Knowledge of Real Estate Laws

Most of the ink has that been spilled surrounding the Brazilian people and their real estate preferences has been about their emerging role as buyers of American properties.

Brazil’s economy is stable, in part due to anticipation surrounding the country’s hosting responsibilities for both the 2014 World Cup and the 2016 Olympics. The most affluent Brazilians, many of whom have enjoyed recent financial successes, have flocked to U.S. cities in droves.  The New York Times has reported on the trend twice in the last year, with feature stories about Brazilians purchasing properties in both New York City and Miami.

Law firms in Brazil assist foreigners with real estate transactions

But, simultaneously, foreign buyers of Brazilian properties continue to expand their own investments, even as prices climb considerably. In fact, some, including the Brazilian government agency known as the Institute of Applied Economics Research (IPEA), believe that the Brazilian government has undertaken policies that have produced a real estate bubble. In part because of decreased interest rates and readily available credit, the IPEA study authors estimate that property values have climbed at an unsustainable rate in the last four years – 165 percent in Rio de Janeiro and 132 percent in Sao Paulo.

A lavish city in the southern part of the country, Florianopolis (also known as Floripa and the Island of Magic), is another location where prices have risen, and are likely to continue to do so unabated, for reasons supplementary to the interest rate issue. Prices in Floripa are climbing for two additional reasons explained recently by a local real estate professional.

“Most of Floripa is set on an island which cannot be expanded, so property is a finite resource, a rare commodity,” Samantha Gore told Property Wire last week. “Most of the island’s luxury homes were bought outright without mortgages, before finance was even available, and vendors have always been able to sit tight until they achieved their full asking price.”

Buyers of Floripa properties should keep in mind that, in general, whenever special circumstances surround the sale of a property, such as if it is part of an estate sale or if it has structural issues, a real estate lawyer is more of a necessity than a luxury. This is especially true if buyers are not familiar with local laws.

An experienced Brazilian law firm can act as a local, trusted ally to foreign buyers with real estate interests in Brazil, shielding them from any legal problems regarding the purchase or ownership of properties.

Portuguese Language Website

The New York Times’ efforts to launch a Portuguese edition of its website – currently scheduled for the latter half of 2013 – could be impeded by a Brazilian law that limits the ownership stake of foreign entities.

While it’s unclear whether the publication’s ownership group has consulted directly with a lawyer in Brazil, its publisher Arthur Sulzberger, Jr., recently told the Brazilian newspaper Folha that he is aware of the law that dictates that media or news organizations must have at least 70 percent Brazilian ownership.

“We are absolutely going to do everything within the laws in Brazil,” Sulzberger told the newspaper last week. “We are talking to people about what that means, and how we can best accomplish our goal in a way that meets the legal requirements.”

The law stems from a 2002 amendment to Brazil’s Federal Constitution intended to restrict the investment stake of foreign companies and individuals in media organizations to no more than 30 percent. Furthermore, foreign investors may not possess direct ownership of a Brazilian business. According to a 2011 report by Ernst and Young – “Doing Business In Brazil” – a foreign investment must be performed through a duly incorporated Brazilian company.

Brazilian media entities are not the only organizations impacted by operational limitations – transportation and public utilities companies face similar restrictions.

For foreigners with legal interests in Brazilian entities in these sectors, the onus rests on them to abide by local laws. These parties should consult a lawyer in Brazil in order to better understand the legal ramifications of all business actions that they take. Given that Brazil is now the sixth-largest economy in the world, businesses are likely to expand their presence in the country, so they must have a savvy legal team in place as they work through contract disputes, property infringement cases, asset acquisition questions and other related business issues.