Brazil property developers advised to incorporate late delivery penalties

Due to the rising number of complaints of Brazilian off plan property delivery delays, a new regulatory mechanism has introduced the imposition a 2 percent penalty of the unit value to be payable by the project developer.  The unit arrival will have to be over 6 months overdue under the stipulations agreed upon by both the sector itself and the Public State Ministry (MPE), enforceable from 26^th November 2011.

Whilst not obligatory, the regulations are focused on bringing more transparency in what still is an immature real estate market and are expected to be incorporated by most professional construction companies as a means of maintaining consumer confidence.  The regulations were signed under a Terms of Conduct Adjustment (TAC) legal document and buyers will be entitled to receive the discount in the form of a reimbursement within 90 days after keys have been delivered or after the signature of the deed of sale.  There will be an ability to be able to take into account delays after the 6 month period, adding a monthly 0.5 percent to the same formula.  Another recommended clause is the obligation to regularly inform buyers of the progress of projects, providing at least 120 days notice should any issues occur.

The document was signed by the Habitation Syndicate of São Paulo (Secovi-SP) which governs 4,500 development companies – however, the MPE confirmed that the norms will be applicable throughout Brazil.  According to Roberto Senise Lisboa of the Prosecutor's Office of Consumer Capital:  “Buyers previously had no way of defending themselves and, whilst many purchase contracts have a 6 month delay compensation clause, claims are a lengthy process and are not always achieved in reality.” 

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