Although not yet regulated in Brazil, the concept of multi-ownership, also known as time-sharing or fractional ownership, challenges the limitations of traditional property rights. By making it possible for several individuals to economically share the ownership of a single property, exercising their right in a specific period during the year, in an exclusive, cyclical, and perpetual manner, the multi-ownership gives dynamism to real estate developments, enables the maintenance of investments in the sector, and highlights the strength of the sharing economy as a global trend.
Four draft laws are currently under way in the Senate and Chambers of Deputies intended to govern multi-ownership. The most complete is Draft Law No. 54/2017, which relied on the collaboration of Secovi-SP and proposes to establish a specific legal regime for this system. It should be emphasized that the draft law does not change Article 1225 of the Civil Code in order to explicitly name multi-ownership in the list of the in rem rights existing under Brazilian law. The text assumes as a premise that the in rem nature is intrinsic to the multi-ownership, considering that it is a subset of property rights. This is also the understanding of the Superior Court of Justice, which, in a recent decision, recognized the in rem nature of the right of multi-owners.
Unlike traditional co-ownership, multi-ownership is the sharing of ownership over time. Each multi-owner exercises his right fully and exclusively, but limited to a predetermined and recurring period. The fraction of the property of each multi-owner is connected to his exclusive time and not only to the physical space of the property.
In this sense, Draft Law No. 54/2017 proposes to establish three subsets for organizing the fractions of time:(i) fixed, in which the quantity of days held by each multi-owner is determined and always in the same period of each year;(ii) floating, where the exact determination of the period of use will be periodic, but according to availability and reserve procedures; and(iii) mixed, in which part of the time will be fixed and part will be floating, given that in any case the period corresponding to each fraction of time will be at least seven days.
Considering that, according to the draft law, multi-ownership would require the formal institution of a condominium among multi-owners, the condominium bylaws would be the document to regulate the relationship between them, especially the criteria to define the dates of the calendar year that will correspond to the period of each property fraction – whatever the adopted subset is (fixed, floating, or mixed), and the conditions of use, maintenance, and liability related to the equipment and furnishings of the shared real estate.
Draft Law No. 54/2017 also reveals other differences between traditional ownership and multi-ownership, as it removes, as a general rule, the right of first refusal among multi-owners of the same real estate. This right will only exist in the acquisition of the fraction of time of the others, if it has been provided for in the document establishing multi-ownership or in the condominium bylaws. Another distinction made in the Draft Law is the limitation of choice in the use and enjoyment of the real estate by the multi-owners, since they are not allowed to make modifications to the equipment, furniture, and facilities.
In addition to the creation of the multi-ownership regime, the Draft Law provides for the amendment of the Public Registers Law so as to provide for the creation of an auxiliary form for the registration of multi-ownership real estate, which would include all information regarding the owners of each fraction and the rules established in the condominium bylaws for the alternation between use of the property.
Multi-ownership is already a reality in Brazil, especially in hotel and leisure real estate projects. However, in the absence of specific regulation, entrepreneurs use various legal structures, which, a priori, do not guarantee that the parties rights and obligations are compatible with the type of investment made, which creates legal uncertainty. Formally, what investors and consumers of this type of product purchase is a purely binding right, which is not enforceable against third parties.
If the purpose of real estate multi-ownership is the acquisition of a fraction of a real estate, even if related to time, it is imperative that the multi-owner be able to use, benefit from, enjoy, and dispose of that fraction and, therefore, benefit of all the attributes of an actual owner. Clarity about the nature of the relationships created on the basis of multi-ownership would relieve the entrepreneur, since it would make the obligations assumed by the multi-owners enforceable against third parties. As example of such obligations, responsibility for the payment of the urban property tax (IPTU) and condominium expenses in proportion to the fraction of the ownership of the real estate stands out.
It is undeniable that the system proposed by Draft Law No. 54/2017 will present practical challenges, especially regarding the adequacy of the registry system and the administration of real estate fractional ownership enterprises. This regulation proposal comes at an extremely convenient moment, in which the sharing economy gives new meaning to the relations of ownership and use of goods and services in general. In this context, legal certainty deriving from regulations can be a decisive factor in establishing this system as an alternative investment in the real estate market.