BRAZIL Law and Practice Contributed by: Alberto Malta, Davi Ory, Ana Vogado and Maria Eduarda Amaral, Malta Advogados
Rental contracts commonly include guarantees to reduce the risk of tenant default. The cash deposit, limited to three months’ rent, is wide - ly used and must be held in a linked savings account, with return plus interest at the end of the lease, unless there are debts or damages. Capitalisation bonds, movable and immovable property may also serve as guarantees. Other frequent forms include rental insurance, where an insurer covers unpaid obligations for a monthly premium and bank guarantees, involv - ing a credit letter from a financial institution with immediate enforceability in case of default. Guarantees can only be triggered upon breach and landlords cannot demand advance payment or retain amounts without justification. Courts prohibit cumulative guarantees and require pro - portionality in their enforcement. 7. Construction 7.1 Common Structures Used to Price Construction Projects There are three main types of contracts: • global price contracts, with a fixed amount and cost risk borne by the builder; • management contracts, where the builder is paid a fee or a percentage of actual costs; and • hybrid models, such as the guaranteed maximum price (capping expenses) and engineering, procurement, and construction (EPC) (turnkey contracts with full contractor responsibility for design, procurement and execution). Land acquisition through exchange for future units enables project initiation without upfront payment, by allocating part of the development
in return for the land. The built-to-suit model, under Article 54-A of Statute No 8,245/1991, links customised construction to an atypical lease, with a full early termination penalty, ensur - ing contractual security without immediate dis - bursement by the tenant. As of 2024, building information modelling (BIM) is mandatory in public tenders, pursuant to Decree No 10,306/2020, aiming to enhance financial accuracy and project risk management. 7.2 Assigning Responsibility for the Design and Construction of a Project It is common for contractors to outsource design services and for the execution to be carried out separately by the construction company. This separation is typical in management contracts, where the contractor manages technical and operational aspects, while the owner directly bears all costs, including design. In the public sector, two key models governed by public pro - curement laws are used: • integrated contracting, where the contractor is responsible for both design (including the basic project) and execution; and • semi-integrated contracting, in which the Public Administration provides the basic pro - ject and the contractor prepares the execu - tive project and executes the works. Which model is chosen will depend on the pro - ject’s complexity and the legal criteria of techni - cal and economic convenience, as provided for by law. 7.3 Management of Construction Risk Risk allocation in construction contracts is typi - cally managed through indemnity clauses, con - tractual penalties, performance guarantees, insurance and liability limitation provisions. In
207 CHAMBERS.COM
Powered by FlippingBook