The regulation of the real estate activity deals with matters such as the obligations of the developer and the restrictions imposed by zoning laws or environmental protection laws.
The matter relating to the ownership of real estate is regulated by the Civil Code. In order to provide greater security in the sale of real estate, as well as in the constitution, transfer, modification or waiver of real rights over real estate, the act only operates with the presence of certain legal formalities.
Real Estate Development
The development activity refers to the realization of a real estate project.
In this same sense, according to Law 4,591, of December 16, 1964, (Incorporation Law), real estate development consists of the activity carried out with the aim of promoting the construction, for total or partial sale, of buildings or set of buildings. buildings composed of units, through sales and purchase commitments or effective sale and purchase of ideal fractions of land linked to future units in buildings to be built or under construction under condominium regime, the developer being responsible for the delivery, within a certain period , price and certain conditions, of the completed works.
The Incorporation Law regulates the incorporator’s rights and obligations, among others:
- only negotiate the sale of the units under construction after obtaining the registration of the incorporation in the land registration at the Real Estate Registry Officer, whose application must be accompanied, mainly, by the following documents: a) title of land property, or pledge , irrevocable and irreversible and duly registered purchase and sale; b) negative certificates of federal, state and municipal taxes, of protest of titles, of civil and criminal actions and of real encumbrances in relation to the land, the land alienators and the developer; c) construction project duly approved by the competent authorities; d) calculation of the building areas, discriminating, in addition to the overall, that of the common parts, and indicating, for each type of Unit, the respective built area footage; e) descriptive memorial of the specifications of the projected work; f) discrimination of the ideal fractions of land with the Units that will correspond to them; g) draft of the future condominium agreement that will govern the building;
- supervise the construction of the project provided for in the contract and in accordance with the approval granted by government authorities;
- obtain the certificate of completion (“Habite-se”) of the enterprise;
- make the specification and institution of the building condominium, so that each unit can have its exclusive owner, registering the built area of the project; and
- deliver the completed units to the purchaser, in accordance with the contractual specifications, and transfer the unit’s direct ownership rights to the purchaser, by drawing up the public deed of sale and purchase.
The acquirer’s main obligation, in turn, consists of paying the price relating to the ideal fraction of the land and the construction. The construction of the incorporated project can be contracted and paid for by both the developer and the final purchasers of the units.
The Incorporation Law provides for two construction regimes for the buildings to be incorporated: construction by contract and construction by administration.
The construction under the contract may be of two different types, one at a fixed price, agreed before the start of construction, and another at an adjustable price, using indices previously determined by the contracting parties.
In construction by administration, the purchasers of the properties under construction are responsible for paying the full cost of the work, in the form of apportionment of the monthly expenses made by the developer or the builder, with no previously determined price for the construction, but only estimated.
Assets appropriation regime
Pursuant to Law 10,931/04, the developer may submit the real estate development to the segregate estate regime or to the special tax regime (RET), which set forth the developer’s rights and obligations, granting more security to the purchasers of real properties, as well as to the bank financing the works.
Through the segregate estate regime, the lot and the construction works on it, as well as funds allocated to it and all assets and rights related to it, which may be used only in the execution and delivery of such real estate development, are placed in a separate estate from the estate of the real estate developer.
Therefore, the real estate development under the segregate estate regime is only liable for debts and obligations related to the execution of its works and delivery of its finished units to the purchasers, not being associated with any other rights, debts and/or obligations of the developer or other real estate developments.
Since August 2010, the Company has submitted all its launched developments to the segregate estate regime. In addition, the Company uses Specific Purpose Entities (SPEs) created to carry out specific real estate developments, aiming to segregate all rights and obligations in each development of the Company, thus increasing security of the segregate estate and also presenting itself as a more efficient and transparent structure in the cases in which the Company acts in partnership with third parties.
Law No. 9,514/97 instituted the conditional sale of real estate for the purpose of facilitating real estate financing in general.
Under the conditional sale mechanism, the creditor retains ownership of the assets pledged by the debtor as a guarantee. According to Law No. 9,514/97, upon full payment of the debt to the creditor, the conditional sale is automatically cancelled and the debtor gains ownership of the property.