by Comunicação - RUCR LawBuilt to Suit (BTS) Contract
The Built to Suit (BTS) contract is a commercial legal model in which the lessor commits to customizing a property — either by constructing it from scratch or by carrying out renovations — according to the specifications requested by the lessee. It is a tailor-made solution designed to meet specific needs, primarily in business operations.
Among its main features are the customization of the property according to the lessee’s needs, the establishment of a necessarily long term, usually exceeding 10 years, and its exclusive use for commercial purposes. Another notable feature is the freedom of the parties to negotiate and agree upon the contractual clauses, given the atypical nature of the BTS, as well as the possibility of stipulating a waiver of the right to review the rental amount during the term of the contract.
The “Superior Tribunal de Justiça” (STJ), in the judgment of “Recurso Especial nº 1.521.448/SP”, consolidated the understanding of the legal nature of the BTS, recognizing its concept, the validity of freely negotiated clauses, and the parity between the contracting parties. The decision emphasized that the BTS is not subject preferentially or exclusively to the “Lei do Inquilinato” and reaffirmed the principle of party autonomy as the guiding principle for this type of agreement.
Regarding the rental amounts, it is common for the rent established in Built to Suit contracts to be higher than the market average. This is because the lessor initially bears all expenses related to the construction or renovation of the property to meet the lessee’s requirements. Furthermore, the rent also reflects the risk assumed by the lessor. Throughout the contract, the lessee reimburses these expenses in a diluted manner: with each installment paid, the lessee covers not only the use of the property (rental) but also the investment made by the lessor in the improvements. For this reason, the total rental amount is higher than that practiced in ordinary leases.
Although the BTS is an atypical contract, it has express legal support under Article 54-A of the “Lei do Inquilinato” (Lei nº 8.245/91). This provision establishes that, in the non-residential lease of an urban property built or substantially renovated by the lessor to meet the lessee’s needs, the freely negotiated conditions shall prevail, including the possibility of waiving the right to rent review during the contractual term.
Among the advantages for the lessor are maintaining ownership of the property, retaining the improvements made, and receiving rent higher than the market average. For the lessee, the BTS offers a property tailored to their needs, the dilution of adaptation costs into the rent, and favorable accounting treatment.
In summary, the Built to Suit contract is a strategic alternative for lessors and lessees, offering legal security, profitability, and customization in commercial leasing.
By: Raphael Mota Chaves
by Comunicação - RUCR LawFive considerations when negotiating international contracts for Brazilian companies
Negotiating international contracts represents a significant challenge for Brazilian companies seeking to expand their businesses into foreign markets. In addition to facing the complexities of adapting to local regulations, companies must deal with cultural, financial, and operational issues, requiring a careful and strategic approach. With the growing globalization and the intensification of transnational transactions, contracting services, exporting and importing goods has become increasingly common, making it essential to ensure clarity and objectivity in contracts signed with foreign companies. This not only ensures the transparency of the agreement but also minimizes potential conflicts and preserves the rights of the Brazilian company.
Therefore, five essential points must be observed when negotiating international contracts for Brazilian companies:
1) Verifying the legitimacy of the foreign company: it is crucial to confirm the legal existence of the partner company, its correct formation, the representatives, and their negotiation powers. Without this verification, a signed contract may be invalid. Government agencies and local chambers of commerce can be valuable allies in this process.
2) Protection against exchange rate fluctuations: currency fluctuations can affect the viability of a contract, so it is important to consider legal and financial instruments to mitigate this risk, depending on the type of contract.
3) Contractual guarantees: due to the unpredictable nature of international markets, it is essential to include guarantee clauses, such as performance, reimbursement, or penalty clauses, to protect against financial and operational risks. Additionally, the method of enforcing these guarantees should be detailed in the contract.
4) Choice of contract execution location: determining where contractual obligations will be fulfilled directly impacts logistical, legal, and financial issues. Local legislation can influence contract interpretation and dispute resolution, making careful selection essential.
5) Progressive conflict resolution: a well-drafted international contract should provide for a graduated strategy for resolving conflicts, starting with negotiation, moving to mediation, and ultimately arbitration if necessary. This approach facilitates quick and less bureaucratic dispute resolution, which is crucial for transnational contracts.
Therefore, the careful negotiation and drafting of international contracts are crucial to avoid future litigation and misunderstandings regarding contract clauses, allowing the company to focus on its main objective: the development and growth of its business.
By: Ana Tereza Andrade