QuintoAndar Facing Possibility of Diminished Revenues as Brazilian Judge Orders Suspension of Tenant Service Fee

A Brazilian judge has issued an injunction ordering the Brazilian brokerage and portal operator QuintoAndar to stop charging tenants a service fee.

The court order came on the back of a civil lawsuit brought in September 2022 by several dissatisfied QuintoAndar customers whose lawyer claims that the company should not legally be allowed to charge tenants a service fee.

QuintoAndar has challenged the injunction and a decision on whether the challenge has been successful is expected within the next ten days.

The company monetises on the landlord side by charging between 8.5% and 9% and one month's rent. However, the controversy comes from how QuintoAndar charges tenants.

Before the injunction was issued last week QuintoAndar charged prospective tenants a reservation fee to effectively reserve a property on the portal while negotiating and going through the online paperwork process. Once a rental contract was signed it was also charging a service fee equal to 2% of the monthly rent.

The company claims that the service fee is made very clear to tenants during the process, is standard among many other service providers with popular apps in Brazil and goes towards the upkeep of the app and development of new features that benefit the tenant.

A QuintoAndar spokesperson told Online Marketplaces that the company...

“...clarifies that all its practices comply with Brazilian legislation, including the reservation and service fees charged to our tenants, which are in accordance with the law and are presented transparently in our terms of use, in all properties advertisement [sic] and our contents.

The amounts collected with the service fee are used in the development and maintenance of technological solutions that offer real services aimed at making life easier for our tenants. The booking fee is an optional service, which the tenant can choose to hire and its availability depends on prior agreement of the owner. We reinforce our commitment to contribute to the discussion on the subject and inform that we have already filed an appeal asking for the reversal of this injunction.”

As for the prosecution, speaking to local publication Diário do Rio, real estate lawyer Roberto Bigler said that the fact that the Public Ministry had filed the lawsuit proved that QuintoAndar's “current practices are abusive”.

Although a decision on QuintoAndar's challenge to the injunction is expected to come soon, the outcome of the case could take months or even years as the merits of the case are debated.

Essentially the outcome of the case will come down to whether the company can justify the service charge with QuintoAndar's spokesperson expressing confidence that its legal team would be able to do so.

If QuintoAndar is ultimately unable to charge tenants a 2% service fee it will have to look at how to cover the lost revenue. Charging landlords instead would likely bring its own set of issues for a company whose expansion has come off the back of a model that is based on incentivising landlords.

Although it has diversified its business significantly in recent years with the acquisition of Navent's real estate portals throughout the region and a move into sales in 2019, QuintoAndar's Brazilian rental brokerage is almost certainly its largest business segment with 200,000 rental contracts under management.

Quinto Andar was founded as an end-to-end rental brokerage in Sao Paulo in 2012. By 2021 the company was worth an estimated $5 billion, on a par with Rightmove in the UK, often named among the most powerful portals in the world.

This article was updated following a conversation with a QuintoAndar spokesperson on 30/03/23.