Corporate lease agreements: the clauses that shape the next five years.
Term, rent, exit, build-out and renewal: what your company signs along with the address, and the dates you can't afford to miss.
A corporate lease decides, for five years or more, what your company pays, what it costs to leave early, what happens if the building is sold, who keeps the build-out and whether you have the right to renew. Read with those questions before you sign, and tracked by the dates it creates, the lease stops being paperwork and becomes part of the location decision.
- The lease is the part of the address you don't see on the tour: term, exit, rent increases, build-out, move-out and renewal.
- Some protections only hold if they're in writing and recorded on the property's registry record, like the clause that keeps the lease in force if the building is sold (Brazil's Tenancy Law, Law 8,245/1991, art. 8).
- After three years, either side can ask a court to reset the rent to market (art. 19).
- The statutory right to renew comes with a window: the renewal action must be filed between one year and six months before the lease ends (art. 51, §5).
- Improvements your company makes may stay with the property without reimbursement, and the space goes back in the condition you received it (arts. 23, 35 and 36).
- For companies that report under IFRS, the lease also shows up on the balance sheet (IFRS 16; in Brazil, CPC 06).
- The legal review belongs to your company's attorney. The negotiation starts earlier, with what you ask for.
A commitment that outlasts the tour
The tour shows you the floor, the light and the view. The lease decides the years that follow: each year's rent, the cost of changing your mind, who pays for work on the building and who keeps your build-out. It's one of the few decisions where a company commits for years at once.
That weight is now on the balance sheet. In 2016, the IASB, which writes the international accounting standards, issued IFRS 16 and brought leases onto company balance sheets starting in 2019. By the IASB's own estimate, listed companies using IFRS or US GAAP had about US$3.3 trillion in lease commitments, and more than 85% of them didn't appear on the balance sheet.
“much-needed transparency on companies’ lease assets and liabilities”
Hans Hoogervorst, then IASB chair, in the IFRS 16 announcement (2016)
In Brazil, the equivalent rule is CPC 06 (R2), adopted by the CVM, Brazil's securities regulator, for fiscal years beginning in 2019. For companies under that standard, term, renewal options and termination fees aren't just a legal matter: they change what finance reports. Your accountant confirms the effect in each case.
The lease calendar
Every lease creates a calendar. These are the dates your company can't lose sight of.
Signing and move-in inspection
The move-in report records the condition of the space, and that's the condition it goes back in at the end, apart from normal wear and tear (art. 23, III).
Free rent and build-out
The free-rent period, if negotiated, can line up with the build-out. Useful improvements are only reimbursed if the landlord approved them (art. 35): get approval in writing before the first wall goes up.
Annual rent increases
The index is whatever the lease says; the law only bars tying rent to a foreign currency, the exchange rate or the minimum wage (art. 17).
Year three
Without an agreement, either side can ask a court to reset the rent to market (art. 19). It can go up or down.
Renewal window
Between one year and six months before the end, the renewal action has to be filed, or the right is lost (art. 51, §5). It applies to written, fixed-term leases totaling at least five years, with the company in the same line of business for three years (art. 51; §4 extends it to industrial companies and for-profit firms).
End of lease and move-out
What was agreed on the build-out, removal and move-out inspection sets the last cost of the lease.
Renewals are negotiated before the window opens. In Getting to Yes, Roger Fisher, William Ury and Bruce Patton called it BATNA, your best alternative to a negotiated agreement: what each side would do without a deal. A company that only starts looking at other spaces in the last six months negotiates without a real alternative. One that knows its options early knows when it pays to stay and when it pays to go.
The clauses that decide
Ten points change your company's cost and flexibility over the life of the lease. For each one, the question to ask before you sign.
| Clause | What it decides | What the law says | The question to ask before signing |
|---|---|---|---|
| Term and early termination | What it costs to change your mind | You can return the space by paying the agreed termination fee, reduced in proportion to the time already served (art. 4). In a build-to-suit lease, the fee can reach the total rent left on the lease (art. 54-A, §2) | When does leaving get cheaper? |
| Rent increases and resets | How much the rent moves | Any index, except a foreign currency, the exchange rate or the minimum wage (art. 17); a court reset to market after three years (art. 19); in a build-to-suit lease, the reset can be waived (art. 54-A, §1) | Which index, in which month, and what happens in year three? |
| Sale of the building | Whether you get to stay | Without a clause keeping the lease in force, recorded on the property's registry record, a buyer can end the lease with 90 days' notice (art. 8) | Is that clause in the lease? Who records the lease with the registry? |
| Right of first refusal | Whether you can buy | Priority to buy on equal terms (art. 27); to claim the property after a sale to someone else, the lease must be recorded 30 days before the sale (art. 33) | Would buying the property ever make sense for your company? |
| Operating expenses | What it costs to occupy, beyond rent | Routine building charges are the tenant's (art. 23, XII); extraordinary charges and the reserve fund are the landlord's (art. 22, X); property tax (IPTU) and insurance per the lease | What's the total monthly cost, and who pays for work on the building? |
| Improvements | Who keeps the investment | Necessary improvements are reimbursable and useful ones only if approved, unless the lease says otherwise; decorative ones aren't, but can be removed if the structure isn't affected (arts. 35 and 36) | Is the build-out approved in writing? Does it stay or go at the end? |
| Move-out | The last cost of the lease | In the condition it was received, apart from normal wear and tear (art. 23, III) | Did you get a shell space or a finished one? Is there a move-in report? |
| Assignment and subletting | Room to reorganize | Require the landlord's prior written consent; silence doesn't count as approval (art. 13) | Can an affiliate use part of the space? |
| Security | How much cash sits idle | Only one type per lease: a cash deposit (up to three months' rent), a guarantor, rent guarantee insurance or a pledge of investment fund shares (arts. 37 and 38) | Which option weighs least on your cash? |
| Renewal | Whether you can stay | Statutory renewal for written, fixed-term leases totaling five years, with three in the same business, filed between one year and six months before the end (art. 51) | Does the lease qualify? Who tracks the date? |
None of these points replaces your attorney's review. They make sure the conversation with your attorney, and with the landlord, starts with the right questions.
What your leadership will ask
- For finance: the total occupancy cost, the termination fee and the balance-sheet effect.
- For HR and operations: the build-out and move timeline.
- For legal: the clauses in the table.
- For leadership: the decision.
For property owners, the same reading applies from the other side. Term, security and rent increases define the property's income and its value to a future buyer. A balanced lease lasts longer than one won at the table.
How Wharbz runs it
Wharbz starts with the operation, not the lease: how long the company plans to stay, what build-out it needs, what might change along the way. That way, the negotiation starts with a list of what to ask for.
One point person runs your project, and a principal joins the table when the negotiation calls for it, aiming for a lease that's balanced for both sides. Wharbz points out what to check; the legal review belongs to your company's attorney. For the properties we manage, we keep track of renewals.
You take a study to your leadership, not a list of properties. See what you receive.
What people ask before they sign
Sources
- Brazilian Senate: Law 8,245/1991 (Tenancy Law), consolidated text (in Portuguese)
- IASB: “IASB shines light on leases by bringing them onto the balance sheet” (Jan 13, 2016)
- CVM: Board decision of Dec 20, 2017 (CVM Resolution 787, CPC 06 (R2); in Portuguese)
- Program on Negotiation, Harvard Law School: “What is BATNA?”
Before the lease, the operation. Tell us what your company needs.
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