Commercial real estate in Brazil: overview

A Q&A guide to corporate real estate law in Brazil.

The Q&A gives a high level overview of the corporate real estate market trends; real estate investment structures, including REITs; legislation; title and public registers of title; confidential information; state guarantee of title; tenure; sale of real estate; seller's liability; due diligence; warranties; cost; taxes and mitigation, including VAT and stamp duty/transfer tax; climate change targets; third party outsourcing; restrictions on foreign ownership or occupation; finance; leases; planning law and consents; and proposals for reform.

To compare answers across multiple jurisdictions, visit the Corporate Real Estate Country Q&A tool.

This Q&A is part of the multi-jurisdictional guide to corporate real estate law. For a full list of jurisdictional Q&As visit

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 Brazilian real estate market has grown during recent years and over the past 12 months there has been an increase in investments in the infrastructure sector with the construction and expansion of airports, ports, roads and energy projects. Due to these investments, land parcelling projects have also increased.

Due to the 2014 World Cup, held throughout Brazil in July 2014, and to the 2016 Olympic Games, to be held in Rio de Janeiro, there have been a number of hospitality projects.

The City of Rio de Janeiro, in particular, has been undergoing a real estate boom due to both the sporting events and the Port Zone urbanisation project (Porto Maravilha Project). In addition to extensive revitalisation of a downgrade area in Downtown Rio, the Porto Maravilha Project has attracted investors and developers to commercial, residential and hospitality projects.

In the City of São Paulo, new Planning Legislation was enacted through Municipal Law 16,050/2014, bringing new challenging rules for the real estate market. Developers are still studying the impacts on new projects for the more affected areas and some delays for the approval of new projects in the City of São Paulo are expected. Additionally, a Bill regarding new Zoning Legislation is currently under discussion and is expected to be enacted in 2015.


Real estate investment

2. What structures do investors typically use for real estate investment in your jurisdiction and what are the main advantages and disadvantages of each (for example, flexibility and tax transparency)?

The more commonly used structures for property investment are:

  • Property companies.

  • Partnerships.

  • Funding mechanisms.

  • Securities structures.

For property companies, the main types of companies are: the limited liability company (sociedade limitada) and the corporation (sociedade anônima). In general, if the company is incorporated exclusively to acquire a real estate property in Brazil, the sociedade limitada could be more appropriate as it is simpler than the sociedade anônima, especially regarding disclosure and management requirements (in a sociedade anônima, for example, it is necessary to have at least two officers resident in Brazil, while in a sociedade limitada, only one officer resident in Brazil is required; in a sociedade anônima all the corporate documents, amendments and financial statements must be published, while in a sociedade limitida only some).

For securities structures, it is worth mentioning:

  • The Real Estate Investment Fund (REIT) (Fundo de Investimento Imobiliário) (FII), which is similar to the US REIT and commonly used for the development of real estate projects.

  • The Private Equity Fund (Fundo de Investimento em Particpação) (FIP), from which at least 90% must be invested in shares, debentures, share warrants and other securities convertible in to or exchangeable for shares issued by publicly-or privately-held sociedades anônimas. Although the FIP cannot directly hold real estate assets, it may invest in property companies (see above).

Depending on the structure, the investors may have some tax benefits and legal protections.

3. What are the main sources of finance and types of investors for real estate investment in your jurisdiction? Does your government encourage overseas investment into real estate in your jurisdiction, for example through real estate investment legislation?

The sources of financing vary in accordance with the type of relevant real estate project. For example, infrastructure projects have a considerable component allocated to the Brazilian development bank (BNDES). Additionally, big institutional investors such as public pension funds participate in the larger projects usually sponsored by the Federal Government. Projects using FII (see Question 2) or the public offering of Certificate of Real Estate Receivables (Certificado de Recebíveis Imobiliários) (CRI), for example, are usually allocated to other institutional investors, such as mutual and/or hedge funds, as well as to natural persons.

The Brazilian Government recently published Provisional Measure 656/2014, creating the Letra Imobiliária Garantida (LIG), a new security backed by credit portfolios constituted of real estate projects financing. This is the Brazilian equivalent of Covered Bonds for the real estate market. The LIG is a debt security with both direct recourse to the issuing financial institution and a claim to the underlying asset portfolio. Although still pending regulation, it is expected that the LIG will also be an important source of funding for real estate projects as it is backed by real estate financing granted by Brazilian banks.

To encourage overseas investment into real estate projects, the government grants some tax incentives to investors, depending on the chosen vehicle.


Restrictions on foreign ownership or occupation

4. Are there restrictions on foreign ownership or occupation of real estate (including foreign ownership of shares in companies holding real estate)? Are there restrictions on foreign guarantees or security for ownership or occupation and on lending for the purchase of real estate?

As a general rule, foreigners (individuals or companies) are free to acquire or to use, at any title, urban real estate properties in Brazil. However, there are some restrictions regarding:

  • Acquisition or lease for rural properties.

  • Acquisition of urban properties located on coastal land.

  • Acquisition and possession of properties located at the borders of Brazil.

Foreign persons or entities domiciled outside Brazil are not authorised to acquire or to lease lands in rural areas.

Only foreign persons domiciled in Brazil or legal entities authorised to operate in Brazil are allowed to acquire or lease rural lands in Brazil, subject to restrictions related to the size of the property and its destination (Law 5, 709/71). In 2010, the interpretation of Law 5,709/71 changed and, consequently, the restrictions that apply generally to individuals or companies (see above) now also extend to Brazilian companies controlled by foreigners.

Foreign persons or entities are not authorised to own or to possess lands or to have any kind of in rem rights over lands on the seashore areas or on the borders of Brazil (the land strip within 150 kilometres from the national border) without special governmental authorisation (Law 6,634/79 and Decree 85,064/1980).


Title to real estate

5. What constitutes real estate in your jurisdiction? Is land and any buildings on it (owned by the same entity) registered together in the same title, or do they have separate titles set out in different registers?

Land and everything that is incorporated into land (whether naturally or artificially) is classed as real estate. Land and any buildings on it that is owned by the same entity are registered together under the same title.

6. How is title to real estate evidenced? What is the name of the public register of title and the authorities responsible for managing it? Is electronic access and electronic conveyancing available?

Title to real estate is evidenced by registration in the appropriate Real Estate Registry Office (Cartório de Registro de Imóveis). An updated certificate of title, issued by the appropriate office, is proof of good title to real estate. It also details all registered transactions relating to the property over the previous 20 years, indicating the current owner and whether there is any lien against the property.

With non-registered land, claims, rights or liens are only enforceable between the parties. Therefore, although the buyer's property rights are derived from a deed, his ownership of property only becomes valid against third parties once the deed is registered in the Real Estate Registry Office under the title number for the property.

To date, there is no electronic access or electronic conveyance available, but in some municipalities (like the City of São Paulo), it is possible to obtain a copy of such certificates online. However, this is for analysis only (that is, the digital copy is not considered an official document for the circumstances where an official certificate is required, such as the granting of a public deed).

7. What are the main information and documents registered in the public register of title? Can confidential information or documents be protected from disclosure in the public register of title?

Since the Public Registers Law (Law 6, 015/73) came into force, Brazil has operated a public registration system for real estate, based on a system of registers. The first transaction involving a property that occurs after 1973 triggers registration in the appropriate real estate register and the property is given a title number (matrícula).

Under this title number, the real estate register records:

  • Details of the owner.

  • A description of the property.

  • The existence of any buildings.

  • All third party rights and interests in the property that are subject to registration, such as mortgages (hipoteca), attachments and any other real right or interest in the property.

Once documents are registered in the Real Estate Registry Office, they become public. Anyone can apply for and obtain certificates of title and copies of titles.

8. Is there a state guarantee of title? Is the authority that manages the public register liable to pay compensation for any errors it makes in relation to title registration? Is title insurance available and is it commonly used?

There is no state guarantee of title or title insurance. The Register Officer at the Real Estate Registry Office is not liable for title validity, but he is accountable for any damage or loss caused to third parties for mistakes and omissions during the registration act.

9. How can real estate be held (that is, what types of tenure and other main ownership rights exist over land)?

Ownership is absolute and perpetual until disposal of the property by the owner, who is free to enjoy it and dispose of it, subject only to third party rights and legal restrictions. On the owner's death, ownership transfers to his heirs.

Among others, the following types of tenure exist:

  • Usufruct: full right of use and enjoyment, including the right to incomes generated by the property.

  • Fiduciary ownership.

  • Fiduciary alienation: a type of security.

  • The acquisition right of the buyer under a purchase and sale commitment.

  • Real right of use: a type of limited usufruct, giving the right to use property for a specific purpose.

  • Surface right: a specific right to build or to cultivate granted by the owner of the land in favour of a third party, segregating the ownership of a building or a plant from the land.

  • Fideicommissary substitution: by which ownership of property passes to one heir or beneficiary, who holds it in trust until his death, when the property passes to the second heir or beneficiary.

  • Emphyteusis: the right of useful domain (domínio útil) over the property on a perpetual basis. Emphyteusis was abolished by the Civil Code of 2002, although existing emphyteutic liens remain valid.

  • Aforamento or occupation right (direito de ocupação) over properties held by the Federal Government, like those located in the coastal area.


Sale of real estate

Preliminary agreements

10. What types of preliminary agreements are typically used in the sale of real estate? Are they legally binding?

The most common preliminary agreement is the purchase and sale commitment, by which the owner of a property promises to sell it to the buyer, who promises to buy it. In general, the parties establish in this agreement the price, terms and conditions for the execution of the definitive purchase and sale deed.

The purchase and sale commitment is usually binding and, in such case, the buyer has a right to, if all conditions have been fulfilled (such as, the payment of the price), judicially compel the seller to perform the sale and to execute the deed.


Sale contract

11. Briefly outline the typical main provisions of a corporate real estate sale contract and main real estate provisions of a typical share purchase agreement.

The main provisions of both a corporate real estate sale contract and a share purchase agreement are related to:

  • Description of the property and its legal situation.

  • Price to be paid.

  • Liabilities of each party in relation to the asset itself.


Due diligence

12. What real estate due diligence is typically carried out before an acquisition and what key areas does it cover? Which documents are typically reviewed? Which specialist advisers are usually involved and which reports do they typically produce?

Due diligence is required to obtain relevant information about the property and its owner, comprising the analysis of the following main documents:

  • Certificate of Title: issued by the relevant Real Estate Registry Office, in order to confirm the description of the property, its owner and whether there is any lien, encumbrance or restriction over it.

  • Law Suits Distribution Certificates: usually issued in the city where the property is located and where the owner is domiciled, in order to confirm the existence of any lawsuit involving the property or the seller.

  • Proof of payment of expenses related to the property, such as electricity, gas, water and so on.

  • Analysis of any agreement involving the property (lease agreements, securities agreements and so on).

  • Environmental Certificates.

Typically, a legal due diligence is performed by a real estate lawyer. Depending on the case, other specialists must be involved, such as environmental consultants, surveyors, engineers and so on. Each specialist renders his own report at the end of his specific task.


Sellers' warranties

13. What real estate warranties are typically given by a seller to a buyer in the sale of corporate real estate and what areas do they cover? What are the main limitations on warranties, for example are they typically qualified by disclosure?

It is not common for the seller to give formal warranties to the buyer, due to the legal liabilities imposed on the seller in relation to any act or debt derived from any fact occurring before the sale. However, the parties may establish any kind of guarantee or indemnification clause.



14. Does a seller have any statutory or other liability to the buyer in a disposal of real estate?

The seller must disclose any lien or claim over the property. The buyer must obtain all relevant information about the property and the seller through certificates issued by the relevant real estate registrars. The law imposes liability on the seller (unless the parties agree otherwise) for:

  • Eviction, which means the buyer has recourse in damages against the seller if the property is lost to a third party by judicial decision.

  • Debts related to the property that arose before the transfer of title by registration.

15. Briefly outline the environmental legislation and potential liability for a buyer in a purchase of real estate. Is it common to carry out environmental surveys and searches and to obtain environmental insurance? How is environmental liability typically dealt with in the sale contract?

Environmental liability runs with the land itself and anyone who acquires a property that has suffered environmental damage may succeed in the former owner's liability regardless of a prior due diligence (the Brazilian system does not apply the bona fide prospective purchaser provisions against third parties). In these circumstances, the buyer may be considered fully liable for management and compensation for pre-existing contamination, although the buyer has a right of recourse against the seller. Therefore, a prior technical due diligence may be recommended depending on the environmental sensitivity of a given property.

Liability for environmental damage can be allocated between the contracting parties, although such provisions are only valid between them and do not bind third parties. In transactions involving contaminated areas, the parties may also agree provisions that will guide the remediation and reimbursement/indemnification.

16. Can an owner or occupier inherit liability for other matters relating to the real estate even if they occurred before it bought or occupied it? Can a seller or occupier retain any other liability relating to the real estate after it has disposed of it?

In some cases, liability passes with the property and therefore the buyer will inherit it on transfer of title. This liability includes:

  • Most environmental liabilities, even if they arose before the transfer.

  • Real estate taxes, unless the public certificates indicate there are no debts at the time of the acquisition. In this case, the buyer is not responsible for debts indicated as paid in the certificates. Usually, outstanding debts shown in the certificates are paid before the transference or the debt is discounted from the price.

  • Maintenance expenses for condominiums, where the debt is transferred with the property to the buyer. The buyer will have recourse against the seller for these costs.

A buyer of a leased property is not liable for the obligations of the former tenant.


Completion arrangements

17. What are the typical arrangements and main documents required for completion of the sale? When does title transfer and what are the formal legal requirements to execute the sale documents, transfer the real estate and register the change of title? Is notarisation required?

Typically, the completion of a purchase and sale transaction is made upon the execution of a definitive purchase and sale deed before a public Notary Office. This deed is usually preceded by legal due diligence, with the presentation of all certificates related to the seller and to the property (including the proof of transfer tax payment, see Question 18).

The sale and purchase deed becomes legally binding once signed by the parties. However, title and ownership of the properties are conveyed only when the public deed is registered in the relevant Real Estate Registry Office.


Real estate tax

18. Is stamp duty/transfer tax (or equivalent) payable on the purchase of real estate? Who pays, what are the rates and are there any exemptions? Does it apply to the transfer of shares in a company holding real estate and at what rate?

All real estate transfers are subject to at least one tax, depending on whether they are made in exchange for payment (onerous transfers) or are gratuitous transfers, such as gifts.

Onerous transfers. These transfers are subject to Imposto de Transmissão de Bens Imóveis (ITBI), also known as SISA, a municipal tax payable by the buyer when acquiring property. The rate varies from city to city but is generally around 2%.

Gratuitous transfers. These transfers are subject to Imposto sobre Transmissão Causa Mortis e Doação (ITD), a state tax payable by the person who receives assets or rights (including property) by gift, inheritance or bequest. The rate varies from state to state but is generally around 4%.

These taxes are usually calculated on the higher of the market value of the property or its appraised value.

In relation to those properties held under the emphytheusis system, aforamento or occupation right, the onerous transfer of the useful domain (domínio útil) is also subject to prior payment of a laudemium fee (laudêmio) (see Question 9). Depending on the case, this fee could be 2.5% or 5% of the updated value of property. The seller is legally responsible for this payment, however, the parties may agree otherwise.

19. Are any methods commonly used to mitigate real estate tax liability on acquisitions of large real estate portfolios? What is the general approach of the tax authorities in your jurisdiction to such schemes?

The most effective way of mitigating tax liability on acquisitions of real estate is by conducting full and thorough due diligence.

20. Is value added tax (VAT) (or equivalent) payable on the sale or purchase of real estate? Who pays? What are the rates? Are there any exemptions?

VAT is not payable on the sale and purchase of real estate in Brazil.

21. Are municipal taxes paid on the occupation of business premises? Are there any exemptions?

There are no municipal taxes based on occupation for business purposes.

Property owners in urban areas are subject to a municipal tax levied annually on the appraised value of property called urban property tax (IPTU), which levies on the ownership of the property with no distinction on the grounds of kind of occupation.

Rates and exemptions vary from city to city. Some municipalities impose additional levies on property to cover the cost of economic activities and waste disposal.

Properties held under the emphyteusis system, aforamento or occupation right (see Question 9) are also required to annually pay an occupancy fee:

  • Emphyteusis or aforamento: an annual fee (foro), corresponding to 0.6% of the value of the property and paid by the holder of the useful domain.

  • Occupation right: an annual fee (taxa de ocupação), which can vary between 2% and 5% of the value of the property, paid by the beneficiary.


Climate change issues

22. Are there targets or incentives to reduce greenhouse gas emissions from buildings in your jurisdiction? Is there legislation requiring buildings to meet certain minimum energy efficiency criteria?

The federal government and most Brazilian states have passed their climate change policies, which do not create specific obligations for real estate projects. Federal guidelines for mitigation and adaptation to climate change are under development for several sectors, including civil construction, although they are not expected to establish specific targets of GHG reduction.

Federal Law 12,836/2013 gives local governments the possibility to establish specific incentives in syndicated transactions aiming to foster technologies to reduce their environmental impacts, including construction works.

Tax incentives have also been used to lower prices of materials used in energy efficiency and sustainable projects. Moreover, some municipalities have recently established the possibility of discounts in urban property tax (IPTU) of projects with environmental improvements.

In the Municipality of Rio de Janeiro, there are some tax benefits regarding sustainable properties related to the 2016 Olympic Games. Particularly in Rio de Janeiro and São Paulo, the concession of incentives and tax benefits for sustainable properties is under discussion.

Voluntary certification is widely adopted in new real estate projects, although they do not automatically qualify for public financial incentives.

23. Are provisions relating to the energy efficiency of buildings commonly included in contracts for the sale of real estate or in leases (for example, green leases)?

Green leases are still uncommon in most real estate transactions, although they represent a growing trend due to recent tax incentives given to real estate projects with sustainable features.

However, there are a growing number of companies concerned with environmental issues and these are looking for buy/lease real estate properties with sustainability certificates.


Real estate finance

Secured lending involving real estate

24. Briefly outline the typical security package required by lenders in relation to real estate lending. How are the most common forms of security interest relating to real estate created and perfected (that is, made valid and enforceable)?

Real estate is a well-established source of security for financial transactions. The most common methods are:

  • A collateral lien created through the receivables originated from transactions involving real estate.

  • Liens over the property, such as mortgages or similar.

Federal Law 9,514/97 created the real estate finance system (SFI) to establish the granting, acquisition and securitisation of real estate loans in Brazil. It also established the common forms of securities used in real estate financing, such as:

  • Mortgage (regulated by the Civil Code) . This is a lien created over the property, by a public deed, to guarantee a debt from the owner or third party. To become enforceable against third parties it must be registered with the Real Estate Registry Office. Ownership and possession of the property remains with the guarantor. If the property is sold, the mortgage remains on the property. A mortgage deed is an out-of-court title to enforcement and the creditor can use court enforcement proceedings to receive payment of the debt.

  • Fiduciary alienation (a kind of chattel mortgage that enables foreclosure by power of sale) . By a private or a public form, the owner transfers property ownership to the creditor, on a fiduciary basis, as a guarantee for the payment of the debt, but the owner keeps direct possession of the property. To be effective this must be registered with the Real Estate Registry Office. The fiduciary alienation agreement is an out-of-court title enforcement before the relevant Real Estate Registry Office. When the debtor defaults, the fiduciary creditor shall send a notice to the debtor through the Real Estate Registry Office giving the debtor the chance to liquidate the debt. If the debtor does not pay the entire debt, the ownership of the property will be consolidated by the creditor, which shall then try to sell the property in accordance with the terms and conditions established by the law.

  • Fiduciary assignment of credits or acquisition rights. A deed of fiduciary assignment of credits arising from a purchase and sale agreement or acquisition rights is an accessory contract to a loan agreement. It takes the form of a private instrument entered into between the developer of a real estate venture and the financial agent (creditor), under which the developer transfers to the creditor the ownership of the credits it holds against the third-party purchasers of real estate or the acquisition rights over certain property. The creditor receives payment of the debt directly from the third-party purchasers.

  • Pledge of credits or acquisition rights. A deed for the pledge of credit rights arising from a purchase and sale agreement, like the fiduciary assignment, is an accessory contract to a loan agreement. It takes the form of a private instrument entered into between the debtor and the creditor. However, in this case, the ownership of the credits or the acquisition rights remains with the debtor. The creditor will notify the third-party purchasers to pay the creditor directly.

The Civil Code also establishes other forms of guarantee that may be used for real estate transactions, but the most common are those listed above.

25. What other real estate related measures do lenders typically take to protect themselves against default by the borrower?

Lenders usually conduct a full legal due diligence investigation on the property and/or credits to serve as collateral (see Question 24) as well as the borrowers. This is necessary not only to evaluate the risks of the financial operation but, mainly, to assess the validity and enforceability of the collateral.

Additional contractual protections may be negotiated, as follows:

  • Acceleration of the debt upon occurrence of certain events, such as:

    • default of payment of one or more instalments of the debt;

    • deterioration or reduction of the value of the guarantee not complemented or replaced;

    • insolvency, protest of titles, bankruptcy, judicial recovery of the borrower;

    • transfer of borrowers' rights and obligations to third parties, or promises to sell or dispose of the property by any other means without prior and express consent of the lender;

    • borrower's obligation to comply with the applicable legislation.

  • Obligations that aim to reduce the risk of depreciation of the property, such as:

    • property insurance;

    • keep the property in good condition;

    • lender's right to inspect the property/instruments of credit;

    • as the case may be, borrower's obligation to report the project development or the activities related to the guarantee, as well as any problem or incident involving the asset that is the subject of the guarantee.

  • Precedent conditions for the liberation of the funds, such as:

    • for mortgages, fiduciary alienation, pledge or rural production, registering the guarantee instrument with the competent Real Estate Registry Office;

    • release funds in tranches according to some pre-agreed milestones;

    • obtaining licences and permits for the activities to be developed in the property (for example, project approval, building permit, environmental licensing).

26. Can lenders incur environmental liability? What measures do lenders typically take to manage potential environmental liability?

If a beneficiary project caused environmental damages, the deep pocket doctrine together with the definition of indirect polluter has served as legal grounds for the liability of financial institutions.

However, there is still no consensus on the precise boundaries of lenders' environmental liability as this matter has not to date been settled by higher courts in a definitive manner. The emerging theory is that a lender may be held liable for environmental damages from project financing whenever it has either:

  • Failed to perform a due diligence before credit release.

  • Sustained credit release when aware of environmental damages.

The main protective measure used by lenders consists of acceleration clauses with specific provisions regarding compliance with environmental matters and avoidance of damages.

27. Briefly outline the main remedies for lenders in relation to the secured real estate if the borrower defaults on the loan. What is the effect of the borrower's insolvency on the lender's remedies?

For the main remedies for lenders in relation to the secured properties see Questions 25 and 26.

The effects of the borrower's insolvency will depend on the guarantee given by the borrower to the lenders. However, debts guaranteed by real estate assets usually have priority over other debts, except for tax and employment debts.

28. Briefly outline key additional issues for lenders in relation to construction and development projects.

Among others, the key additional issues for lenders in relation to construction and development of real estate projects are:

  • Urban and environmental restrictions and authorisations.

  • Tax issues.

  • Labour issues.

  • Liability for the construction, delivery, security and soundness of the building.


Other real estate financing techniques

29. Are other real estate finance techniques commonly used in your jurisdiction? For example, real estate securitisation and sale and leasebacks.

Real estate securitisation, governed by Law 9,514/19, is widely used. Through the securitisation, the project developer transfers real estate credits arising from a real estate venture to a securitisation company (a non-financial agent registered with the Brazilian Security and Exchange Commission) (Comissão de Valores Mobiliários) (CVM), which issues a security (usually a Certificate of Real Estate Receivables (Certificado de Recebíveis Imobiliários) (CRI)), backed by the acquired portfolio of real estate credits, and sells it on the market through private placements or public offerings.

There are also some real estate backed titles, such as the Letter of Real Estate Credits (Letra de Crédito Imobiliário) and, recently, the Brazilian Government created the Letra Imobiliária Garantida (LIG), a new security backed by credit portfolios constituted of real estate projects financing (see Question 3).

The real estate market also uses other alternatives for financing, such as dedicated investment funds and private equity transactions (see Question 3).

Built-to-suit lease transactions (in which the landowner/lessor constructs a facility that meets the future tenant's specifications and the tenant, in turn, undertakes to lease the property for a period of time sufficient for the landowner to obtain a return on his investment) are also very common. Sale and leaseback transactions are recently becoming more common, especially after the amendment to the Lease Law (through the enactment of Law 12,744/12). Under this amendment, lease agreements that involve significant investments by landlords to acquire, refurnish or construct the property to be leased, may set out terms and conditions freely negotiated between landlords and tenants.


Real estate leases

Negotiation and execution of leases

30. Are contractual lease provisions regulated or freely negotiable? Which legislation applies?

Urban properties

Lease terms are governed by Law 8,245/91 (Lease Law), modified by Law 12,112/09 and by Law 12,744/12, which applies to the lease of urban properties. In general, the terms and conditions to govern the lease are freely negotiable by the parties. However, the Lease Law brings a number of limitations, which must be observed by the parties. For example, the landlord may require the tenant to present only one form of guarantee; if the payment of the rent amount is covered by a guarantee, the landlord cannot require the tenant to pay the rent amount up front; provisions that aim to exclude tenants' rights under the law could be considered null and void; penalties for tenants returning the property before the expiration of the term must be proportional to the remaining term of the lease.

The Lease Law was recently amended through the enactment of Law 12,744/12. The amendment sets out that in leases of urban property for non-residential purposes in which the landlord incurred material investments in order to acquire, refurnish or build the property to be leased (to meet tenant's needs), the terms and conditions stipulated by the parties will prevail.

Leases in shopping malls may also be governed by the terms and conditions freely negotiated between the landlord and tenant subject, however, to a few limitations set out in the Lease Law, such as a prohibition to charge some specific expenses forecasted in the Law.

The following are governed by the Brazilian Civil Code:

  • Leases of parking spaces.

  • Real estate owned by the government.

  • Hotels for residential purposes (or similar).

  • Spaces for publicity.

Rural properties

Leases of rural properties are governed by Law 4,504/64 and by Federal Decree 59,566/66.

Similar to leases of urban properties, the terms of a rural lease can be freely negotiable by the parties, but there are legal limitations to protect the social role of the property. If the parties do not observe the limitations established by the law, the respective provisions and practices may be considered null and void (for example, minimum term of validity; provisions that aim to exclude tenants' rights under the law are not allowed).

There are restrictions regarding the lease of rural properties with foreigners or entities controlled by foreign capital as tenants (see Question 4).

31. What are the formal legal requirements to execute a lease? Does the lease have to be executed by certain parties or as a deed? How do the formalities differ for a company, partnership and for individuals?

There are no formal legal requirements to execute a lease agreement, which may be agreed upon by the landlord and tenant even without a written agreement. The same rules apply to leases of real estate properties by companies, partnerships or individuals.

However, in certain cases, for the parties to be entitled to some rights under the law, a written agreement will be necessary, with a definite term of validity and, in some cases, the lease agreement must be registered on the records of the leased property with the Real Estate Registry Office.


Rent payments

32. How are rent levels usually reviewed and are there restrictions on this? Is stamp duty and VAT (or equivalent) payable on rent? Is a rent security deposit required and does it have to be managed in a certain way?

Rent amount review

Rent amounts can be reviewed by mutual agreement, or, at market value, upon request by tenants or landlords for judicial review. Judicial review can only be requested after a three-year period counted from the last agreement between the parties or the last review of the rent amount.

The lease agreement can contain terms and conditions for the adjustment of the rent amount. It is very common for lease agreements to have a provision stipulating periodic adjustment of the rent amount according to an inflation index elected by the parties. Currently, these periodic automatic adjustments cannot be applied to a period shorter than twelve months.

Taxation on rent

Rent of properties is not subject to VAT.

Rent is subject to Income Tax (Imposto sobre a Renda) (IR).

When the owner is a corporate entity, rent is also subject to Social Contribution on Net Income (Contribuição Social sobre o Lucro Líquido) (CSLL) and Social Security Taxes on Revenues (Contribuição para o PIS/ Pasep and Contribuição para o Financiamento da Seguridade Social) (PIS and COFINS). The applicable tax basis and rates vary according to the company's activities and methods elected by the entity for calculating IR/CSLL (actual or presumed profit method) and PIS/COFINS (cumulative or non-cumulative method).


Length of term and security of occupation

33. Is there a typical length of lease term and are there restrictions on it? Do tenants of business premises have security of occupation or rights to renew the lease at the end of the contractual lease term?

Lease terms can be definite or indefinite. There is no minimum or maximum lease term; the term is established on a case by case basis.

Indefinite term leases can be terminated with a 30-day prior notice.

In definite term leases, landlords cannot request the return of the property before the term expires.

If the leased property is sold during the lease term, the new owner can terminate the lease agreement with a 90-day prior notice. The exceptions are where the lease agreement fulfils all of the following conditions:

  • Has a definite term of validity.

  • Contains a provision establishing that the lease will continue to be valid upon transfer of title.

  • Is registered on the records of the leased property with the Real Estate Registry Office.

Leases for business purposes with a term of five years or more allow the tenant to request compulsory renewal in Civil Court, provided that a written lease agreement was executed and the tenant performed the same activities at the property for at least the previous three years.



34. What restrictions typically apply to the disposal of the lease by the tenant? Can the tenant assign or sublet the lease with the landlord's consent? Can tenants share their premises with companies in the same group? What is the effect of a legal reorganisation or transfer/sale of the tenant on the lease and on a guarantee of the lease?

A tenant's disposal of the lease, including assignment or sublet, is subject to the landlord's formal approval, unless expressly agreed otherwise. However, it is common practice to have provision in the lease agreements that allows the assignment of the lease or the sublet to companies that belong to the same group.

The law does not provide any limitations to change in control or legal reorganisation of tenants. However, it is not unusual that such limitations are included in the lease agreement (especially for shopping malls), such as a requirement for the landlord's prior consent.

35. Does a landlord or tenant retain any liability under the lease after the lease is assigned?

The assignment of rights and obligations does not imply that the assignor retains any liability regarding the fulfilment of the obligations by the assignee from the date of assignment, except as provided otherwise by the parties.

Generally, the occupier of the property is responsible for the issues and debts occurred during its occupation of the property.


Repair and insurance

36. Who is usually responsible for keeping the leased premises in good repair and for insuring the leased premises? Are there provisions for the ownership of lease improvements?

Tenants are generally responsible for taking the necessary measures to maintain the leased premises as received, except for wear and tear resulting from regular use.

The following costs are due by the landlord:

  • Insurance policy fees.

  • Taxes that levy on the property (including IPTU (tax on property)).

However, most lease agreements set out that tenants will pay for these in addition to the rent, water, electricity and telephone bills.

Landlords are responsible for keeping tenants' possessions without disturbances and appropriate for the purposes of the lease, as well as for structural problems and defects that originated before the lease.

Under the Lease Law, any improvements made on a leased property are incorporated into the property, and, except if the parties agree otherwise, tenants may be entitled to be reimbursed/indemnified for certain kinds of improvements.


Landlord's remedies and termination

37. What remedies are available to a landlord for a breach of the lease by the tenant? On what grounds can the landlord usually terminate the lease and what restrictions and procedures apply? What is the effect of the tenant's insolvency under general contract terms and insolvency legislation?

During the lease term, landlords have the right to terminate the lease early for:

  • Tenants' breach of contractual duties, including payment default.

  • Need for urgent repairs, if those repairs cannot be done while the tenants occupy or if they can be done during the tenants' occupation, but the tenants do not agree with the repairs.

A tenant's insolvency does not automatically trigger termination of the lease, except where the lease agreement provides for termination on the tenant's insolvency or bankruptcy. However, a court-appointed trustee may decide on the lease termination if it is no longer beneficial to the bankrupt estate.

For sale of leased property, the buyer is entitled to terminate the lease agreement upon a 90-day prior notice, except if the lease provides that the lease will remain in full force if the property is sold and the agreement is registered on the records of the leased property with the Real Estate Registry Office (see Question 33). This termination right must be exercised within 90 days of registration of the deed of sale on the records of the property, otherwise, the lease will remain in full force and effect.

38. Can the tenant withhold rent payments in certain circumstances, for example for serious damage to the leased premises? Can the tenant terminate the lease in certain circumstances?

Generally, tenants are not allowed to retain the payment of the rent, unless authorisation is provided for in the lease agreement.

If the leased premises has serious and urgent restraints of use, analysed case by case, tenants may be entitled to either:

  • Request in the courts that the landlord repairs the property.

  • Request judicial authorisation to deposit the rent with the court.

Tenants can terminate the lease either:

  • For cause, if the landlord does not comply with its contractual duties.

  • Without cause, by paying the penalty stipulated in the agreement. This is calculated proportionally to the remaining months for the end of the lease term, or the penalty stipulated by the judge.

In Built-to-suit (see Question 29) and sale and lease back transactions, the penalty agreed by the parties can be paid fully without proportional reduction.


Planning and development controls

39. In what circumstances can local or state authorities purchase business premises compulsorily? Is the purchase price market value?

The government can acquire properties through expropriation (governed by the Federal Constitution, Decree-Law 3,365/41 and Law 4,132/62) based on a public need or public interest. Fair compensation must be paid in cash before expropriation takes place.

Courts may anticipate possession of the property to the government, provided that purchase price is judicially deposited.

40. What authorities regulate planning control and which legislation applies? Is there specific protection for special categories of buildings such as historic buildings?

The municipal authorities regulate and implement planning control. Authorisation must therefore be requested from the municipal government for any construction, and for most refurbishment and expansion work. Other governmental approvals may be necessary, such as environmental licences.

Generally, municipal planning and zoning legislation establishes restrictions and limits on each neighbourhood or area of the city.

Additional measures and restrictions apply for buildings designated as historical by the government, or parts of sites or areas of historic value located in environmental conservation units.

41. What planning consents are required for building works and the use of a building?

A building permit granted by the municipality is required for all construction projects. Depending on the activities involved and the impacts of these activities, the project may be subject to environmental licensing as well.

Additional authorisation can be necessary, for example for buildings designated as historical sites or areas located in environmental conservation units.

Once construction is complete, a certificate of conclusion of works (habite-se) is required before the building can be occupied. Each municipality has its own issuing agency for the certificate.

42. What are the main authorisation and consultation procedures in relation to planning consents?

Initial consents

Planning applications should be made to the Municipal authorities and may vary for each Municipality. Depending on the case, approval of State bodies will also be necessary.

Third party rights

Third parties have the right to object to planning applications.

Public inquiries

Public inquiries are held for large-scale urban projects, particularly when there is local opposition to the proposals.

Initial decision

The time frame for the initial decision depends on the size and nature of the project; there is no fixed time period for the decision.


A decision can be challenged by bringing an administrative appeal. If the outcome of the appeal is unsuccessful, the decision can be challenged in the courts.



43. Are there proposals to reform real estate law and are they likely to come into force and, if so, when?

The following proposals are being discussed by the Brazilian Congress and may be modified before their approval:

  • Provisional Measure 656/2014 (Medida Provisória). Provisional Measure 656/2014 (see Question 3), among other things (including creating the LIG (see Question 3)) aims to simplify the process of purchasing or financing real estate properties. Under this measure, among other things, creditors of the owners of properties must register their credit with the competent Real Estate Registry Office to be enforceable against a third party acquirer of the relevant property. Provisional Measure 656/2014 must be converted into law within 120 days of its publication, under penalty of losing its effects.

  • Bill 2,289/07. Sponsored by Deputy Beto Faro, this Bill strictly maintains all existing limitations for the acquisition or lease of rural estate properties in Brazil by foreign entities. This includes Brazilian legal entities that comprise of foreign individuals or legal entities that hold the majority of the voting capital or exercise, under law or equity, the power to decide on the entity's activities (whose majority of capital stock is held by foreigners, either individuals or legal entities).

  • Bill 4,059/12. As a result of several amendments to the previous Bill, this new Bill, in a less restrictive level, clarifies that the limitations set out in Law 5,709/71 (see Question 4) are not applicable to Brazilian legal entities, even if they were established or are controlled directly or indirectly by foreign private individuals or legal entities, except for the legal entities held by non-governmental organisations or private foundations whose funds are derived from foreign individuals or legal entities, as well as the sovereign funds created by foreign states.

  • Bill 5,627/13. This Bill aims to change the legislation regarding the real estate properties owned by the Federal Union of Brazil. It proposes to reduce the occupation tax to 2% and to exclude from the valuation of the property (used as the base for calculation of a laudemium fee, see Question 18) the improvements made by the occupiers of the property. This Bill may be voted on within the next few years.


Online resources

Brazilian Institute of Real Estate Officers (Instituto dos Registradores Imobiliários do Brasil)

Main activities. This institute consolidates several real estate registrar services in Brazil.


Brazilian Association of Notaries and Public Registrars (Associação dos Notários e Registradores do Brasil)

Main activities. This is an umbrella organisation representing notaries and registrars throughout Brazil.


Union of Real Estate Agencies of São Paulo (Sindicato das Empresas de Compra, Venda, Locação e Administração de Imóveis de São Paulo)

Main activities. This organisation represents businesses engaged in the sale and purchase, lease and management of real estate in the state of São Paulo.


Association of Real Estate Businesses of Rio de Janeiro (Associação dos Dirigentes de Empresas do Mercado Imobiliário) (ADEMI)

Main activities. ADEMI is an association of companies and individuals engaged in the construction and sale of real estate properties.


The Brazilian Senate

Main activities. This website contains Brazilian legislation.


Contributor profiles

Cristiana Moreira, Partner

Barbosa, Müssnich & Aragão

T +55 21 3824 1079
+55 21 3824 5740

Professional qualifications. Brazil, Lawyer, 2000

Areas of practice. Real estate.

Non-professional qualifications. Law Degree, Pontifícia Universidade Católica do Rio de Janeiro (PUC/RJ), 2000; Post Graduation, Constitutional Civil Law, UERJ, 2004; Master, Civil Law, Universidade do Estado do Rio de Janeiro (UERJ), 2007

Languages. Portuguese, English

Professional associations/memberships. Member of the Brazilian Bar Association, Rio de Janeiro section.

Cristiane M Mamprin de C Guerra, Partner

Barbosa, Müssnich & Aragão

T +55 11 2179 4634
+55 11 21794597

Professional qualifications. Brazil, Lawyer, 1998

Areas of practice. Real estate.

Non-professional qualifications. Law Degree, Pontific Catholic University of São Paulo, 1998; Specialisation, MBA in Economic Law, Fundação Getúlio Vargas/SP, 2001; Certificate in US Law, New York University (NYU), 2005

Languages. Portuguese, English

Professional associations/memberships. Member of the Brazilian Bar Association, São Paulo section.

Maria Eduarda Bérgamo, Associate

Barbosa, Müssnich & Aragão

T +55 21 3824 5873
+55 21 2262 5536

Professional qualifications. Brazil, Lawyer, 2005

Areas of practice. Real estate.

Non-professional qualifications. Law Degree; Pontifícia Universidade Católica do Rio de Janeiro (PUC/RJ), 2004; Post-graduation in Real Estate Law; Cândido Mendes (in progress)

Languages. Portuguese, English

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