‘Real Estate Settlement Law’ Imposes New Rules For Negotiating Property Under Construction

A legal hallmark is being consolidated for the real estate sector in 2019. The so-called ‘Real Estate Settlement Law,’ sanctioned in December of last year, confers greater legal assurance for processes of alienation of property under construction. In practice, new guidelines have been developed for purchase and sales agreements in order to impose sanctions on breach of contract due to default.“In summary, Law number 13,786 adds clauses to the Real Estate Development Law (Law No. 4,591 / 64) and to the Allotment Law (Law No. 6,766 / 76), establishing rules for default on these contracts,” explains lawyer Felipe Muxfeld Knebel, Partner at Sotto Maior & Nagel Advogados. According to Knebel, the new legislation stipulates that all purchase and sales agreements, sales promises, cessions or cessions of independent real estate development units signed as of this year must be initiated with a summary table that includes mandatory information. “The absence of any of the required information permit the buyer to request rightful termination of contract,” warns the lawyer. This refers to cases where customers notify the builders, who, in turn, do not taking action within the deadline.

Companies should observe the new Real Estate District Law and revise their contracts. “We, therefore, advise companies to anticipate measures by including all the information cited in all contracts to avoid future losses as a result of such predicaments,” emphasizes Felipe Muxfeld Knebel. Sotto Maior & Nagel Advogados has been advising clients to take such measures. The firm´s legal team has prepared a detailed summary table template to assist them with the contract process.

Learn what items the summary table should contain:

The summary table determined by the ‘Real Estate Settlement Law’ must contain the following mandatory information:

· The total price to be paid for the property;

· The down payment price, form of payment, highlighting the amount paid in full, including percentages added to the total value of the contract;

· The amount and payment terms due to the broker, including the identification of the beneficiary, precisely;

· The form of payment of the total price, clearly indicating the installment amounts and due dates;

· Interest rates applicable to the contract and, when more than one interest index is existent, the applicable period of each one;

· The consequences for termination of contract, whether it be a result of contractual termination or of contractual resolution due to contractual breach by either the buyer or the developer, including applicable penalties and deadlines for reimbursement of monetary values ​​to the acquirer written in bold lettering;

· The interest rates eventually applied, whether they be monthly or annually, nominal or effective, incidence and amortization system;

· Information about the possibility of the property buyer to exercise the right to regret, specified in art. 49 of Law No. 8,078, of September 11, 1990 (Consumer Protection Code), in all contracts signed at sales booths and away from the incorporator’s headquarters or commercial establishment;

· The payment deadline for the buyer after being notified by the developer of building completion;

· Information about liens on property, particularly when bound as a real guarantee for financing intended for the construction of the investment;

· The registration number of the incorporation memorial, property registration and identification of the competent real estate registry office;

· The final document for obtaining the building completion report (license) and the contractual effects of untimely occurrences, provided for in art. 43-A of the Real Estate Termination Act.

Asset Protection under the Real Estate Termination Law

Attorney Felipe Muxfeld Knebel points out that, among the various rules instituted by the brand new law that deserve special mention, the fact that developers now have one more reason to protect building properties under the asset protection law, i.e., by setting up management and accounting for each individual venture.

“In the event of cancellation by the buyer, the developer may withhold up to 50% of the amount paid if the merger is subject to the assignment equity. For all others, the maximum withholding will be 25% of the amount received,” argues the lawyer, referring to paragraph 5 of article 67-A, added to the Merger Law by the “Real Estate Termination Law.’

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SOTTO MAIOR & NAGEL ADVOGADOS specializes in Real Estate Law, providing advice and consultancy to construction companies, developers, real estate and investors. The team offers project evaluation and structuring, considering specific legislation. It also assists in drafting contracts and monitoring buy-sell operations, leases, regularization, among others, and acts in cases of disputes related to real estate business.

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