Real Estate Due Diligence: How to Buy Property Safely in Brazil

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

Real estate due diligence is the set of legal, tax, and document checks a buyer should carry out before acquiring a property. It makes the transaction safer and prevents losses down the road.

What Is Real Estate Due Diligence?

Real estate due diligence is a full investigation into the legal, tax, and physical condition of a property before you buy it. The term, borrowed from corporate law, means “required diligence.” It involves reviewing every document and certificate that could reveal hidden risks in the purchase.

Law No. 13.097/2015 made property buying safer by establishing the principle of concentration of acts in the property record (matrícula). Under this law, facts that do not appear in the property’s matrícula at the real estate registry cannot be asserted against good-faith third parties, except in specific cases.

Even with this legal protection, due diligence remains essential. Risks such as the seller’s labor debts, pending lawsuits, environmental violations, and unpaid taxes can jeopardize your purchase if they are not identified beforehand.

Property Documents You Need to Check

The most important document is the property’s up-to-date matrícula from the competent Real Estate Registry (Registro de Imóveis). It shows the complete chain of title, meaning every previous owner, as well as encumbrances such as mortgages, court-ordered attachments, usufructs, and easements. The matrícula should have been issued no more than 30 days before you review it.

The certificate of no real encumbrances confirms whether any liens exist on the property. The full-text certificate (certidão de inteiro teor) provides the complete content of all registrations and annotations. For condominium units, the condominium payment statement (art. 1.345 of the Civil Code) proves that no debts are owed to the condominium.

Under this law, facts that do not appear in the property’s matrícula at the real estate registry cannot be asserted against good-faith third parties, except in specific cases.

For urban properties, you should check the certificate of no IPTU (municipal property tax) debts with the city government. For rural properties, you will need the Rural Property Registration Certificate (CCIR), the certificate of no ITR (federal rural property tax) debts from the Receita Federal (Brazil’s federal tax authority), and the Rural Environmental Registry (CAR) record.

Seller Documents You Need to Check

Reviewing the seller’s legal situation is just as important as reviewing the property. Certificates showing no civil or criminal cases filed in state and federal courts reveal whether the seller is a party to any lawsuits that could jeopardize the sale.

The certificate of no labor debts issued by the TST (Brazil’s Superior Labor Court) shows whether the seller owes labor debts. If labor enforcement proceedings are pending, the sale can be annulled as fraud on enforcement (fraude à execução), even if you acted in good faith.

Federal court certificates show whether the seller owes debts to the federal government, the INSS (Brazil’s National Social Security Institute), or the Receita Federal. The protest certificate from the protest registry office reveals unpaid debt instruments. If the seller is a legal entity, you also need to check the simplified certificate from the Commercial Registry (Junta Comercial) and the company’s articles of organization.

A public deed is mandatory to transfer properties worth more than 30 times the monthly minimum wage, under art. 108 of the Civil Code. You must have the deed drawn up at a notary office and then record it with the Real Estate Registry.

Risks of Skipping Due Diligence

If you skip due diligence, you may end up buying a property with hidden encumbrances. Undiscovered court-ordered attachments can cost you the property in enforcement proceedings. Mortgages you failed to check give the creditor the right to foreclose on the property, even after the sale.

Fraud on enforcement is one of the biggest risks. If the seller was party to a lawsuit that could leave them insolvent at the time of the sale, the judge can declare the transaction ineffective, and you lose the property. Art. 792 of the CPC (Code of Civil Procedure) sets out the situations that qualify as fraud on enforcement.

Zoning and environmental violations also pose serious risks. Buildings without a certificate of occupancy (habite-se), built area that exceeds what is permitted, and occupation of environmentally protected land can lead to fines, work stoppage orders, and even demolition. Checking with the city government and environmental agencies prevents these situations.

Costs and Professionals Involved in Due Diligence

The cost of real estate due diligence includes registry office fees for issuing certificates, attorney’s fees, and, in some cases, fees for an engineer or architect to conduct a technical inspection. The total varies with the complexity of the review, but it generally runs between 1% and 2% of the property’s value.

A lawyer who specializes in real estate law is the best professional to lead the due diligence. The lawyer reviews the documents, identifies legal risks, and issues an opinion on whether the purchase is safe. For higher-value transactions, it is also advisable to hire an engineer to perform a technical inspection of the property.

The cost of due diligence is always lower than the potential loss from a problematic purchase. A property with a court-ordered attachment or a hidden condominium debt can cause losses far greater than the cost of the upfront investigation, along with years of litigation to sort things out.

Frequently Asked Questions

How long does a complete real estate due diligence take?

A complete real estate due diligence takes an average of 15 to 30 days. The timeline depends on how quickly the registry offices issue certificates and on how complex the property’s and the seller’s situations are. Properties with a history of multiple transfers, or sellers with many certificates to obtain, may take longer.

Do I have to hire a lawyer for due diligence?

There is no legal requirement to hire a lawyer for due diligence, but it is highly recommended. A lawyer has the technical knowledge to interpret certificates, spot legal risks that laypeople miss, and advise you on the steps you need to take. In high-value transactions, saving on a lawyer can end up costing far more if problems surface later.

What should I do if the due diligence uncovers problems with the property?

If the review reveals pending issues, you can negotiate for the seller to fix them before you close the purchase, ask for a price reduction to cover the cost of fixing them, or simply walk away from the deal. In cases involving attachments or mortgages, you can make the purchase conditional on the lien being released. The right decision depends on how serious the problem is and on whether the seller is willing to resolve it.

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