Guarantor on a Lease in Brazil: Risks and How to Protect Yourself

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

Signing as guarantor on a rental agreement puts your assets on the line for the tenant’s debt, including the home where you live. Knowing the limits of the guaranty, how long your liability lasts, and how to be released can spare you losses that surface years later.

The request usually comes as a favor. A relative is going to rent an apartment, the real estate agency requires a guarantee, and only one signature is missing to close the deal. The document is signed in a few minutes, almost always without being read in full, and the matter seems settled. Months or years later, a summons arrives in a collection lawsuit against the person who only wanted to help.

The rental guaranty (fiança locatícia) is the most common guarantee in Brazil’s rental market, and also the one that generates the most disputes. The reason is simple: it shifts the entire risk of the tenant’s default onto a third party who receives no financial compensation for it.

What the guarantor takes on by signing

A guaranty is a personal security. Whoever gives it answers with their own assets for the obligations the tenant fails to meet. Under the Brazilian Civil Code, the guaranty must be in writing and cannot be interpreted broadly. In other words, the guarantor is liable for what is in the contract and nothing more.

In practice, the standard text used by agencies tends to be broad. Liability reaches unpaid rent, inflation adjustments, interest, late-payment penalties, water, electricity and gas bills, condominium fees, IPTU (Brazilian municipal property tax), damage to the property found during the move-out inspection, court costs, and attorney’s fees. A debt that began with two late rent payments can reach the guarantor many times larger.

There is one more detail that changes everything. Under the general rule, the guarantor has what is called the benefit of order (benefício de ordem), which lets the guarantor demand that the tenant’s assets be pursued first. Nearly every lease contains a clause waiving that benefit, with the guarantor declaring himself or herself jointly and severally liable. Once the waiver is signed, the landlord chooses whom to collect from, and normally chooses whoever has assets.

Another point often overlooked is the spouse’s consent. Except under a regime of complete separation of property, a guaranty given by a married person requires the agreement of the husband or wife. Without that consent, the validity of the entire guaranty is compromised, not just the marital share of the spouse who did not sign. It is also worth reviewing the other clauses of the rental agreement before signing anything.

The guarantor’s home can be seized

Brazilian law protects the family’s residence from seizure for ordinary debts. This protection, known as the bem de família (family home protection), has express exceptions, and one of them is precisely the obligation a guarantor assumes in a lease.

The guarantor’s own home loses its family home protection precisely because of the signature on the rental agreement. The family’s only property can be sold at auction to pay rent that someone else failed to pay, even when the guaranteed lease is a commercial one. The higher courts have upheld this exception for more than two decades, on the ground that it encourages the rental market.

The guarantor’s own home loses its family home protection precisely because of the signature on the rental agreement.

Besides the property, the debt can be satisfied from salary above the legal limit of protection from seizure, vehicles, financial investments, shares in a company, and a company’s revenue when the guarantor is a partner and personal and business assets have been commingled. A written lease signed by two witnesses is an enforceable instrument, which removes the need for an ordinary lawsuit on the merits and allows the landlord to go straight to enforcement, with assets seized within a few months. The topic is covered in detail in our material on what can and cannot be seized.

How long the liability lasts

This is the biggest misunderstanding about rental guaranties. Many people believe the guaranty ends when the term written in the contract does, typically thirty months. That is not what happens when the contract contains a clause extending liability until the keys are actually returned.

When the agreed term ends, if the tenant stays in the property without objection from the landlord, the lease is extended for an indefinite period on the same terms. With a keys-return clause, the guarantor remains bound throughout the extension, which can last ten years or more. Many people find this out when they receive a collection demand under a contract they thought had ended a decade earlier.

There is one important limit to this extension. Later changes, such as a rent increase outside the agreed adjustment, a change of tenant, or a new term set in an amendment, bind only a guarantor who agreed to them in writing. An amendment signed only by landlord and tenant does not expand the guaranty of someone left out of the negotiation.

The guarantor’s death does not erase the liability either. Obligations that fell due before the death pass to the heirs, up to the amount each one receives as an inheritance. What falls due after the death can no longer be demanded from the estate, and the landlord must seek a new guarantee from the tenant.

How to get out of a guaranty

While the contract’s fixed term is in force, getting out depends on the landlord’s agreement, which is usually conditioned on offering another guarantor with equivalent income and assets. Without that agreement, you remain bound until the end of the contracted period.

The situation changes once the lease is extended for an indefinite period. Brazil’s Tenancy Law allows the guarantor to be released by giving notice to the landlord, remaining liable for 120 days from the date the notice is received. After that period, the guaranty ends, and it falls to the landlord to require a new guarantee from the tenant, failing which the landlord may seek eviction.

The form of the notice decides the outcome. A message sent through a messaging app rarely works as proof. The safe route is an extrajudicial notice through a registry of deeds and documents (cartório de títulos e documentos) or a registered letter with return receipt, keeping the proof of delivery. If the landlord refuses to recognize the release, the request can be taken to a judge.

There are also situations in which the law allows the landlord to demand a replacement guarantor, such as death, insolvency, bankruptcy, a change of residence without notice, or the sale of all of the guarantor’s real estate. In these cases, replacing the guarantee serves both sides and is usually resolved without a lawsuit.

Precautions before you sign

Anyone who decides to give the guarantee can reduce the risk considerably with simple steps taken before signing:

• Read the entire contract, paying special attention to the waiver of the benefit of order and the keys-return clause.
• Check the tenant’s income and payment history, applying the same rigor a bank would.
• Negotiate a cap on the guaranty and a fixed term, and put both in writing in the contract.
• Require a clause obligating the landlord to notify the guarantor in the first month of late payment.
• Keep a signed copy of the contract and ask the landlord for an annual statement confirming payment.
• Mark on your calendar the end date of the fixed term, so you can consider seeking release as soon as the extension begins.

Following the payments month by month makes a real difference. A late payment discovered in the first month can usually be negotiated. Discovered in the twenty-fourth, it has already become an enforcement action with seizure of property and accumulated attorney’s fees. Prolonged default ends up in an eviction action for nonpayment, with the guarantor named as a defendant in the collection claim.

Alternatives to a guarantor

The market offers other guarantees that do not involve third parties. A cash security deposit is limited to the equivalent of three months’ rent and must be placed in a savings account, with the earnings going to the tenant at the end. Rental guaranty insurance (seguro-fiança) shifts the risk to an insurance company in exchange for an annual premium. A capitalization bond (título de capitalização), a savings-type product, works as a reserve the tenant can redeem when the contract ends with no outstanding issues. There is also the fiduciary assignment of investment fund shares.

The law prohibits requiring more than one type of guarantee in the same lease. Requiring a security deposit and a guarantor at the same time, for example, violates the law and exposes the violator to a penalty. If the agency insists on that combination, the clause is open to challenge, and the prospective guarantor has a solid argument for refusing to sign.

Frequently Asked Questions

Does the landlord have to try to collect from the tenant before going after the guarantor?

Only when the contract preserves the benefit of order, which is rare. Where there is an express waiver and a declaration of joint and several liability, a clause found in most contracts, the landlord is free to choose whom to sue and may direct enforcement straight at the guarantor, without first trying to collect from the tenant.

If you own only one property, can you lose it because of a rental guaranty?

Yes. The family home protection contains an express exception for obligations arising from a guaranty in a lease, and that exception reaches a sole residence. Seizure requires a court action, and the guarantor can dispute the amount claimed, but protection from seizure itself is not usually recognized in this scenario.

How long does the landlord have to collect overdue rent from the guarantor?

The right to claim unpaid rent expires after three years, counted from the due date of each payment, under the Civil Code. Installments older than that period can be challenged in the defense. Charges of a different nature, such as compensation for damage to the property, follow their own time limits and must be analyzed case by case.

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