Annual rent adjustment: how often and by which index?

Every year, on the lease's anniversary date, the same question arises between landlord and tenant: how much can the rent go up? By the index? Above it? And what if the amount has become badly out of date over time? Rent adjustment seems simple, but it generates a great deal of conflict when the rules are not clear — and when rent adjustment (correction for inflation) is confused with rent review (adjustment to the market).

In this guide, you will understand how often rent can be adjusted, which index applies, the crucial difference between rent adjustment and rent review, and how far the landlord's right to increase the amount goes — all under the Tenancy Act.

How often can rent be adjusted?

The answer is clear: once a year. The law does not allow adjustment with a frequency of less than 12 months (Lei 9.069/1995 and Lei 10.192/2001). In other words, rent can only be corrected annually, on the lease's base date, by the chosen index.

This means that monthly adjustments or adjustments over a shorter period than a year are not valid. The landlord cannot, for example, adjust the rent every six months, even if inflation has risen. The adjustment date and the index must be set out in the lease — and it is to this annual milestone that the parties must keep. This rule gives the tenant predictability and protection against frequent increases.

Which index is used to adjust the rent?

The index is whatever is provided in the lease. The most common are:

• IGP-M (General Market Price Index): historically the most widely used in leases, but known for its volatility (it can vary greatly from one year to the next).

• IPCA (Broad Consumer Price Index): the official inflation index, more stable, which many leases adopted precisely for that reason.

The parties choose the index when entering into the agreement — and that choice has a real impact on the wallet over the years. In periods of high IGP-M, leases tied to it saw adjustments well above the IPCA, prompting renegotiations. For this reason, setting the index is a clause that deserves attention at signing. Where no index is provided, or in the face of distortions, room opens up for negotiation — but the rule is to follow what the lease establishes.

What is the difference between rent adjustment and rent review?

This distinction is fundamental — and a source of much confusion:

• Rent adjustment: the automatic annual correction by the lease's index. It serves only to make up for inflation, preserving the real value of the rent. It happens every year, without the need for an agreement or court action.

• Rent review (rent review action): the adjustment of the amount to the market price, upward (landlord) or downward (tenant). It is only available when there is no agreement and three years of the lease's term or since the last agreement have elapsed (art. 19 of Lei 8.245/1991).

In other words: the rent adjustment keeps the rent from losing value to inflation; the rent review corrects a rent that, after years, has fallen well above or well below the market. They are different instruments, for different purposes. We cover the rent review action in detail in a dedicated article on our blog — here, the focus is the annual rent adjustment.

Can the landlord increase the rent above the index?

Not unilaterally. During the lease, the rent increase is limited to the annual adjustment by the agreed index. A real increase — above inflation — can only occur in two ways: by agreement between the parties, or, failing agreement, through a rent review action after three years (art. 19 of Lei 8.245/1991).

This protects the tenant against impositions: the landlord cannot, in the middle of the lease, simply demand an amount above the index because “the market has gone up.” The tenant is not obliged to accept an adjustment greater than the one provided. If the parties agree on a new amount, fine — the agreement holds. If not, the route is the rent review action, at the right time. Knowing this limit keeps the tenant from accepting undue increases and the landlord from making baseless demands.

A practical example: Mr. Paulo's “doubled” adjustment

Mr. Paulo had been renting an apartment in São Paulo for two years. On the lease's second anniversary, the landlord announced an adjustment well above what he expected, claiming that “rents in the area had gone up a lot.” Mr. Paulo, unsure whether that was legal, almost accepted it — which would have strained his budget.

When he sought guidance, he understood two points. First: the annual adjustment had to follow the lease's index (in this case, the IPCA), merely making up for inflation — and not an arbitrary “market” figure. Second: a real increase, above the index, could not be imposed; it would depend on agreement or on a rent review action (and there was still time to go before the three years). With that, Mr. Paulo refused the abusive increase and the landlord applied the correct index from the lease. He paid the adjustment due — not the double demanded. Knowing how to tell rent adjustment from rent review protected him from an unlawful increase.

The most common (and costly) mistakes

• Accepting an adjustment in less than 12 months. The law requires annual frequency — an adjustment before that is invalid.

• Confusing rent adjustment with rent review. Adjustment makes up for inflation; the rent review action adjusts to the market (after three years).

• Accepting an increase above the index without agreement. Outside the rent review action, a real increase depends on consent.

• Not setting the index in the lease. The omission creates uncertainty at the time of adjustment.

• Ignoring the gap after years. An amount badly out of line with the market may call for a rent review action — upward or downward.

Checklist: for a correct rent adjustment

• Check the index and the base date of the adjustment in the lease.

• Apply the adjustment only once a year (a minimum frequency of 12 months).

• Calculate the correction by the agreed index (IGP-M, IPCA or another).

• Remember that an increase above the index depends on agreement (or a rent review action after three years).

• After years, assess whether a rent review action is appropriate (amount badly out of line with the market).

• In case of a dispute, consult a real estate lawyer.

Frequently asked questions about rent adjustment

How often can rent be adjusted?

Rent adjustment is annual: the law does not allow a frequency of less than 12 months (Lei 9.069/1995 and Lei 10.192/2001). In other words, the amount can only be corrected once a year, on the lease's base date, by the chosen index. Monthly adjustments or any adjustment over a period of less than a year are not valid. The index and the adjustment date must be set out in the lease agreement.

Which index is used to adjust the rent?

The index is whatever the lease provides. The most common are the IGP-M and the IPCA. Historically, the IGP-M was the most widely used, but, because of its volatility, many leases switched to the IPCA. The parties may choose the index when entering into the agreement. Where no index is provided, or in the face of distortions, the adjustment can be negotiated or, as the case may be, contested — but the rule is to follow what the lease establishes.

What is the difference between rent adjustment and rent review (rent review action)?

They are different things. The rent adjustment is the automatic annual correction by the lease's index, solely to make up for inflation. The rent review (rent review action) is the adjustment of the amount to the market price, upward or downward, available when there is no agreement and three years of the lease's term or since the last agreement have elapsed (art. 19 of Lei 8.245/1991). The rent adjustment preserves the real value; the rent review brings it closer to the market.

Can the landlord increase the rent above the index?

Not unilaterally. During the lease, the increase is limited to the annual adjustment by the agreed index. A real increase (above inflation) only occurs by agreement between the parties or, failing agreement, through a rent review action after three years (art. 19 of Lei 8.245/1991). Imposing an increase above the index, outside these situations, is not valid — the tenant is not obliged to accept an adjustment greater than the one provided in the lease.

How can a rent adjustment dispute be resolved in São Paulo?

First, by checking what the lease provides (index and date). If the adjustment applied departs from the lease, or if the amount is far above/below the market after years, the option is to negotiate or, as the case may be, file the appropriate action (rent review action, after three years). In São Paulo, a real estate lawyer reviews the lease, calculates the correct adjustment and guides landlord and tenant to resolve the impasse without loss.

Do I need a lawyer for rent adjustment matters?

For the routine annual adjustment, generally no — it is enough to apply the lease's index. But, in the face of a dispute (adjustment outside the lease, abusive increase, amount badly out of date after years), legal guidance is important. A real estate lawyer in São Paulo checks the calculation, verifies whether a rent review action is appropriate and protects landlord and tenant from undue charges or refusals.

A clear adjustment prevents an annual dispute

Rent adjustment is, in essence, simple: once a year, by the lease's index, to make up for inflation. Disputes arise when someone tries to adjust before the deadline, impose an increase above the index without agreement, or confuse the annual adjustment with the review of the amount to the market — which is something else, available only after three years.

Knowing these rules protects both parties: the tenant, from undue increases; the landlord, from keeping an amount out of date for years. And, by setting the index well at the time of contracting, most future friction is avoided.

At Falchet e Marques Sociedade de Advogados, a firm in São Paulo (Av. Paulista), we work in real estate law and leasing — checking adjustments, assessing whether a rent review action is appropriate and advising landlords and tenants in value disputes. If you have doubts about the adjustment of your rent, it is worth checking what the lease and the law guarantee.

Talk to our team on WhatsApp: +55 11 95901-1854 — and resolve your rent adjustment matters with legal certainty.