CNJ regulates fiduciary lien of real estate through public deed at the national scope

On June 05, 2024, the Brazilian National Council of Justice (“CNJ”) decided to amend state disciplinary board regulations so that only entities part of the Real Estate Finance System (SFI) and the Housing Finance System (SFH), in addition to real estate consortium managers, be authorized to carry out the fiduciary lien of real estate through private instruments.

The decision arises from Request for Measures No. 0008242-69.2023.2.00.0000 and will result in the publication of a specific regulation by the CNJ that includes article 440-AN in the National Disciplinary Boards Code, providing that private instruments can only be used to carry out fiduciary lien by the entities mentioned above, in addition to credit unions.

Article 38 of Law No. 9,514/73 (“Fiduciary Sale Law”) establishes that fiduciary lien of real estate can be carried out by means of public deed or a private instrument with the effects of a public deed. The core of the discussion is precisely the expression “particular instrument with effects of public deed.”

The CNJ’s understanding of this provision was that only the SFI and the SFH could use private instruments to carry out a fiduciary lien of real estate. Although this opinion had already been consolidated by the CNJ, its effects were restricted to the state disciplinary boards of the courts of Minas Gerais, Maranhão, Paraíba and Bahia.

The CNJ has provided that all state disciplinary boards in Brazil will have 30 days to comply with the new regulation, calculated from the publication of a specific provision by the CNJ.

The apparent settling of the matter, however, extends far beyond the mandatory use or not of a public deed in specific cases. Other details must be taken into consideration, such as potential restrictions for housing operations, appropriate categorization of real estate credits and, especially, the potential of – under the same argument that supports the CNJ’s understanding – guarantees constituted under private instruments being questioned, due to non-compliance with the form.

Demarest’s Real Estate team is monitoring the developments of the topic and is available to provide clarifications and assistance.