The Urban Real Estate Tax (IPTU) is a municipal tax charged annually from owners and possessors of a real estate that, at first, does not raise doubts about who are the legitimate taxpayers. However, when it comes to on-credit real estate, the issue takes on new definitions, and it has given rise to debates in the Judicial Branch.

This is because mortgage loans usually have been secured by fiduciary sales, a security modality in which the buyer acquires the direct possession of the property while the financial institution, i.e., the lender, keeps the indirect possession and the terminable property of the real estate for itself.

Whereas the IPTU has the owner or possessor of the real estate as responsible for the payment, according to Article 34 of the Brazilian Tax Code, some Municipalities have addressed the collection of this tax not only to those who have direct ownership of the real estate but also to the financial institution (lender), as a fiduciary owner and indirect possessor.

Traditionally, the São Paulo State Court of Justice (TJ-SP) found that the creditor is not responsible for the IPTU, since the terminable property exists only for the purpose of security, with no rights to use, enjoy and dispose of the property, inherent to the property right. Also, because the indirect possession has no purpose of acquiring the property and, therefore, the so-called animus domini does not exist, that is, the intention to possess/be the owner. And finally, because Article 27, §8 of Law No. 9514/97 provides that the debtor must bear the taxes until the creditor takes possession of the property, after the consolidation of the property resulting from the loan default.

However, the referred court has been currently ruling on this matter in an oscillating manner. In recent trials held in February, the TJ-SP sentenced the financial institutions to pay the IPTU on the grounds that the creditor would be the owner of the property, as well as that Article 27, § 8 of Law 9514/97 would rule only between contracting parties and, therefore, is not opposed to the Tax Authorities¹.

Therefore, creditors’ encumbrance due to the tax obligation acknowledged by the court may impact the cost of the credit involved in the mortgage loan operations and reach the final consumer, which can be reckless in light of the scenario of severe economic instability experienced in Brazil.

Besides the immediate cost resulting from the funds spent for the payment of the tax, in cases where neither the debtor nor the financial institution makes the payment, the debt in overdue tax liability will be enrolled with the CNPJ of the institution, which, therefore, will be prevented from being eligible for bids, given that the tax compliance is one of the legal requirements, which negatively impacts the institution’s revenue.

On the other hand, the debt also motivates the filing of lawsuits in which the property may be susceptible to a levy of execution, given that the IPTU is an obligation classified as a propter rem, that is, it falls on the thing itself and, because of that, the creditor also bears the risk of collapsing its security, which again, justifies the increase in the total cost of operations.

On this matter, the Superior Court of Justice made some comments in the Court Precedents Bulletin No. 638 (REsp 1.731.735-SP) pointing out that the interest of the credit holder generated by the property, as is the case of the condominium maintenance charge debt and the IPTU, is compared to the interest of the creditor, who intends to maintain the security.

The solution suggested in the Bulletin is that the creditor should be responsible for the payment of the proposed obligations only after the consolidation of the property and, therefore, the levy of execution may fall on the purchasing rights of the debtor and not on the property itself, thus maintaining the security of the creditor in full.

Therefore, such a solution can also be used when it comes to the obligation to pay the IPTU, acknowledging the creditor’s responsibility only after the property’s consolidation, contrary to the recent decisions mentioned of the Court of Justice of São Paulo and reaffirming the traditional ruling.

In this scenario, it can be observed that if the court’s conflicting decisions are reproduced in future trials, they may be the precursors of a profound legal instability with consequences on the market that are potentially harmful to the buyers of on-credit property.

¹ AI 2225247-67.2020.8.26.0000 (2/03/2021), AI2182667-22.2020.8.26.0000 (2/04/2021), AI 2290264-50.2020.8.26.0000 (2/12/2021) and AI 2179989-34.2020.8.26.0000 (2/16/2021).