BRAZIL Law and Practice Contributed by: Mariana Cobra, Janaína Vargas, Mayara Zanini and Marcela Freire, Mattos Filho
3.5 Legal Requirements Before an Entity Can Give Valid Security There are no legal rules or requirements that must be complied with before an entity can give valid security over its real estate assets. 3.6 Formalities When a Borrower Is in Default In 2023, the Security Framework Law imple - mented important amendments to the security laws. One of the most relevant changes was to allow mortgages to be foreclosed out of court, which makes the procedure less time-consum - ing: a nonjudicial foreclosure may be completed in three to six months. The nonjudicial foreclosure procedure works as follows. • After the debtor is in default, in accordance with the relevant loan agreement, the creditor requests the competent Real Estate Registra - tion Officer to notify the debtor to cure the default within 15 days. • In the case of fiduciary sales, if debtor fails to cure the default, the Real Estate Registra - tion Officer will request the creditor to pay ITBI and perfect the transfer of full title in the name of the creditor. • Subsequently, the first auction will be sched - uled and, if it is not successful, another auc - tion must occur. If both auctions are unsuc - cessful, in the case of a fiduciary sale, the lender will keep the full title to property and, in case of a mortgage, the creditor will receive the property as payment-in-kind of the debt. 3.7 Subordinating Existing Debt to Newly Created Debt Secured claims are affected by judicial reor - ganisation and can be restructured under an approved reorganisation plan. During this period,
enforcement proceedings are typically suspend - ed until the debtor fulfils its obligations under the reorganisation plan. However, security of the credit remains in place unless stated otherwise in the reorganisation plan or consented to by the relevant creditor. Fiduciary sales are not subject to reorganisation or bankruptcy proceedings. 3.8 Lenders’ Liability Under Environmental Laws See 2.7 Soil Pollution or Environmental Con- tamination . 3.9 Effects of a Borrower Becoming Insolvent Security interests created over real estate in favour of a lender cannot be made void if the borrower becomes insolvent. However, in a bankruptcy scenario, creditors are categorised based on the nature of their claims and some of them have priority over secured claims, such as labour claims. Fiduciary sales are not affected by insolvency. 3.10 Taxes on Loans See 2.10 Taxes Applicable to a Transaction and 3.4 Taxes or Fees Relating to the Granting and Enforcement of Security . 4. Planning and Zoning 4.1 Legislative and Governmental Controls Applicable to Strategic Planning and Zoning The Federal Constitution recognises the compe - tence of municipalities to promote adequate ter - ritorial planning. The Urban Land Statute, which is a federal law, provides the general rules that
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