The law provides that, in cases of real estate development (a legal means for building construction that allows the sale of units before their construction/completion), the developer may apply a penalty of up to 50% of the amount paid by the buyer if the buyer cancels the purchase and the property is within the regime known as "patrimonio de seguridad" (affected property), the most common regime in Brazil (in which each project is legally separate from the construction company, with its own CNPJ (Brazilian Registry of Legal Entities) and accounting records), in addition to other discounts provided for in the contract and permitted by law. The refund of the remaining amount paid by the buyer must occur within 30 days after the occupancy permit is issued.
In other incorporations, without the affected property regime, the fine may be up to 25% of the amount paid by the buyer, in addition to other discounts provided for, and the refund of the remaining amount must occur in a single installment within 180 days of the termination of the purchase and sale agreement of the property or within 30 days of the resale of the terminated unit to a new buyer.
If the buyer wishes to give up the property without paying the fine, they will have the option of finding a new buyer, in which case, provided the requirements set out in the law are met, they may avoid the penalty clause of 50% or 25%, depending on the regime.
In the case of subdivisions, the penalty for withdrawal may reach up to 10% of the value of the purchase and sale contract and the refund of the remaining amount after discounts to the buyer may occur in up to 12 installments.
Furthermore, the enacted Law maintains the developer's grace period in the event of a delay in delivery of the project within 180 calendar days after the date stipulated in the contract, without the developer being required to pay a fine or the buyer being able to terminate the contract. However, the Law adds the provision that, if the developer exceeds this grace period, the buyer may terminate the contract and receive full payment of the amounts paid and the contractually stipulated fine within 60 calendar days of the contract termination. Or, if the buyer is interested in maintaining the contract/property despite the delay, the buyer will be entitled, upon receipt of the property, to compensation of 1% of the amount actually paid to the developer for each month of delay.
Our Real Estate Law team at Montgomery & Associados is available to provide any additional information or clarification on this topic.
