Corporate Real Estate: A Q&A Guide To Corporate Real Estate Law In Brazil

By Christiane Scabell Hˆhn and Cristiana Moreira

The corporate real estate market

1. What have been the main trends in the real estate market in your jurisdiction over the last 12 months? What have been the most significant deals?

The real estate market in Brazil is flourishing. The combination of low inflation, appreciation of the Brazilian currency, interest reduction and creation of modern investment funding mechanisms has made the real estate market extremely attractive to investors.

Several important real estate companies have gone public and there are significant funds available for investment in real estate.

However, the country still lacks a well-defined housing policy and programmes.

Corporate real estate investment

2. Please briefly outline the opportunities for investing in real estate in your jurisdiction. In particular, consider:

The structures commonly used (for example, property companies and partnerships).

Are real estate investment trusts (REITs) and real estate derivatives available? If so, are they commonly used?

The role of institutional investors.

The role of private investors.

There are several ways to invest in real estate, directly or through a property company.

There are some other mechanisms to invest in the real estate market, such as securitisation of credits related to real estate receivables (Certificado de RecebÌveis Imobili·rios and CÈdulas de CrÈditos Imobili·rios), and a Real Estate Investment Fund (Fundo de Investimento Imobili·rio), which is similar to the American REIT.

Both institutional and private investors have an important role, since they provide the necessary resources to stimulate the real estate market.

Sources of law

3. What are the main sources of real estate law?

The main sources of real estate law are:

The Brazilian Civil Code.

Public Register Law (Law 6015/73 Law 6015/73).

Lease Law (Law 8245/91).

Other specific statutes.

Title

4. How is title to real estate evidenced? Is there a public register? If so, is it of title or of transactions?

The Public Register Law established a public register system of title to real estate, which is based on Real Estate Registrars. In the first transaction regarding a property made after 1973, the real estate is given a title number (matrÌcula). Under such number, the Real Estate Registrar records the details of the owner, a description of the property and all third party rights to which it is subject, which require registration. These may include any legal mortgage or charge, or any other real estate lien in connection with the property.

Good title can be evidenced by a recent certificate of the title number of the property, issued by the competent Real Estate Registrar, covering the property and all transactions made over the last 20 years regarding the property. A flaw in any such transaction can result in its cancellation, which would also cancel all subsequent transactions.

Therefore, it is very important to review and make sure that:

Each transfer of the property during the last 20 years was properly made by the persons who actually owned the property.

The parties were correctly represented, had the power to transfer and convey property, and were authorised to do so.

The transfer does not violate the law or third parties' rights.

To check the title of a property, it is necessary to search the corresponding title, which should cover at least a 20-year period. A certificate of title will normally evidence the ownership and whether or not there is any kind of lien.

Investigation of title, however, would normally go beyond the mere review of a Real Estate Registrar certificate, and would also include analysis of the acquisition deed and certificates related to the owner and the property.

Non-registered titles, claims, rights or liens are not enforceable against third parties, but can be enforced against those who took part in the transaction. Therefore, although the rights to the real property derive from a deed, the ownership of such property is only transferred to the buyer and becomes valid against third parties after the registration of the deed by the Real Estate Registrar under its title number.

5. If there is a public register of title:

Is there a state guarantee of title?

What categories of documents and information are registered?

Can confidential information or documents be protected from disclosure?

State guarantee. There is no state guarantee of title.

Categories of documents and information. The title is recorded with details of the previous owners as of 1973, a description of the property and its boundaries, and all third party rights (requiring registration) to which it is subject. In addition, a variety of other acts may require registration or annotation, such as a change in name of the owner or a change in marital status.

Confidential information or documents. The registered title becomes a public document and accessible for any person. For this reason, it is not possible to protect confidential information from disclosure in this case.

6. Is title insurance available? If so, is it commonly used?

Title insurance is not available in Brazil. It is important to note, however, that some foreign insurance companies do insure titles in Brazil.

7. How can real estate be held (that is, what types of tenure exist)?

Tenure in real estate is usually freehold. The ownership is absolute and in perpetuity until the disposal of the asset by the owner, who is free to enjoy it and dispose of it, subject only to third party rights and applicable legal restrictions. On the owner's death, ownership transfers to the owner's heirs.

There are, however, several other types of tenure to real estate, such as:

Usufruct (the right to use and enjoy something belonging to another).

Fiduciary property.

Resolvable property.

Security sale agreement (alienaÁ„o fiduci·ria).

Purchase and sale commitment.

Real right of use.

Rights over superficial property.

Trust (fideicomisso).

There are also properties subject to emphyteusis (seisin) and others that are subject to a special coastal land system.

The concept of tenure as understood by countries of Anglo-Saxon origin does not exist under the Brazilian legal system.†Exclusive possession and†rights to use land and buildings can be obtained principally through:

Freehold ownership.

Usufruct.

Lease.

Commodatum (a type of gratuitous lease).

Real right of use, which is the right to use the property to meet the needs of the holder of the right and his family.

Property by the seashore is subject to a special coastal system.

Sale and purchase of corporate real estate

8. What are the main stages in the sale and purchase of corporate real estate? In particular, consider:

How corporate real estate is marketed.

Commercial negotiation.

Whether pre-contractual arrangements are commonly used.

Due diligence (including title investigation and searches of public authorities).

Negotiation and execution of a sale contract.

When the parties are legally bound.

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