason, the contract history must be analyzed to determine whether the three-year period has already been met.

How does the provisional rent work in the rent review action?

Upon receiving the action, the judge may immediately set a provisional rent of up to 80% of the amount requested, due as of the service of process (art. 68, II, of Tenancy Act 8.245/1991). That is, while the case proceeds and the expert appraisal is carried out to determine the market value, an intermediate amount already takes effect. In the end, the definitive rent set in the judgment is backdated to the service of process (art. 69), and the differences are settled between the parties. This prevents a party from being stuck for years at an outdated amount.

Is it worth filing a commercial rent review action in São Paulo?

It can be well worth it, depending on the gap. In São Paulo, where the real estate market varies considerably by region, it is common for rents to become outdated over the years — too high or too low. If there is a significant difference between the rent paid and the market rate for comparable properties, and three years have already elapsed, the rent review action allows this distortion to be corrected through the courts. An appraisal of the property and of the local market indicates whether the claim has merit.

Do I need a lawyer for the rent review action?

Yes, because it is a court action. And technical work is especially relevant here: the rent review action depends on proving the market value (with an appraisal and, in court, an expert examination), on correctly calculating the three-year period and on requesting the provisional rent. A Business and Real Estate Law attorney in São Paulo structures the claim with the appropriate evidence, whether for the landlord seeking an increase or for the tenant seeking to reduce the rent to a fair level.

A fair rent is one that keeps pace with the market

The rent review action exists to correct a common distortion: the rent that, over the years, has drifted away from what the market charges. It gives the landlord and the tenant a way to rebalance the contract — upward or downward — without having to end the relationship.

The success of the rent review action depends on three things: the three-year period correctly calculated, the evidence of the market value and the use of the provisional rent. With these elements well handled, it is a powerful tool for anyone paying (or receiving) a rent out of step with reality.

At Falchet e Marques Sociedade de Advogados, a firm in São Paulo (Av. Paulista), we handle rent review and renewal actions and Business and Real Estate Law matters — structuring the claim with the appropriate evidence, for the landlord seeking an increase or the tenant seeking to reduce the rent to a fair level. If your commercial rent is out of step with the market, it is worth assessing a rent review action.

Talk to our team on WhatsApp: +55 11 95901-1854 — and adjust your rent to the fair market value.