Canceling a Pre-Construction Property Purchase in Brazil: How Much the Buyer Can Get Back

This page is a translation of the original Portuguese text, provided for convenience. It deals with Brazilian law. If there is any discrepancy, the Portuguese version prevails. Read the original in Portuguese

A buyer who backs out of a property purchased off the plan does not lose everything paid, but does not get a full refund either when the decision to withdraw is the buyer’s own. The law sets maximum percentages the developer may keep and deadlines for the refund, and these rules change depending on whether the development falls under the patrimônio de afetação regime (a ring-fenced assets structure created for each development).

When the Buyer Walks Away: The Cancellation Law

Buying a property under construction usually happens through a promise-to-purchase-and-sale contract, with payment in installments over months or years. When the buyer decides not to go forward, whether because of financial difficulty, a change of plans, or loss of interest, the result is what Brazilians call a distrato imobiliário: an agreed termination of the contract before the keys are handed over.

Before 2018, this situation produced a great deal of litigation. Courts applied the Consumer Protection Code and the settled view that excessive retention amounted to an abusive clause. Superior Court of Justice Precedent 543 (Súmula 543) already guaranteed a partial refund of the installments when the buyer was the one who caused the termination, and it barred the developer from keeping everything paid.

Law 13.786 of 2018, known as the Cancellation Law (Lei do Distrato), amended Law 4.591/1964 and began to regulate expressly the limits on retention, the refund deadlines, and the information that must appear in the contract. Its stated purpose was to reduce legal uncertainty and to balance the relationship between buyers and developers.

Keep in mind that the law applies to contracts signed after it took effect. For earlier contracts, the framework built by case law still governs, which makes the signing date a decisive fact in determining which set of rules applies to your situation.

Permitted Retention Percentages and the Patrimônio de Afetação Regime

The central question in any cancellation negotiation is how much the developer may keep as a contractual penalty. The Cancellation Law set two distinct levels, depending on the legal structure of the development.

Under the general rule, set out in Article 67-A of Law 4.591/1964, the contractual penalty may not exceed 25% of the amount the buyer has already paid. This is the cap for developments that have not adopted the patrimônio de afetação regime, which is still common in part of the market.

When the development is under the patrimônio de afetação regime, the limit goes up. In that case, the developer may keep up to 50% of the amounts paid. The regime separates, for accounting and legal purposes, the land and assets tied to that specific project, protecting buyers if the developer goes bankrupt. The law justifies the higher percentage as the counterpart to that stronger protection.

For that reason, before discussing numbers, the buyer should check whether the development registration file (memorial de incorporação) recorded at the real estate registry shows that a patrimônio de afetação was established. This detail determines whether the retention cap is 25% or 50%, and it changes the refund significantly.

The maximum retention jumps from 25% to 50% when the development adopts the patrimônio de afetação regime, and that difference determines the size of your refund.

One common mistake deserves attention. The retention percentage applies to the amounts the buyer has actually paid, not to the total price of the property. Confusing the two bases for the calculation often leads to refund offers far lower than what the law allows.

What the Developer Can and Cannot Deduct

Beyond the contractual penalty, the law allows the developer to deduct other items, as long as they are provided for in the contract and were properly disclosed to the buyer. Knowing this list helps you avoid accepting improper deductions when the settlement is made.

Deductible items include the broker’s commission, when the buyer was told in advance that this amount would not be refunded, as well as taxes and condominium charges on the property. Brazil’s Superior Court of Justice, in a repetitive-appeals ruling, has already upheld the validity of shifting the broker’s commission to the buyer when the information is clear and given in advance.

If the buyer has already received the keys and occupied the unit, the developer may also charge for the use of the property, a kind of rent for the period of occupancy, plus maintenance expenses. This charge, however, requires that the buyer actually took possession. It does not apply to someone who never occupied the property.

On the other hand, there are clear limits. The developer may not keep everything that was paid, may not stack penalties so as to empty the right to a refund of its substance, and may not impose deductions that were not agreed to or were not transparently disclosed. Clauses that neutralize the refund are considered abusive and may be reviewed by a court.

Another sensitive point is the refund deadline. For developments without patrimônio de afetação, the amount must be returned within 180 days of the termination of the contract. For developments with patrimônio de afetação, the refund may be made within 30 days after the occupancy certificate (habite-se) is issued, that is, after construction is completed, which can delay payment considerably.

How to Negotiate the Refund and What to Watch For Before Signing the Termination

Negotiating a cancellation starts with gathering documents. The buyer should assemble the contract, proof of every payment, any amendments, and the development registration file. Together, these allow you to calculate the retention base precisely and identify which regime governs the development.

With the numbers in hand, you can compare the developer’s proposal against the legal caps. If the company offers a refund well below the permitted percentage, there is real room for a well-grounded counteroffer based on the Cancellation Law and on settled case law on the subject.

Before signing any termination agreement, read each clause carefully, especially those dealing with a general release and a waiver of rights. Cancellation documents often contain broad statements that, once signed, make it harder to later dispute amounts improperly withheld.

It is also wise to require that the agreement list, item by item, every deduction applied, along with the calculation base for each. A generic cancellation agreement that only states the final amount to be refunded, without showing how it was composed, makes it harder for the buyer to check the figures and can hide retentions above what is allowed.

When the developer refuses to respect the legal limits or imposes refund deadlines that do not fit the situation, the courts remain open. The buyer may seek review of the clauses, a refund of whatever was withheld in excess, and a reasonable deadline for repayment, always in light of the rules in force and the duty of good faith in contracts.

Professional guidance at the outset makes a difference in this process. Calculating the balance correctly, identifying abusive deductions, and weighing the best strategy, whether out of court or in court, tends to protect the buyer’s assets and keep the decision to withdraw from turning into a disproportionate loss.

Frequently Asked Questions

How much can the developer keep if I back out of a property bought off the plan?

It depends on the development’s regime. Under the general rule, the amount retained as a contractual penalty is up to 25% of the amounts paid. If the development is under the patrimônio de afetação regime, the limit rises to up to 50% of the amounts paid. In both cases, the percentage applies to what was actually paid, not to the total price of the property.

How long does the developer have to refund the money?

For developments without patrimônio de afetação, the refund must be made within 180 days of the termination of the contract. For developments with patrimônio de afetação, the refund may be made within 30 days after the occupancy certificate (habite-se) is issued, meaning after construction is finished, which can push back payment by a significant amount of time.

Is the broker’s commission also refunded when a purchase is canceled?

As a rule, no. The broker’s commission may be kept when the buyer was clearly told in advance that this amount would be the buyer’s responsibility and would not be refunded if the contract were terminated. The higher courts have settled on this position. Without clear, advance disclosure, however, the retention can be challenged.

As informações deste artigo são de caráter informativo e não substituem consulta jurídica individualizada. Cada caso possui particularidades que exigem análise específica.