Guilherme Zauli is a real estate law coordinator at Tortoro, Madureira & Ragazzi Advogados.

Published in Valor Econômico on March 12, 2019

At the beginning of February this year, Law No. 13.777/2018 became effective. The law, which establishes time-sharing in Brazil, was enacted at the end of last year.

At first glance, readers may wonder what such an innovation means, given that, in Brazil, it is already possible for a specific real estate property to have more than one duly registered owner.

Contrary to what is currently practiced, time-sharing does not provide for the ideal fraction of each property. This regulatory innovation provides for the possibility of several people owning 100% of a property during a certain time of the year.

This regulatory innovation provides for the possibility of several people owning 100% of a property during a certain time of the year.

This practice, quite common in the United States, consists of purchasing what the law calls “periodic units” of a particular real estate property.

By purchasing such periodic unit, the individual becomes the owner of the property for a certain period of time that should never be less than 7 days a year.

Thus, considering the minimum 7-day period, this legislation allows the division of a property in up to 52 periodic units, being it perfectly possible for investors to purchase as many units as they wish, which, consequently, will influence the period of enjoyment that each investor is entitled to during the year.

Regarding each owner’s period of use, the legislation provides for the possibility of (I) fixed and specific dates in the same period each year; (II) non-fixed dates, in which case the period will be determined periodically, by means of an objective procedure that respects, for all timeshare owners, the principle of equality, and must be previously disclosed; or, finally, (III) mixed dates, combining fixed and non-fixed date systems.

With the advent of the new law, it will be possible to institute time-sharing in all types of existing real estate developments, but for time-sharing to occur in condominium, it will require an express provision in the condominium establishment instrument or by resolution of the absolute majority of owners in the meeting.

In the event time-sharing is established, a general real estate registration should be created, which should include the description of the entire property, mentioning the adopted regime.

Each periodic unit will be individually registered in a document derived from the general registration. This provides a guarantee to owners that any debts related to taxes and condominium contributions are only payable by the owner of that quota, in addition to allowing the free exercise of the rights inherent to the property, being it perfectly possible for each owner to dispose of their unit or to pledge it for line of credit.

Thus, it should be clarified that each periodic unit owner will be responsible for paying property tax and any condominium fees referring to their quota only.

Another point that may raise doubts to those who wish to invest in this type of business, is that of liability for any damage caused to the property, as well as to the property’s furniture.

The legislation stipulates that any damage resulting from time-related depreciation must be borne by all owners, in proportion to each periodic unit they own. As for any damage caused by misuse, the person responsible for the period in which the damage occurred will be held liable.

Because it is a new business in Brazil, aiming to provide greater legal certainty to the matter, the approved legislation addresses specific situations that buyers may face over time, such as delay by a certain owner to vacate the property, which may cause damage to the other owners of periodic units.

Should this occur, the law stipulates a daily fine should be paid to the owner who may be harmed.

Obviously, when deciding on the amount, the judge responsible for the case must stipulate a sufficient amount to cover all fees related to the days the former owner failed to vacate the property, as well as to serve as a deterrent and punitive sanction, aiming to prevent the recurrence of such practice.

Another specific situation already provided for by the new rule addresses eventual default by the owner of a unit in an undertaking under a pool regime (exploitation of the property as a hotel unit).

In such cases, the owner may be prevented from enjoying the period related to their periodic unit, so that the income generated by the property lease in such period settles any existing debts.

Therefore, the legislator’s concern becomes clear when trying to foresee possible issues that may arise with the advent of the new law, aiming to protect those who intend to invest in such modality, providing greater legal certainty to this new type of business and, consequently, putting heat into the real estate sector.