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What is "luva"?

Home Forums Investing in Brazil What is "luva"?

This topic contains 8 replies, has 8 voices, and was last updated by  Tony 1 year, 5 months ago.

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  • #71905

    dalmata
    Member

    Would someone be kind enough to explain to me the concept of luva, and how it usually works? If I understand correctly it is a non-refundable lump sum payment to the landlord when leasing commercial real estate paid before leasing and then again every 5 years. My in-laws friend has a recently vacated commercial space which was previously rented for about 3000 p/month and are asking for 70,000 luva. They intend to wait it out for 6 months and if still no takers drop it down to 60,000, which I thought still sounded a lot. Who sets this price and how do they set it? Is it the Cartorio? Anyone know what this luva is all about?

  • #71909

    I don’t have your answer but it sure sounds to me like “key money” in japan.

  • #71910

    Sian
    Member

    Yeah – sounds like the same concept – a gift to the landlord in appreciation for their kindness in renting you their property. But key money is usually about 2 months rent – here we are talking over 23 months rent! I guess the landlords here must be verykind!

  • #71911

    x32792
    Member

    Someone tried to tell me about this and I thought I was havinglanguage difficulties. A one time R$70,000 rental payment…I bet he‚Äôll takeyour BMW in place of cash. This may technically be against the law. Ask ifhe gives a receipt. I believe this is market based and mainly for prime realestate.

    It probably made more sense in the days of hyper-inflation…anticipated income…

  • #71919

    x32792
    Member

    It really is a gift, there is no law that may require you to pay “luva”, however, if you don‘t pay, you won‘t be renting.

  • #72088

    Sounds a bit like ‘Alright my Luva what you on tonight’ a little Charlie Drake

  • #10480

    moumitamou
    Member
  • #264823

    Anonymous

    It`s been 7 years since this thread received any attention,but rather than start a new topic, I want to add to it.

    I am looking at buying a commercial lease here in Brazil. Theissue of the luva has come up, as I expected it would.

    Does anyone actually know what a luva is paying for? Does itpay for existing commercial goodwill, or existing fixtures and fittings, or isit simply key money as mentioned above.

    Or can it be whatever the property owner wants it to be? I expect so!

    I have also read that the concept of a luva is actuallyillegal in Brazil, although it is always factored into deals, but calledsomething else? Can anyone add to that point?

    I have experience in UK commercial leases, andwhile I realise I am not in Kansas anymore , is it usual practice in Brazil to beable to buy your lease, through the luva or whatever other means, then build a business,then sell that business lease?

    I am dealing with a property owner who of course wants their luva,but does not want me to ever sell my business, meaning neverrecoup my luva either. Bollocks to that, but what is usual business practice in terms of selling your business (lease) in Brazil

    Finally, is it true that a lease of five years affords the leaseholderautomatic rights to renew their lease, whereas a lease for less than fiveyears, does not?

    Any takers?

    Thanks in advance

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  • #284765

    Tony
    Participant

    Luva, ponto, different words , almost same meaning. Means someone is charging you a transfer fee for you to acquire the trading spot where a supposed thriving business once operated or still does.

    Sometimes the demanding party will do it without even being the property owner. A departing tenant might want sons compensation for all the business goodwill built into the spot.

    In this day of retail record closures , it almost asinine to fork this fee up, unless the spot in question is key for your operation success , and it becomes obvious.

    I personally would walk away at the possibility to pay such a fee, but then again, it is my principle to not pay to play that gets in the way

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