Newsletter Real Estate | Law No. 14.010/20 – Emergency and Transitional Regime for Legal Relations of Private Law

On 06/12/20 it was published Law No. 14,010/20, providing the institution of the Emergency and Transitional Regime (RJET) for legal relations of private law, due to the coronavirus pandemic (COVID-19).

In view of the crisis in private law relations caused by COVID-19’s pandemic and of the need of safeguarding the Brazilian economic and social scenario, Public Authorities have been adopting several urgent measures to mitigate the effects of COVID-19.

Thus, Senator Antônio Anastasia presented, on 03/21/2020, Bill No. 1,179/20, providing for the Emergency and Transitional Regime for legal relations of private law (RJET). After due legislative process, the Bill now converted into Law No. 14,010/20, with vetoes to be analyzed by the Congress, is based in some principles, such as: (a) not to change the current laws, but only to create transitional rules that will be applicable during the pandemic period; (b) deal solely with matters of private law, leaving tax and administrative issues for other legislative bills.

In this newsletter, we will present the main changes brought by Law No. 14,010/20 in the real estate context, thus not dealing with the transitional rules of consumer, competition, family and succession law and of urban mobility national policy, which were also, before the presidency vetoes, object of this Law.

(I)  Statute of limitation and Lapse

Article 3º stipulates that all limitation periods of the legal system, including those contained in special acts, will not begin or will remain suspended, as applicable, between June 12 and October 30, 2020, without prejudice to specific hypotheses of suspension and interruption which have already begun, set forth in special acts.

In this sense, all statutes of limitation are suspended, as they are always and mandatorily exercised in court, but the suspension will not apply to unilateral rights subject to lapses terms that can be exercised outside court.

Accordingly, the following terms remain unchanged, without suspension, for example: (a) term for termination of incorporation (art. 34 of Law nº 4.954/64); (b) period of purging the arrears of the fiduciary debtor (art. 26, §4° of Law nº 9.514/97); and (c) terms of the Tenancy Law (Law nº 8.245/91), such as, for example, the 90-day period for the purchaser of the property to terminate the contract without a clause in force (art. 8, §2°).

Finally, the statutes of limitation and lapses consummated until 06/11/2020 cannot be revived.

(II)  Usucaption (acquisitive prescription)

Article 10 determines the suspension of the required lapses periods of time of possession to acquire real estate or assets, in the various types of usucaption (also known as acquisitive prescription), between June 12 and October 30, 2020.

(III)  Termination, Unilateral Termination and Review of Contracts

In the scope of contractual relations, the articles 6º and 7º present in PL nº 1,179/20 that aimed to discourage opportunistic behaviors that used the pandemic to avoid compliance with contracts, were vetoed by Law nº 14,010/20.

Thus, the two vetoed rules provided, respectively, that: (a) the consequences of the COVID-19 pandemic for contractual execution, including the application of art. 393 of the Civil Code, would not have retroactive effects; and (b) exchange rate variation, inflation, devaluation and substitution of the monetary standard would be excluded as causes of review, rebalancing or unilateral termination for excessive burdens (arts. 317,478,479 and 480 of the Civil Code).

The vetoes were made under the justification that the Brazilian law system has already appropriate mechanisms for modulating contractual obligations in exceptional situations, such as force majeure and act of God mechanisms and theories of unpredictability and excessive burden.

 (IV)  Eviction

As for tenancy relations, another veto concerns article 9, which prohibited, until October 30, 2020, the granting of an injunction in eviction suits for the evictions moved after March 20, 2020 that referred to the hypotheses foreseen in art. 59, §1°, of the Tenancy Law.

In this case, the presidential veto maintained that the device was contrary to the public interest, as it suspended one of the instruments of coercion to comply with the obligations set forth in the lease agreement − the eviction −, for a substantially long term, thus giving excessive protection to the debtor to the detriment of the creditor, in addition to promoting an incentive for default and disregarding the reality of several landlords who depend on receiving rents as a complementary or even exclusive income for their own support.

(V)  Building Condominium

In relation to social interaction in building condominiums, article 11 of the PL No. 1,179/20 also suffered a presidential veto, as it is understood that the article, by grating exceptional powers for condominium managers to restrict the use of common areas and to restrict the use of private areas for the purposes of meeting and festivities, as well as the parking space by third parties, harmed the autonomy and the need for deliberations by general assembly, in accordance with the bylaws, thus excessively limiting the collective will of the building occupants.

Under the terms of art. 12, maintained without vetoes, the  condominium assembly, including for the purposes of articles 1.349 and 1.350 of the Civil Code, and the respective voting, it may take place, on an emergency basis, until October 30, 2020, by virtual means, in which case the manifestation of will of each condominium member will be equated, for all legal purposes, with face-to-face signing. In case it is not possible to hold a condominium assembly, the condominium manager’s term of office which ended as of March 20, 2020 will be extended until October 30, 2020.

Finally, article 13 stipulates the regular accountability of the condominium manager’s acts of administration, under penalty of dismissal.

(VI)  Conclusion

The relevant rule provides legal certainty in general matters of private law, such as statute of limitation and non-retroactivity of the effects of COVID-19 in contracts, as well as in real estate issues such as  usucaption and condominium relations, but fails to regulate more complex and controversial issues, notably about parameters for contractual judicial review and collection of penalties in case of contractual termination.

Among these controversial points in the real estate scope that were left out of Law No. 14,010/20, it should be highlighted the review of lease agreements – whether to postpone the payment of the rent or to grant a discount – and the early termination of contracts for the acquisition of a future real estate unit, currently regulated by the Termination Act (13.786/18).

This means that the matters mentioned above should be resolved, ideally, by mutual agreement between the parties, by means of reciprocal concessions, according to each case, or, in the absence of a friendly solution, through litigation, in which case the decisions may be the most varied, in view of extensive doctrinal and jurisprudential divergence in this regard.

Finally, be aware that the vetoes, which were many, shall be analyzed by the National Congress and can still be rejected. If that happens, a new newsletter will be produced informing about it.

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MATERIALS:

Full content of the Law. No. 14,010 (In portuguese):http://www.in.gov.br/en/web/dou/-/lei-n-14.010-de-10-de-junho-de-2020-261279456

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CONTACTS:

Bernardo Schiller
Patner
T: +55 21 3262-3004
E: bschiller@cmalaw.com

Theo Keiserman
Patner
T: +55 21 3262-3021
E: theo.abreu@cmalaw.com

Ivandro Trevelim
Patner
T: +55 11 3077-3561
E: ivandro.trevelim@cmalaw.com

Cristiano Schiller
Associate
T: +55 21 2217-2014
E: cristiano.schiller@cmalaw.com