The Government had already announced in August that it would take measures to encourage real estate credit. Provisional Measure No. 656 (or in Portuguese, Medida Provisória, known simply as "MP") was finally enacted. Amongst other measures, it established the "concentration of acts on the real estate record".
The Government says the purpose of this MP was to contribute to "increased legal certainty for transactions," promote "less bureaucratic procedures involving real estate procedures" and "encourage lending", in addition to contributing to the "reduction in the cost and speed of deals."
The MP establishes that legal transactions related to the acquisition, transfer or modification of real estate are to be considered effective in relation to past legal actions in cases in which the following information has not been registered in the real estate record: (i) real estate or personal lawsuits; (ii) judicial restraint, foreclosures, and lawsuits related to enforcements of judicial decisions, (iii) administrative or conventional to the registered rights, unavailability or other legal liens or attachments; and (iv) the existence of another type of lawsuit or financial liability, the results of which may reduce its owner to insolvency, by judicial decision.
Under the MP, legal situations not registered in the real estate record may not be invoked against third parties that acquire or receive in good faith the real estate as collateral, except for: (i) certain provisions of the so-called Bankruptcy Law; and (ii) when the acquisition and extinction of the property do not depend on the registration of the property title.
The MP also states that the selling or giving of individual units of a real estate development, land division or condominium plots (if duly registered) may not be subject to eviction or declaration of ineffectiveness, and the creditor of a person who sells or gives such property as collateral shall be subrogated to the price or mortgage loans.
The provisions of the MP do not apply to buildings that are part of the assets of the Federal, State, Federal District, or Municipal governments, as well as their foundations and government agencies.
Although the market has recognized that this is a first step that could generate the necessary discussions for the changes to be implemented in practice, there is still a debate about the extent to which the measure will be effective in achieving its goals, particularly due to the risk of the MP (which is a temporary measure) not being converted into law.
The new ruling came into force on November 7, granting a period of two years thereafter for registrations related to previous legal acts to be registered on the real estate record.
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