Increased Use of 7 Year Old Brazilian Property Buying Protection Law Being Witnessed
An optional Brazilian Law – no. 10.931 of 2004 – which focuses on consumer protection has seen a revival in recent times in light of increasing difficulties some off plan real estate buyers have been experiencing with the progress of their purchases.
The main stipulations of the law include allowing buyers to access administrative and financial information as well as offering protection in the case of bankruptcy of the developer. The latter is particularly focused on permitting the project to continue by means of being contracted to another construction company (without an extended judicial process needing to be undertaken).
As a result, a growing number of ´buyer committees´ have been seen where constructors are obligated to provide quarterly reports which include a financial balance of the project as well as detail with regards to the schedule of works and other budgetary information. Should any irregularity / discrepancies become apparent, the committee is well within its right to formally request for the issue to be dealt with accordingly.
Property development companies in Brazil that opt to have the Law incorporated benefit from having a slightly lower real estate sales tax rate as well as by increasing their reputation in the marketplace. The Tecnisa and Even construction companies have publically announced their alignment with the law and according to Fábio Rossi of the Itaplan real estate company – in an interview with the Estadão newspaper – more developers are following suit (note that all projects under the Minha Casa, Minha Vida programme have a legal obligation to adhere).
In order to find out if the development company incorporates the law into its practices, buyers should verify with the company itself or via a lawyer. Buyers are also being advised to ensure that the committees have real estate construction specialists (engineers, lawyers or accountants) as impartial representatives as opposed to fellow buyers or agents with vested interests. It should also be remembered that the law should not be perceived as a watertight form of protection – for example, financial losses incurred by a bankrupt companies will not be able to be recouped which will affect the position of the takeover company and, ultimately, the value of the development.
