Buying Real Estate Off the Plan in Brazil: Contract Risks and Precautions

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

Buying real estate off the plan requires close attention to the registration of the incorporation memorial, the one hundred eighty-day grace period for delivery, and the limits on how much the developer may keep if the contract is canceled. These factors determine how legally secure the buyer’s position is.

The incorporation memorial and project registration

Before selling units in a building that has not yet been built, the developer must register the memorial de incorporação (the incorporation memorial) with the competent Real Estate Registry Office. Law No. 4.591/1964 requires this document, which brings together the approved project, the breakdown of each unit’s undivided share, the calculation of areas, and the certificate of encumbrances on the land.

The registration works like a legal snapshot of the project. If the memorial has not been recorded, the sale of the units is irregular, and the buyer faces a significant financial risk, because there is no formal assurance that the project was licensed or that the land is free of encumbrances.

Checking the project’s incorporation registration number is therefore the first step for any prospective buyer. The property’s registration record (matrícula) shows whether the project has a segregated estate (patrimônio de afetação), a mechanism that separates the project from the developer’s other assets and protects the buyer if the company becomes insolvent.

The one hundred eighty-day grace period and late delivery

Law No. 13.786/2018, which amended the legislation on real estate developments, established the so-called grace clause. Under it, the construction may be delivered up to one hundred eighty days late, counted from the date set in the contract, without the developer being in default and without any penalty.

The sensitive point is what happens after that period. Once the one hundred eighty days have passed, the delay is no longer justified, and the buyer has two options: terminate the contract and receive a full refund of the amounts paid, plus inflation adjustment, or keep the purchase and demand compensation for the period of delay.

Case law from Brazil’s higher courts recognizes that the grace clause is valid as long as it is express and reasonable, but rejects its use when the period serves to cover up the developer’s disorganization. A prolonged delay may also give rise to lost profits, calculated on the estimated rental value of the unit.

Carefully reading the registration record and the preliminary contract avoids surprises that tend to appear only when the keys are handed over.

Documenting every charge and every advertising promise in writing strengthens the buyer’s position in any court dispute over the delay.

A prolonged delay may also give rise to lost profits, calculated on the estimated rental value of the unit.

Cancellation by the buyer and limits on withholding payments

When the buyer decides on their own to back out of the deal, the cancellation regime (distrato) set out in Law No. 13.786/2018 applies. The law allows the developer to keep part of the amounts paid as a penalty clause, but it sets caps that prevent the loss of nearly the entire amount, a common practice before the law.

In projects without a segregated estate, the maximum amount the developer may keep is twenty-five percent of the total paid. In projects with a segregated estate, the limit rises to fifty percent, a percentage that reflects the greater commitment of funds to that specific construction.

In addition to the penalty clause, the developer may deduct amounts for the brokerage commission, taxes levied on the property, and condominium fees already past due. The refund of the balance must meet the legal deadlines, or interest and inflation adjustment will accrue in the consumer’s favor.

Checking the developer, the fees, and the clauses

Before signing, it is wise to investigate the developer’s reputation and financial health by obtaining certificates of lawsuits and protested debts and reviewing its record of past deliveries. Projects by companies with stalled construction call for extra caution and a review of additional guarantees.

The payment schedule deserves a close look. Construction progress fees, interest built into the installments, adjustment indexes, and the so-called intervening-party fee (taxa de interveniência) charged when a bank financing is involved can raise the final cost significantly, often without any mention in the sales materials.

The contract clauses on deadlines, penalties, forum selection, and conditions for transferring the unit must be read in full. Provisions that shift to the buyer costs that belong to the developer, or that exclude liability for construction defects, tend to be considered abusive under the Consumer Protection Code (Código de Defesa do Consumidor).

Frequently Asked Questions

When does a delay in delivering the construction give rise to compensation?

Compensation becomes payable once the one hundred eighty-day grace period provided in the contract has run out. If the keys have not been delivered by then, the buyer may claim lost profits, calculated on the estimated rental value of the unit, or choose to terminate the contract and receive a full refund of the amounts paid, with inflation adjustment.

What is the maximum percentage the developer can keep if the contract is canceled?

The cap depends on the project’s regime. In developments without a segregated estate, the maximum is twenty-five percent of the amounts paid. Where there is a segregated estate, the limit is fifty percent. Brokerage commissions, taxes, and past-due condominium fees may also be deducted from the calculation, under Law No. 13.786/2018.

How can I check whether the project is properly registered?

The check is made in the property’s registration record, at the local Real Estate Registry Office. The document shows the registration number of the incorporation memorial, whether a segregated estate exists, and any encumbrances on the land. The absence of this registration signals an irregularity, and it is advisable to suspend the transaction until it is regularized.

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