Real Estate

Complete guide on real estate law

Buying a property or offering it for rent are some of the situations that, at first glance, may seem simple. However, the inconvenience they can cause if the person in charge is not supported by a real estate lawyer who specialises in real estate law is many and, worst of all, serious.

In recent years, the demand for professionals in this area has grown significantly, largely due to the popularization of measures to encourage the purchase of home ownership for the most different segments of society.

It happens that the consumer, in general, usually seeks the specialist in real estate law when in the course of the process of buying the property arises some problem, such as the delay in delivery of the property, misleading advertising, improper collection of brokerage and numerous other irregularities in the contract or in its execution. The right thing to do would be to count on the advice of this professional from the beginning, to avoid problems.

But real estate law goes far beyond purchase and sale contracts and lease contracts. In addition to this traditional area, areas that require knowledge of structured activities, such as real estate investment funds, multi-use ventures and shopping centers have also gained notoriety.

That’s why having a lawyer to advise the client throughout the process is much more interesting than just to solve a problem.

So, keep reading our post to understand a little more about one of the legal areas with more demands for new professionals. In it, we will present the basic concepts, the importance of specialist lawyers and the areas of expertise. Continue reading and find out if this is the area of your dreams!

What is real estate law?

Real estate law can be understood as a branch of private law responsible for establishing the rules governing relationships involving the acquisition and loss of property, possession, lease, usucapiao, real estate development, condominium, donation and assignment of rights, homeownership financing, the right to build, neighbourhood law, registration of real estate and other legal institutes related to real estate.

The basis of the real estate law, therefore, is in the property right. Thus, the real estate law will involve both the phases prior to the acquisition, such as purchase, financing, usucapion, as well as the exercise of property, such as right to build, lease, neighborhood right, sale, condominium, among others.

It is, therefore, about what can be done with the real estate by its owner.

Faced with this diversity of matters, there is also a diversity of laws involving the real estate law branch.

The most important of these is the Civil Code, especially in the chapter on rights in rem. There are the legal determinations about property, possession, neighborhood, condominium, among others. Besides the part that deals with contracts, which is extremely important for the conclusion of business.

Among the sparse laws that are important in this area are Law No. 8.245/91, which deals with urban real estate leases, and Law No. 4.594/64, which regulates the profession of insurance broker. Law No. 4,380/64, which regulates the housing financial system, and Law No. 6,015/73, which deals with public registries.

In addition to these laws, the Consumer Defense Code is also important for real estate law, insofar as it protects the consumer against abusive clauses and against possible maneuvers that could harm the client. It is also important the knowledge of business, urban, environmental and tax law, according to the area of expertise of the professional.

What are the basic concepts of real estate law?

To enter the universe of real estate law it is necessary to understand some basic concepts, whose technical terms are common in the area, such as registration, deed, promise of purchase and sale, contract and due diligence.

To facilitate understanding, it is worth analyzing each of these terms separately.

Registration

The license plate is exactly the sheet of paper with the unique numbering that represents the property. In order to be valid, the registration must be kept at the Real Estate Registry Office of the relevant municipality.

Therefore, each property must be registered with the Real Estate Registry Office in your city. It is the registration that proves the ownership of the real estate.

Each license plate contains information about the property in order to specify and individualize it. This information includes the area where the property is located, its limits, the neighbors, the address and the municipal inscription.

Of course, these specifications may vary according to the type of property. In this sense, a rural property usually contains specifications such as the name of the farm and the border areas that are often rivers and trees. Already an urban property, such as an apartment, must have specifications as the full address, including the name of the building and number of the apartment. This all beyond the size of the area, either in bushels, as rural property, or in square meters, as are usually the urban properties.

Besides the identification of the property, are registered the data of the current owner, as well as all the successor owners, demonstrating the path taken until you get to the present time.

After the identification of the property, are recorded all acts produced previously, such as purchase and sale, donation, dismemberment, promise of purchase and sale, as well as liens and mortgages.

It is important to emphasize that no data is erased from the register, the registration is only updated according to the new condition.

The registration is, therefore, a kind of identity card of the property, but with even more information about its characteristics and its history.

In addition, the registration is a public document, which means that it can be seen by anyone, just as anyone can request a certificate from the notary’s office about what is on their register. As a result, the information contained therein has an erga omnes effect, i.e. it is enforceable against any person and not only against interested parties.

Due diligence

Due diligence is an auditing process that aims to verify the legal security of the acquisition of a property, through the reduction of risks that surround it. It is a concept that originated in business law, in which investigations were made for the purchase of a company.

This audit process analyzes all aspects of the property and its sellers in order to ensure that the buyer is not surprised after conducting the business and making the purchase of the property.

In this sense, the auditor evaluates the possible existence of liabilities of the property in court and liabilities of the seller to verify possible risks, such as the sale will configure a fraud to the execution and, as a consequence, be annulled in court.

In addition, depending on the property, it is analyzed whether it meets the requirements of the environmental and urban norms that surround the property.

It is, therefore, a thorough analysis of the situation of the property and its seller, to the extent that it involves the verification of documents, judicial liabilities, the verification of the property itself, which requires visits to the location of the property, public agencies and notary offices.

For this reason, it should be done by an office specialized in real estate law, because only a specialist knows what the legal requirements are for a property to be in good standing.

Buy and Sell

Until the formalization of the purchase and sale of property, seller and possible buyer can choose to sign prior contracts or just the contract of purchase and sale itself. As the knowledge about the acquisition of the property is fundamental to the real estate law itself, it is worth seeing which are these contracts.

Option to buy and sell

The call and put option contract is an atypical contract, that is, not defined by the Civil Code, but, still, it is accepted in the legal world. It is also a preliminary contract, i.e. concluded at the negotiation stage, whereby the seller and the prospective buyer set a deadline for the confirmation of the purchase and sale business.

This contract, however, cannot be registered in the registration of the real estate, since the Law of Public Registries only admits registrations and annotations of the acts provided for in its article 167 and, among them, the put option contract is not included. However, the contract may be registered with the Notary Public.

During this term, the owner is prevented from selling the property to a third party, under penalty of payment of a fine. The idea is to give the possible buyer the preference for the purchase of the property, provided it is done within that period.

In general, the buyer takes advantage of this period to, precisely, research the conditions of the property with regard to real estate, urban planning, environmental, tax issues, in short, to do due diligence.

After the expiration of the term without the interested party having exercised the purchase option, the contract loses its effects and the owner becomes free to sell the property to another person.

Promise to buy and sell

The promissory contract is also a preliminary but typical contract, i.e., the Civil Code provides for this contractual model.

It is, therefore, a preliminary contract by means of which the owner promises the sale and the buyer promises the purchase of the good, to be carried out in the future. But it is not a mere option, in which the prospective buyer has the preference for the purchase, but a commitment made between the parties that the deal will be closed within a certain period.

If the contract does not provide for a right to repentance by the parties, the prospective buyer acquires a real right to purchase the property. Thus, if the owner does not comply with the agreement, the buyer can file an action to complete the sale.

However, if the contract gives the right to repentance to the parties, the one who does not fulfill his part, that is, the one who gives up selling or buying, will be penalized. In general, this penalty is in the form of payment of a fine and, eventually, compensation for losses and damages.

Although the purpose of this agreement is to produce effects only between the parties involved, it may be taken to registration in the registration of the property and, thus, also produce effects for third parties.

It is interesting to note that the promissory contract of purchase and sale does not confer the right of use and enjoyment on the part of the promissory buyer, only of acquisition of the real estate.

Private contract of purchase and sale

A contract of sale is a private contractual instrument by which one party undertakes to transfer its property to another person for consideration.

The mere execution of this contract may mean the execution of the business. This is because in some situations, the purchase and sale contract is not sufficient to complete the transfer of the asset.

It only effective the transfer of the property when, duly registered in the registry of real estate, the value of the property is equal to or less than 30 minimum wages – which currently corresponds to R$28,110.00 – or when it is a property financed by the Housing Financial System and Real Estate Financial System. In the latter case, the private contract will have the force of public deed.

In general, the contract with force of public deed is linked to a bank financing. Because of this, the promissory buyer is only imitated in possession of the asset, but remains in debt with the financing bank which, in turn, has already concluded the deal with the buyer, releasing him from any connection with the property. The financial institution, therefore, has its own as well as a guarantee for the payment of the financing, in general by the institute of fiduciary alienation.

In other cases, the purchase and sale agreement is not sufficient, and it is necessary to draw up the Public Deed of Purchase and Sale for the transfer of the asset to the buyer.

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