Executive Order (MP) No. 992/20, published on July 16, provides, among other issues, for the possibility of sharing a single fiduciary sale of real estate as collateral for more than one contract to open financial transactions within the Brazilian Financial System.
The innovation arises from the inclusion of certain provisions in the current Law No. 13,476/17, which deals mainly with credit facility agreements, and aims to facilitate the taking out of new loans without additional risks to financial institutions by allowing the sharing of the security interest in the property.
Although the additions have been made to the legislation on credit facility agreements, the new provisions are not clearly worded in such a way as to restrict their application to such agreements. On the contrary, the MP indicates that sharing can be done for "new and autonomous financing transactions of any nature", provided that such transactions are encompassed within the Brazilian Financial System. As a result, the scope of application of the new provisions may be subject to discussion and, ideally, should be clarified when the MP is converted into law.
Without prejudice to this discussion, the MP may benefit individuals and legal entities that have entered into financing transactions guaranteed by fiduciary sales of real estate with certain creditors (original transactions) and that wish to enter into new financing transactions within the Brazilian Financial System with the same creditors, using the same asset as collateral (derivative transactions). If an individual, the interested party may only do so for his own benefit or that of his family entity by declaring such information in a contract.
In order to be annotated in the real estate record as a derivative transaction under the terms of MP 992/20, the new contract must necessarily contain certain elements, as was already the case for the original financing transactions governed by Law No. 9,514/97. The amount of principal of the new transaction, the interest rate and charges incurred, the term and conditions for repayment of the financing to the creditor, the declaration regarding the use for his own benefit or that of his family entity (in the case of an individual), the grace period for arrears, the declaration that the property may be used freely by the debtor when in default of the obligations and requirements dealt with in article 27 of Law No. 9,514/97 are all essential requirements of the contract and must be expressly provided for.
Among the requirements, it is important to mention with emphasis that, in addition to the above-mentioned requirements, the contract must include a provision that provides that non-payment of any obligations in financing transactions guaranteed by the same fiduciary sale of real estate (both for original and derivative transactions) will allow the creditor to accelerate all obligations guaranteed under the shared fiduciary sale. This means that the changes introduced in Law No. 13,476/17 by Executive Order 992/20 allow the automatic inclusion of the due date cross-referenced with an accelerated maturity event in financial transactions previously carried out with the same creditor, even without the handling of contractual changes specific to the original transaction.
Another relevant inclusion is the specific provision that, for the purpose of sharing guarantees, provisions relating to automatic settlement of debt do not apply when the product resulting from the execution is not sufficient to settle the debt, with the exception made for transactions for financing housing. This point is certainly one of the most controversial when it comes to choosing fiduciary sale of real estate as collateral for transactions, especially when compared to the alternative of creating a mortgage, which does not have the same restriction.
Thus, the important changes introduced in the legislation certainly expand access to credit, as well as reduce lenders' exposure to risk and making the updating of collateral for new loans more dynamic. Before, the use of the same property as collateral for a new financing transaction required the undoing and redoing of the original security interest, with consequent cancellations and new real estate recordings.
Although the scope is limited to the Brazilian Financial System, the innovation brought about by MP 992/20 may encourage discussions on legislative changes to allow expansion of these provisions for the creation of a fiduciary sale of real estate as security for other types of financing. MP 992/20 still has to be submitted to the Legislature in order to be converted into law. In this process, changes to this legal arrangement may be implemented.