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Legal Update

Fractional Ownership and Timesharing: Global Trends Spread to Brazil

16 April 2018
Tauil & Chequer Legal Update

Fractional or “multi-property” ownership originated in the 1960s in France to revive the post-World War II economy and spread worldwide. In this arrangement, multiple parties co-own a property, with each party holding a fraction of the property and being able to take advantage of it, individually, for a certain length of and period of time proportional to the fraction owned.

With no law regulating fractional ownership in Brazil, Brazilian real estate investors are unsure of the rights and obligations involved in this arrangement. However, legislative proposals for multi-property regulation are being drafted, the main one being the Senate Bill 54/2017 ("Bill No. 54/17"), authored by Senator Wilder Morais. 

Bill No. 54/17 provides fractional ownership as a legal relationship that establishes the economic use of an immovable property, in fixed and repeated periods of time, for the exclusive use of its owners, each taking turns. Moreover, it provides that the ownership relationship is perpetual.  Bill No. 54/17 also provides that the regime of fractional ownership may be applied to a condominium building—for part or all of its autonomous units—whether or not the property is used for leisure/tourism purposes. 

Although there is no legal provision of fractional ownership in Brazilian law, a decision from the Superior Court of Justice (STJ) acknowledged its existence, that it has a nature of a right in rem, considering that the Civil Code does not bring any obstacle  nor does it refer to the impossibility of consecrating new rights in rem.1

Fractional ownership should not be mistaken with “timesharing,” which also emerged in Europe after World War II to address the post-war economic crisis by aiming to stimulate tourism and also involves property sharing. Timesharing is a service agreement whereby the rights to use real estate units are obtained, also fractioned by time, and the units are typically owned by hotel chains. Timesharing involves a personal obligation right, whereas fractional ownership combines business rights in rem with the obligatory right (personal obligation). Timesharing is already regulated by Brazilian law through articles 28 and 29 of Decree Law No. 7381/2010, which regulates Law 11771/2008 (Tourism Law). 

It is worth noting that both fractional ownership and timesharing contribute to the real estate sector and bring to Brazil the globally trending concept of a shared economy and its social function of reducing costs and providing greater access to property.

On March 21, Bill No. 54/17 was approved by the Constitution, Justice and Citizenship Commission of the Federal Senate (CCJ). If there is no appeal by the Senate Plenary, the Bill No. 54/17 will be sent to the Chamber of Deputies.2

1STJ Third Class. REsp No. 1,546,165 – SP – President and Reporter: Minister João Otávio de Noronha; j. April 26, 2016.

2As a general rule, a proposition of law begins with the House of origin—the Chamber of Deputies or Senate—reading a summary of the bill. After that reading, the bill goes to one or more technical committees, where it will be examined and then addressed in a report. Subsequently, it will return to the plenary for a vote. If approved, the bill is sent to the other House, which will act as the reviewing body. If modified by that House, the bill returns to the House of origin. After new voting, the originating House will forward the bill for presidential sanction/veto.

Authors

  • Ludmila Arruda Braga
    T +55 11 2504 4635
  • Aristeu Tenório
    T +55 11 2504 4222
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