News October 16, 2018

Failure to Register Lease Continuation Clause May Lead to Contract Termination

The Third Panel of the Superior Court of Justice (STJ) reformed a ruling of the Court of Justice of Rio de Janeiro (TJRJ) and declared terminated a commercial lease contract containing a tenancy-continuance clause that was not recorded at the registry office before the disposal of the property.

For the panel, it is necessary that the lease contract be recorded in the property’s title register, and the purchaser’s knowledge of its existence is not sufficient for the tenant to be protected in the event of a disposal.

See also:
TST recognizes good faith in the purchase of a disposed property and sets aside the attachment

 

In the case under analysis, two stores were leased in a shopping center in Rio de Janeiro for a term of ten years. Relying on the long term of the lease and the existence of a tenancy-continuance clause in the event of the disposal of the stores, the tenant decided to build two theaters, with capacity for 300 and 480 people.

The shopping center was sold, and the buyer decided to terminate the contract with the administrator of the theaters, alleging that, even though the definitive deed of purchase and sale stated that the stores were leased, he was not aware of the existence of a tenancy-continuance clause in the event of disposal, especially as he was not a party to that arrangement.

The TJRJ understood that the eviction action brought by the purchaser of the shopping center was invalid, since the registration of the tenancy-continuance clause may be replaced by any other instrument of unequivocal notice, such as the purchase and sale contract itself.

 

The tenancy-continuance clause must be recorded

According to the reporting justice of the appeal at the STJ, Justice Villas Bôas Cueva, the tenancy law (Law 8,245/91) requires, in order for the disposal of the property not to interrupt the lease, that the contract be for a fixed term, that there be a tenancy-continuance clause, and that the arrangement be recorded in the property’s title register.

He stated that, in the case, the maintenance of the lease contract of a property that was disposed of to a third party depended on the prior registration of the lease contract in the property’s title register.

“In the case of these records, there is no way to oppose the tenancy-continuance clause against the purchaser of the shopping center. Although, in the purchase and sale contract, there is a clause providing that the purchaser would be subrogated to the obligations of the lessor in the numerous lease contracts, there is no reference to the existence of a tenancy-continuance clause, much less to the fact that the buyer would respect the lease until its final term,” he explained.

The panel decided, unanimously, that, in the absence of the registration of the lease contract in the property’s title register, it is not possible to impose a restriction on the right of property and to set aside an express provision of law, obliging the purchaser of the shopping center to respect the tenancy-continuance clause of the lease.

 

Source: STJ

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