Real Estate Development in Brazil: Legal Requirements, Registration & Key Steps

Introduction

Real estate development is one of the most important activities in the Brazilian property market. It enables developers to structure, build and sell projects divided into individually owned units, such as apartments, commercial units, shops, houses and, where legally applicable, lots within condominium developments.

In Brazil, this activity is known as incorporação imobiliária. It commonly involves the sale of units before or during construction, often referred to as the sale of off-plan property.

Although real estate developments are common throughout Brazil, they involve complex legal, corporate, urban-planning, registry, technical and financial requirements. Before selling future units, the developer must comply with a series of statutory obligations intended to protect purchasers and ensure that the project is legally viable.

Real estate development is primarily governed by Federal Law No. 4,591/1964, known as the Brazilian Real Estate Development and Condominium Law. The legislation was enacted to regulate a growing market in which developers were already selling future units linked to undivided interests in land.

Later events, including the collapse of major Brazilian construction companies such as Encol in the 1990s, revealed the need for additional protection for off-plan property purchasers. This led to the introduction of the segregated estate regime, known in Brazil as patrimônio de afetação, which was consolidated by Federal Law No. 10,931/2004.

This article explains how real estate development works in Brazil, who may act as a developer, which documents are required, how the development must be registered, how the segregated estate regime operates and what liabilities may arise from contract termination and construction defects.

What Is Real Estate Development in Brazil?

Real estate development is the activity of organising and promoting the construction of a project divided into individually owned units, with the purpose of selling those units before or during construction.

In its broadest sense, incorporation may describe the legal attachment of a building to the land on which it is constructed. In the technical sense used under Brazilian real estate law, however, incorporação imobiliária refers to the organisation of the legal, financial, technical and material resources required to develop and sell future units under a condominium ownership structure.

Each purchaser acquires an individual unit together with an undivided interest in the land and common areas. This structure is commonly used for apartments, commercial units, houses and certain lot condominium projects sold off plan.

Real estate development should not be confused with the simple construction of a building. Its defining feature is the advance sale of units that have not yet been completed or, in some cases, have not yet begun to be constructed.

Because the transaction involves future property, Brazilian law imposes specific registration and disclosure requirements to protect purchasers and ensure the legal regularity of the project.

Definition Under Federal Law No. 4,591/1964

The legal definition of real estate development is found in Article 28, sole paragraph, of Federal Law No. 4,591/1964.

Under the statute, real estate development is the activity carried out for the purpose of promoting and completing the construction, for total or partial sale, of buildings or groups of buildings composed of individually owned units.

The definition therefore contains three main elements:

• the organisation and promotion of the construction;
• the division of the project into individual units; and
• the intention to sell all or part of those units.

Article 29 defines the real estate developer, known as the incorporador, as the individual or legal entity that promotes the sale of undivided interests in the land linked to future individual units, coordinates the development and assumes the obligations arising from the transaction.

The developer does not necessarily have to perform the construction directly. The building work may be carried out by a separate construction company, while the developer remains responsible for the legal and commercial organisation of the project and, depending on the contractual structure, for delivering the units within the agreed conditions, price and timeframe.

Real estate development is therefore the activity, while the developer is the person or company responsible for organising and carrying it through.

What Is the Real Estate Development Registration Dossier?

Before selling future units, the developer must register a set of documents known in Brazil as the memorial de incorporação with the competent Real Estate Registry Office.

For international purposes, the term may be translated as the real estate development registration dossier or development registration package.

This dossier contains the legal, registry, technical and financial documents that officially describe the development. It provides information about the ownership of the land, approval of the project, future units, construction specifications, estimated building costs and condominium structure.

Under Article 32 of Federal Law No. 4,591/1964, the developer may only sell or encumber the undivided interests in the land and the corresponding future units after the development has been registered.

Which Documents Are Required?

The principal documents required for registration include:

• Title to the land or a registered instrument granting acquisition and development rights: this demonstrates that the developer owns the property or holds registered rights allowing it to develop the land. Depending on the structure, this may include a purchase and sale commitment, assignment of rights or land-for-units exchange agreement granting possession, authorisation to build and authority to sell the future interests.
• Federal, state and municipal tax clearance certificates: these disclose the tax status of the property, landowners and developer.
• Protest certificates: these identify formally protested debts registered against the developer or landowners.
• Court certificates: these disclose civil or criminal proceedings that may represent risks to the development.
• Real estate encumbrance certificate: this identifies mortgages, attachments, unavailability orders, usufructs, easements and other restrictions recorded against the property.
• Twenty-year chain of title: this presents the history of ownership of the land over the statutory period, together with the corresponding registry certificates.
• Approved construction project: this confirms that the project has been approved by the competent public authorities and complies with applicable planning and construction rules.
• Calculation of building areas: this identifies the total construction area, private areas, common areas and the area corresponding to each individual unit.
• Social security clearance documentation, when required: this applies in the circumstances established by Brazilian legislation.
• Construction specifications: these describe the construction standard, materials, finishes, equipment and technical characteristics promised for the development.
• Updated assessment of the total construction cost: this provides an estimate of the overall cost and the amount attributed to each unit, prepared under the applicable technical standards and signed by the responsible professional.
• Instrument allocating undivided interests in the land: this defines the percentage of the land attached to each future unit and identifies the private and common areas.
• Draft condominium bylaws: these establish the rules for administration, use of common areas, allocation of expenses and relations between future unit owners.
• Statement concerning payment for the land: this is required when the landowner is to receive future units, a share of the development proceeds or another form of consideration connected with the project.
• Power of attorney documentation, where applicable: this is required when the developer acts under authority granted by the landowner or holder of the relevant property rights.
• Statement establishing a withdrawal or grace period, where applicable: this specifies the period and circumstances in which the developer may withdraw from the project.
• Garage plans and statements: these identify the number, location and intended use of parking spaces.

All documents must be consistent with the approved project, the property registry record, the construction specifications and the agreements that will be presented to purchasers.

In addition to Federal Law No. 4,591/1964, developers must comply with the rules issued by the judicial authorities of the relevant Brazilian state and with the requirements of the competent Real Estate Registry Office.

Do Debts or Legal Proceedings Prevent Registration?

Not necessarily.

The purpose of the certificates is to disclose the legal and financial position of the land, the landowners and the developer. Proceedings or encumbrances that do not legally prevent the transfer of the property may be disclosed through appropriate qualifications or reservations without automatically preventing registration.

However, restrictions that affect the legal availability of the land, such as certain unavailability orders or judicial measures, may prevent registration until the issue is resolved.

For this reason, real estate legal due diligence should be carried out before the project is definitively approved and before significant capital is invested.

An early review of the property record, title documents, certificates, planning restrictions and contractual rights can prevent the developer from pursuing a project affected by legal or registry obstacles.

What Are the Main Registration Steps?

The registration of a real estate development in Brazil generally involves the following stages.

1. Legal and Registry Due Diligence

The property record, ownership, chain of title, existing encumbrances, planning restrictions and the instruments authorising the developer to use the land should first be reviewed.

This stage is particularly important for foreign investors or companies entering into joint ventures with Brazilian landowners or developers.

2. Project Approval

The architectural and construction project must be approved by the competent municipal authorities in accordance with local planning and building regulations.

Municipal approval and real estate development registration are separate procedures.

The municipality primarily examines planning and construction matters, while the Real Estate Registry Office reviews the legal and registry requirements of the development.

3. Preparation of Technical and Legal Documents

Once the project has been defined, the developer must prepare the area calculations, construction specifications, cost assessment, allocation of undivided interests, draft condominium bylaws and other statutory statements.

This phase normally requires coordinated work between lawyers, architects, engineers, accountants and other professionals involved in the project.

4. Filing with the Real Estate Registry Office

The complete documentation must be filed with the Real Estate Registry Office responsible for the property record.

The registry officer will carry out a legal review to determine whether the documentation complies with statutory requirements.

5. Compliance with Registry Requirements

The registry officer must issue all necessary requirements in writing and at one time within 10 business days.

Once the developer has complied with those requirements, the Registry Office has a further 10 business days to issue the registration certificate, in accordance with Article 32, paragraph 6, of Federal Law No. 4,591/1964.

If the developer disagrees with a registry requirement, the applicable registry procedures may be used to challenge it.

6. Registration of the Development

Once the requirements have been met, the development registration is entered in the property record.

Only after registration may the developer regularly sell or encumber the future units.

When May the Developer Sell Off-Plan Units?

The developer may only sell or encumber future units after the development registration dossier has been registered with the competent Real Estate Registry Office.

Therefore, before executing binding purchase and sale commitments or accepting binding offers, the developer must complete the real estate development registration.

The registration number and identification of the competent Registry Office must be included in advertisements, proposals, contracts and other marketing materials relating to the development.

The beginning of construction should be distinguished from the beginning of sales.

As a general rule, Brazilian law does not state that construction may only start after registration. The statutory restriction primarily concerns the sale or encumbrance of undivided land interests and future units.

Nevertheless, beginning construction before completing the legal and registry structure may lead to additional costs, redesigns, delays and commercial difficulties.

Does the Registration Dossier Need to Be Updated?

If the development has not been effectively implemented within 180 days after registration, expired certificates and documents must be updated before sales begin.

For this purpose, the development is considered implemented when at least one of the following events occurs:

• the sale or encumbrance of a future unit;
• the execution of construction financing; or
• the commencement of the building work.

Until one of these events occurs, documents with limited validity must be updated after each 180-day period.

The registration dossier is therefore not merely a bureaucratic formality. It forms the legal foundation of the development and allows purchasers to review essential information about the land, project, units, construction cost and contractual structure.

How Does the Segregated Estate Regime Work?

The segregated estate regime, known in Brazil as patrimônio de afetação, legally separates the assets, rights, income and obligations of a particular real estate development from the developer’s general assets.

Introduced into Federal Law No. 4,591/1964 by Federal Law No. 10,931/2004, this mechanism is designed to protect resources allocated to construction and reduce the risks faced by off-plan property purchasers.

As a result, debts of the developer that are unrelated to the development should not, as a rule, affect the segregated assets of the project.

How Is the Segregated Estate Created?

The regime is optional and must be formally recorded with the competent Real Estate Registry Office.

Once constituted, it remains in effect until one of the statutory termination events occurs.

The segregated estate may include:

• the land;
• the buildings and improvements;
• receivables arising from the sale of units;
• construction financing proceeds; and
• other assets and rights linked to the development.

These resources must be used for the relevant project and may not be freely transferred to pay expenses of other developments or the developer’s general obligations.

What Happens If the Developer Becomes Insolvent?

In the event of the developer’s bankruptcy or insolvency, the segregated estate does not, as a rule, merge with the developer’s general assets or automatically form part of the bankruptcy estate.

The statutory structure allows purchasers, acting through their representatives’ committee, to decide whether the construction should continue or whether the segregated estate should be liquidated.

The regime does not eliminate every risk associated with a real estate development. It does, however, reduce the risk that funds paid by purchasers will be used for purposes unrelated to their project.

What Obligations Does the Regime Impose?

The segregated estate regime requires stricter administrative, financial and accounting controls.

The developer must, among other obligations:

• maintain separate accounting records for the development;
• separately control the project’s funds and transactions;
• use the proceeds for the construction and completion of the project;
• provide periodic information concerning construction progress;
• report to the purchasers’ representatives’ committee; and
• allow appropriate financial and physical inspection of the development.

Simply opening a separate bank account does not create a segregated estate. Formal registration and compliance with the statutory requirements are necessary.

What Is the Relationship Between the Segregated Estate and the RET?

The Special Tax Regime for Real Estate Developments, known as the RET, is an optional Brazilian tax regime providing for the unified payment of certain federal taxes on the development’s monthly income.

The segregated estate and the RET are not the same legal mechanism.

The segregated estate provides asset separation and protection. The RET is a tax regime that requires a separate application to the Brazilian Federal Revenue Service and compliance with specific tax requirements.

As a general rule, a development admitted to the RET is subject to a unified rate of 4% of the monthly income received, covering Corporate Income Tax, Social Contribution on Net Profit, PIS/Pasep and Cofins.

The reduced rate of 1% applies to qualifying social-interest residential properties intended for families within Urban Income Bracket 1 of the Brazilian Minha Casa, Minha Vida housing programme.

The tax treatment should be reviewed individually, particularly in developments involving different types of units, government housing programmes, special-purpose companies or foreign investment structures.

How Does Contract Termination Work in a Segregated Estate Development?

Federal Law No. 13,786/2018 introduced specific rules for the termination of off-plan property purchase agreements.

Where the development is subject to the segregated estate regime, the agreement may provide for a contractual penalty of up to 50% of the amounts paid by the purchaser, in addition to other deductions permitted by law.

Any remaining balance must be refunded within 30 days after the issuance of the occupancy permit, known in Brazil as the habite-se, or an equivalent municipal document.

The maximum 50% penalty does not apply automatically. Its application depends on the contractual provisions, the reason for termination and compliance with the statutory requirements.

The differentiated treatment is intended to preserve the financial resources required to complete the development and protect the collective interests of purchasers who remain in the project.

What Are the Benefits of the Segregated Estate?

For purchasers, the regime provides greater transparency, financial supervision and protection of the funds allocated to construction.

For developers, it may:

• increase the commercial credibility of the project;
• facilitate access to financing;
• improve financial organisation; and
• allow the development to apply for the RET, provided all statutory requirements are met.

On the other hand, it requires more rigorous accounting, administrative and financial controls.

The decision to adopt the segregated estate should therefore be considered during the initial structuring of the project, taking into account its legal, corporate, financial, tax and operational consequences.

How Does Termination of an Off-Plan Property Agreement Work?

Federal Law No. 13,786/2018, commonly known as the Brazilian Real Estate Contract Termination Law, regulates the termination of off-plan property purchase agreements, whether by mutual agreement or as a result of purchaser default.

Where termination is attributable to the purchaser, the developer must refund the amounts paid, adjusted for inflation, but may deduct, as applicable:

• the full brokerage commission;
• a contractual penalty of up to 25% of the amounts paid;
• taxes, condominium charges and other expenses relating to the property, where applicable; and
• compensation for use of the property, calculated at 0.5% of the updated contract value and applied proportionally to the period of possession or availability.

Deductions associated with occupation are only applicable where the purchaser had possession or use of the unit.

Except for compensation for use of the property, the deductions and retentions are limited to the amounts effectively paid by the purchaser.

What Is the Refund Period?

For developments that are not subject to the segregated estate regime, the remaining balance must generally be paid in a single instalment after 180 days from termination.

For developments subject to the segregated estate regime, the contractual penalty may reach up to 50% of the amounts paid, and the remaining balance must be refunded within 30 days after issuance of the occupancy permit or equivalent document.

If the unit is resold before the applicable statutory deadline, the amount due to the former purchaser must generally be refunded within 30 days after resale.

Must the Agreement State the Termination Rules?

Yes.

The consequences of termination must be clearly set out in the contract summary, including the applicable penalties, permitted deductions and refund deadlines. The purchaser must specifically acknowledge the relevant clauses.

Developers should therefore monitor the cancellation rate of each project and use agreements tailored to the project’s legal and financial structure.

Generic, unclear or outdated provisions may prevent the developer from applying the intended deductions and may increase the risk of litigation.

What Is the Developer’s Liability for Construction Defects?

A real estate developer may be held liable for construction defects affecting individual units and common areas, even when the physical construction was carried out by a separate construction company.

Federal Law No. 4,591/1964 established the developer as the party responsible for organising and carrying out the development, delivering the units and complying with the conditions presented in the registration documents, contracts and advertising materials.

In consumer transactions, the developer’s liability is generally strict. This means that the purchaser does not usually need to prove fault, but must demonstrate the defect, the loss and the connection between the damage and the development.

Where the developer and construction company both participate in the supply chain, they may both be held liable to purchasers, without prejudice to contractual recourse between them.

Outsourcing construction does not automatically release the developer from liability towards the purchaser.

Developers should therefore maintain:

• effective construction quality controls;
• technical supervision;
• records of construction methods and materials;
• procedures for inspecting delivered units; and
• an efficient post-completion assistance system.

Preventing and promptly addressing defects can reduce financial losses, litigation and reputational damage.

Conclusion

Real estate development in Brazil is a complex legal, technical and commercial operation that requires careful planning from the acquisition or contribution of the land through to the construction and delivery of the units.

Compliance with Federal Law No. 4,591/1964, particularly the registration of the development before the sale of off-plan units, is essential to the legal regularity of the project.

Developers and investors must also carefully assess the contractual structure, land title, project approvals, segregated estate regime, tax treatment, purchaser agreements and potential liabilities.

Proper legal structuring is not merely a formal requirement. It reduces risk, protects purchasers and contributes to the financial and commercial viability of the development.

Legal Advice for Real Estate Developments in Brazil

Botti | Mendes has experience advising Brazilian and international developers, investors, landowners and companies on the structuring of real estate developments in Brazil.

Our work may include real estate due diligence, project structuring, landowner and investor agreements, special-purpose companies, development registration, construction and purchase agreements, segregated estates, tax planning and ongoing legal support.

We provide legal services in English, French, Spanish, Danish and Portuguese, allowing foreign clients to receive clear and direct advice throughout the development process.

Contact our team before acquiring land, entering into a joint venture or marketing off-plan units in Brazil so that the legal, corporate, tax, contractual and registry aspects of the project can be assessed from the outset.

References

BRAZIL. Federal Law No. 4,591 of 16 December 1964. Governs condominiums in buildings and real estate developments.

BRAZIL. Federal Law No. 10,931 of 2 August 2004. Introduces rules concerning segregated estates and the Special Tax Regime for real estate developments.

BRAZIL. Federal Law No. 13,786 of 27 December 2018. Regulates the termination of agreements involving real estate developments and urban subdivisions.

CHALHUB, Melhim Namem. Incorporação imobiliária. 8th revised, updated and expanded edition. Rio de Janeiro: Forense, 2024.

MEZZARI, Mário Pazutti. Condomínio e incorporação no registro de imóveis. 5th revised and updated edition. Porto Alegre: Livraria do Advogado.