Active/partial retirement may not terminate the contract if there is actual continuity in the activity; this is a case-by-case issue that should be well documented. The 1994 LAU established that old commercial leases are terminated by the retirement or death of the individual tenant, with limited subrogation.
In “old” commercial leases (signed before May 9, 1985), the mandatory extension of the 1964 Urban Lease Law (LAU) applied: the tenant could extend the lease practically “ad infinitum.” This changed with the 1994 LAU, which imposed an exit schedule: if the tenant is a natural person, the contract is terminated upon their retirement or death, unless the spouse subrogates and continues the same activity; in the absence of a spouse, a descendant may enter to complete up to 20 years from the entry into force of the law. In the case of legal people, the law set fixed terms which, in many cases, ended on January 1, 2015.
What if the contract is dated after May 9, 1985?
Following the so-called “Boyer Decree” (RDL 2/1985), mandatory extensions for new contracts were eliminated: the parties are free to agree on the duration. But beware: if after 1985 it was expressly agreed to submit to mandatory extension (yes, there were many cases), the Supreme Court has ruled that the duration and termination are governed by Transitional Provision 3 of the LAU 1994, as were pre-1985 contracts. Practical result: they are also terminated due to the retirement of the individual tenant (except for planned subrogations).
Does “active retirement,” partial or flexible, count?
There are nuances here. The traditional doctrine of the Supreme Court held that the tenant’s retirement terminates the contract even if they continue to run the business.
However, more recent rulings have differentiated between cases of partial/active retirement (combining 50% of the pension and continuity in the activity), in which the contract is not automatically terminated on the understanding that there is no full withdrawal. It is a case-by-case issue: it is advisable to analyze the specific case (type of pension, date, actual continuity in the activity).
How can we verify that the tenant is truly “retired”?
Their employment history is not sufficient (it only reflects contributions made and withdrawn). The ideal solution is to request a benefits certificate from the INSS (or “comprehensive benefits certificate”), which certifies whether they receive a retirement pension and since when.
Subrogation of spouse or descendant.
If the spouse is not retired and continues the same activity, they can be subrogated; otherwise, a descendant could enter only to complete the maximum 20 years since 1995 (transitional regime). The activity must be the same, and there are limits when there have been previous transfers.
- Please note. If the tenant retires fully and there is no valid subrogation, the contract may be terminated and the premises recovered. If the tenant does not retire (simply reaches retirement age and continues to work), the contract continues. In contracts after 1985 without a mandatory extension agreement, the agreed clauses (and the current LAU) apply, not the transitional regime.
For further information, please consult Legal Advice
If you found this interesting, please share it on social media, thank you!
