New Directions for Land Occupation
On October 31, 2022, Federal Supreme Court (“STF”) Justice Luis Roberto Barroso upheld the decision for the implementation of a “transition framework” regarding collective land occupation – that is, the irregular occupation of land or property by a group of persons -, with the creation of Land Conflict Resolution Commissions by the state courts.
Contrary to what certain alarmist media reports publicized, the decision does not prohibit evictions. On the contrary, it resumed the carrying out of orders that had been suspended by other decisions provided for in the Claim of Non-compliance with a Constitutional Precept 828/DF (“ADPF 828/DF”), filed by the Socialism and Liberty Party (PSOL) in order to attempt to stay the effects of such measures during the Covid-19 pandemic.
It was the understanding of the STF that the current legislation in force is sufficient to regulate the referred orders within the scope of the Brazilian Lease Law (Law No. 8,245), without the need for a transition framework. As a result, Minister Barroso expressly excluded such orders from the effects of his decision.
Still, the question remains: what transition are we talking about?
Throughout the Covid-19 pandemic, property lessors have faced obstacles involving certain laws and decisions that impacted the right to recover the possession of real estate in the event that the contract is terminated prematurely. In June 2020, Law No. 14,010 introduced the Emergency Legal Framework for contractual relationships involving Private Law, preventing evictions from being carried out until October 03, 2020.
Shortly after, Law No. 14,216/2021, still taking the Covid-19 health emergency into consideration, amended the abovementioned Law. Law No. 14,126/2021 allowed judicial eviction orders to be granted and carried out, provided that they are unappealable. In contrast, it also extended the deadline to comply with judicial decisions that ruled for forced collective evictions from public or private buildings until December 31, 2021. Such period was further extended until October 31, 2022 by way of injunctions granted through ADPF 828/DF.
In addition to this series of laws and decisions collectively referred to as the “special framework,” more initiatives were proposed to defend lessors. Bill No. 1026/2021 aims to limit the increase of rent prices according to the Broad Consumer Index Price (“IPCA”), both for residential and commercial rentals.
The first months of the pandemic saw a 30% increase in rent prices, as a result of US dollar appreciation, combined with positive fluctuation of certain elements of the General Market Price Index (IGP-M), the index most used in leasing contracts. The high volume of contract renegotiations and terminations drove the National Congress to propose this measure in order to curb price increases, limiting them to the IPCA, which was lower at the time.
Although the IGP-M has decreased to pre-pandemic levels (close to the IPCA), the Bill mentioned above remains active, which might indicate resistance to abandoning measures aimed at protecting lessees.
Specific rule for the land leasing for installation of energy generation projects
Bill No. 4,283/2021 aims to include a sole paragraph to Article 565 of the Civil Code (Law No. 10,406/02), establishing that the lease of rural property for energy generation projects be regulated by the Civil Code.
The Brazilian legal system provides for different rules on leasing, depending on the real estate involved and the type of activity that the lessee intends to carry out.
For instance, if the real estate is a private urban property (among other legal requirements), the lease will be governed by Law No. 8,245/91. Contrastingly, if the real estate is a rural property aimed at carrying out agricultural, livestock, agro-industrial, extractive or mixed activities, the lease (specifically an “arrendamento” in this case) will be governed by Decree-Law No. 59,566/66. Additionally, if the real estate is public property, the lease (in this case called “assignment of use”), will be governed by Decree-Law No. 271/67.
However, certain leases, such as leasing for the implementation of projects aimed at energy generation, are not framed within the rural, nor the urban property legislation.
In order to regulate the matter, representative Carlos Bezerra introduced Bill No. 4,283/2021, which provides for the leasing of rural property for energy generation projects under the rules of the Civil Code.
Since February 03, 2022, the Bill is pending approval by the House of Representatives’ Constitution, Justice and Citizenship Committee. If passed, the Bill must also be approved by the Federal Senate and subsequently sanctioned by the President of Brazil.
In addition to being an effective instrument to regulate the ownership of real estate located in rural areas (but which does not necessarily carry out rural activities), the regulation of leasing under the Civil Code also enables the lessee to register the real estate in order to guarantee its validity in the event of alienation of property.
As such, the approval of the Bill will consolidate a market practice that is increasingly prevalent within the scope of energy generation, but that still faces resistance from certain financial agents.
It is worth noting that the regulation of leasing under the Civil Code is aligned with the Brazilian legal system and is an instrument that can provide security in the regulation of rural property use for non-rural activities.
Challenges for digital rental platforms in residential condominiums
Digital platforms that act as intermediators between real estate owners (“hosts”), advertising available accommodation, and travelers (“guests”) seeking accommodation – such as Airbnb and others of the same genre – have been facing certain obstacles, specifically in regard to accommodation advertised for units or rooms located in residential condominiums (where there are both private and common areas).
Digital short-term rental platforms enable hosts to advertise residential real estate, or part of it, to interested guests, without a relationship between the parties. This type of hosting enables guests to access the whole unit or specific rooms, as determined by the hosts and, in some cases, access to other services such as laundry, internet, house cleaning, among others.
The obstacles regarding such accommodations concern, in particular, the residential nature of the condominiums in which they are often located. In addition to safety concerns resulting from the casual admission of “strangers” into the condominium, the allocation of units for accommodation purposes also deviates from the social responsibility duty of the condominium.
Within the context of a residential condominium, the social responsibility must meet what the Civil Code describes as the “reasonable use of the property in alignment with the quality of life of those living in it”, according to the guidelines established in the condominium bylaws and protected by the Civil Code in its article 1336, item IV. In order for this activity to officially constitute accommodation (lodging), the application of a special law – the National Tourism Policy Law – is required, which brings regulatory issues regarding the use of real estate (zoning, residential use licensing, consequences from its commercial use, among others).
The Brazilian Superior Court of Justice (“STJ”) discussed the topic in two Special Appeals judged on recently.
In the first Special Appeal, a condominium filed lawsuits against two of its unit owners – a mother and son – who had been advertising rooms in their units for Airbnb guests. The court of original jurisdiction decided that any commercial activities linked to the platform be suspended until express permission was granted in the condominium bylaws to carry out such activities. The STJ denied the tenants’ appeal and maintained the court of original jurisdiction’s decision, establishing that the form of hospitality carried out through Airbnb and similar platforms is governed by atypical hosting contracts, which have specific aspects that prevent it from being framed in the same category as traditional hosting contracts.
In this case, the STJ does not recognize hosting through Airbnb as rental or short-term rental, as claimed by the owners of the property, but rather as informal and segmented housing commercialization – with the addition of services – in which there is no written contract entered into between the parties.
Additionally, such relationship does not fall under any of the traditional regulation in regard to hosting carried out by hotels, inns and other establishments of the same category.
Consequently, the STJ maintained the understanding that such type of hosting depends on express permission provided in the condominium bylaws, both for the whole unit and for rooms that are part of the property, in order for there to be compliance with the condominium’s social responsibility. Otherwise, the condominium can limit or prevent the use of units for hosting through platforms such as Airbnb.
The second Special Appeal involved a condominium located in Londrina, in the state of Paraná, which proposed to include in the condominium bylaws the prohibition of short-term rentals of less than 90 days. IThe STJ were unanimous in their decision that to allow or not the short-term rental of autonomous units is solely up to the condominium tenants, and consequently maintained the amendment to the condominium bylaws.
Both cases evidence the lack of specific legislation to regulate this atypical form of hospitality. Accordingly, neither the Brazilian Lease Law (Law No. 8,245/1991) nor the Brazilian Tourism Law (Law 11,771/2008) encompass this innovative form of services, as they cannot be framed as any type of rental or traditional hospitality. As a result, in most cases, the residential condominium is entitled to decide whether to allow the carrying out of hosting through Airbnb and related platforms.
However, Brazil is not the only country where Airbnb and similar platforms have faced such obstacles. Certain U.S. cities prohibit the rental of a whole unit but allow you to rent only one room for guests. In fact, Airbnb’s official website cites the regional legislation of approximately 100 US cities that address the topic. As a result, Airbnb has entered into Voluntary Collection Agreements with local governments in the US, regarding the voluntary collection of fees and taxes on its services.
In Europe, on April 27, 2022, the Court of Justice of the European Union (“CJEU”) ruled on a matter involving information that Airbnb failed to provide to the Belgian tax authority. The understanding of the CJEU was that the company must keep data related to accommodation transactions and submit them to the local tax authority, when requested, in order to ensure the precise collection of taxes on the rental of real estate.
In another case pending before the CJEU, Airbnb refused to comply with an Italian law from 2017. Such law establishes that platforms such as Airbnb must provide data on its customers and retain 21% of revenue from rentals for the payment of fees to tax authorities in Italy. There is still no decision in regard to the Italian case, but one of the attorney generals of the CJEU has expressed its support for the application of the aforementioned Italian law from 2017 to Airbnb services.
In other locations, such as Paris and Barcelona, there are restrictive rules regarding leasing through platforms such as Airbnb. Such rules are related to the existence of a main residence and a secondary residence of the host, number of rooms, real estate value, among others, as well as the requirement of adjusting to the urban planning of the city. In fact, in Barcelona, licenses for Airbnb accommodation were suspended for two years from February 01, 2021.
In the US, cities such as New York, San Francisco, Santa Monica, Las Vegas and New Orleans already have restrictive rules on leasing through platforms such as Airbnb. In New York, for example, such restriction consists of a limited hosting period and a requirement that the owner remain in the property during such period.
Finally, another international precedent: on December 19, 2019, Airbnb was recognized as exempt from the effects of the Hoguet Law (Law 70-9 of January 02, 1970), which regulates the activities of real estate agents in France. Following a complaint filed by the French tourism association AHTOP, the CJEU ruled that Airbnb is not a real estate agent, but rather an information society service. According to the CJEU, the platform is merely an intermediary in the hosting process – and is not indispensable for the carrying out of the activity – as it has no control over prices established by hosts or over the accommodation chosen by guests.
Such cases evidence the urgency for specific regulation on the matter, due to the volume of operations that such platforms carry out on a daily basis, in order to prevent situations of legal uncertainty. Should such legal certainty be achieved, the potential of these digital platforms can finally be explored to its full extent.
“Bilateral amendment” required when there is area rezoning of property
A seemingly plain and clear matter continues to result in statements from the Disciplinary Board of the Courts of the State of São Paulo: when there is rezoning of real estate, a bilateral amendment of the deed is necessary.
The bilateral amendment deed is specified in Law 6,015/73, in its article 213 and, as the term itself explains, is carried out when the agreement of both parties involved is required – the owners and the occupants of the property.
Once again, the Disciplinary Board of the Courts of the State of São Paulo maintained the understanding that seems appropriate to us, in the case No. 1001182-44.2021.8.26.0268 of the First Court of the Judicial District of Itapecerica da Serra-SP, under the following terms:
“Registration of Real Property – Denial of registration of georeferencing – Borders, description and total area determined in the technical work divergent from what is on the registration table – Insertion of georeferenced coordinates that depends on prior bilateral amendment – Intelligence of art. 213, II, of Law No. 6.015, of December 31, 1973 – Opinion for the maintenance of the sentence, dismissing the appeal”.
Presently, the rule of merely amending the georeferencing registration, without hearing the interested parties, is no longer applied. The appropriate procedure for this scenario must be aligned with the deadlines of the business involving the property, also taking into consideration any alternatives that can result in the dismissal of the participation of third parties, such as the transmission of information already included in the property registry, such as the definition of property lines. Additionally, although the decision addresses rural property, this concept is widely applicable to urban properties.
Both in urban and rural real estate, establishing an accurate definition and carrying out “estremação” (method of obtaining an independent record for a certain fraction of the condominium), are fundamental procedures in many aspects, from environmental matters (e.g. amount of green areas or legal reserve areas, including compensation), to urban, land use and occupation matters (e.g. retreats, constructive potential, extension of permeable surfaces or built-up area).
Decision reinforces that the cancellation of restrictive clauses requires the participation of the Settlor.
In a decision published on November 8, 2022, the Permanent Judge of the Property Registry Offices of the Capital of the State of São Paulo established the understanding that the cancellation of restrictive clauses, such as inalienability, depend on a court order for them to be accepted without the participation of the Settlor of the clause.
Among the details of administrative proceeding No. 1121504-78.2022.8.26.0100, pending before the 1st Public Registry Court of the Central Civil Court of the Judicial District of São Paulo-SP, it should be noted that the participation of the Settlor of the restrictive clause is a condition for this cancellation.
This situation, common in real estate business, reveals potential difficulty in transactions involving real estate.
This situation, common in real estate business, reveals potential difficulty in real estate transactions. In such cases, the advance identification of such a situation is essential to establish an appropriate and effective strategy in order to overrule the restrictive clause, either by its substitution or by its cancellation.
A possible judicial process to overrule a restrictive clause may represent a hindrance to the business, because it demands a deadline often incompatible with the wishes of those involved, or simply because of its unpredictability.
A restrictive clause, such as inalienability, prevents the transfer of a real estate property from being registered and, commonly, has its origin in the purchasing title of that property, such as a donation.
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