This article examines the concept of good faith in real estate transactions, exploring the legal guarantees provided by Brazilian law to the good-faith purchaser and the risks they may face. Legislation, particularly the Civil Code and the Public Records Law, establishes protective mechanisms for buyers who, despite acting with due diligence, may encounter hidden defects, fraud, or irregularities.
The analysis also discusses the role of the Superior Court of Justice (STJ) in consolidating protection for the purchaser, especially in situations where there is a conflict between third-party rights and a buyer who acted transparently and ethically.
The real estate market, especially in Brazil, is one of the most dynamic and complex areas of property law. In a realm of high-value transactions and often extended timelines, legal security is essential to uphold the rights of the parties involved. The good-faith purchaser, who acts diligently and carefully when acquiring a property, is one of the key subjects protected by legislation. However, the complexity of real estate acquisitions often entails potential fraud, irregular documents, or hidden encumbrances, which can cause significant harm to the buyer.
This article aims to analyze the protection mechanisms for the good-faith purchaser in real estate transactions, in light of the Civil Code, the Public Records Law, and the jurisprudence of the Superior Court of Justice. It also discusses the risks that the buyer may face, even when acting diligently, and how legislation addresses these challenges.
1. The Concept of Good Faith in Real Estate Transactions
In Brazilian law, the principle of good faith is central to legal protection in contracts and transactions, including the real estate market. It takes two forms:
Subjective good faith: This is the purchaser's belief that they are acting correctly and that there are no obstacles or hidden defects in the transaction.
Objective good faith: This is ethical conduct based on mutual trust, transparency, and loyalty between the parties.
In real estate transactions, the purchaser’s good faith is recognized when they take all reasonable steps to ensure the transaction is legitimate, such as examining certificates, checking property records, and verifying the seller's credibility. Article 422 of the Civil Code reinforces the requirement to observe good faith throughout contract execution and completion.
Additionally, Article 1.201 of the Brazilian Civil Code protects possession in good faith, presuming that someone who acquires possession of a property based on a legitimate title is unaware of any flaws that might invalidate the transaction.
2. Protection Mechanisms for the Good-Faith Purchaser
Brazilian law provides various mechanisms to protect the good-faith purchaser in real estate transactions. The main forms of protection are analyzed below:
2.1. Public Registry Transparency and the Presumption of Veracity
The Public Records Law (Law No. 6.015/1973) establishes that real estate registration is the formal act that makes the property’s legal status public. In other words, property ownership is only transferred through the registration of the purchase title in the real estate registry, as provided in Article 1.245 of the Civil Code. This registration is essential to ensure the purchaser’s good faith, as they can rely on the publicly recorded information.
The public registry protects the purchaser by conferring a presumption of veracity and legal security to the transaction. If, upon consulting the registry, the buyer finds no irregularity, they can conclude that the property is free and unencumbered, with their good faith presumed. The real estate registry fulfills the role of providing public knowledge of the property’s legal status, serving as one of the main guarantees of legal security.
2.2. Protection Against Fraud and Hidden Defects
Even when taking the necessary precautions, a good-faith purchaser may encounter fraud or hidden defects that compromise the transaction. Article 1.201 of the Civil Code ensures that a good-faith possessor is not held responsible for unknown frauds at the time of acquisition. If, for example, the seller concealed the existence of debts, encumbrances, or legal disputes on the property, the buyer has the right to request annulment of the purchase or compensation for damages.
In these cases, the jurisprudence of the Superior Court of Justice (STJ) has played a significant role in protecting the good-faith purchaser. The STJ has ruled in numerous cases that a diligent buyer, who has observed all necessary precautions, cannot be prejudiced by third-party fraud. In conflicts between third-party rights and the purchaser’s good faith, the judiciary tends to protect those who acted according to the rules, based on the principle of trust.
2.3. Cancellation of Fraudulent Registrations
When fraud occurs in the property registry, such as a sale by a non-owner or forged documents, the good-faith purchaser can request the cancellation of the registration in court. According to Article 214 of the Public Records Law, cancellation of the registration may be requested in cases of error or fraud, and if the good-faith buyer has duly registered the purchase title, they have a strong chance of having their right protected.
It is important to note that a prior registration obtained fraudulently cannot prevail over the legitimate title of a good-faith purchaser who registered correctly under the law. The STJ’s jurisprudence follows this understanding, recognizing the superior right of the buyer who registered in good faith.
3. Risks Faced by the Good-Faith Purchaser
Despite the protection mechanisms offered by legislation, the good-faith purchaser may still face some risks:
Ownership disputes: If the seller is not the legitimate owner of the property or there are ownership disputes, the buyer may become involved in legal proceedings.
Hidden encumbrances and liens: If the property has hidden encumbrances or liens not disclosed to the buyer, they may lose the property or be held responsible for the debts.
Hidden defects: Structural issues with the property, such as construction defects or administrative liabilities, may cause financial losses for the buyer.
To mitigate these risks, the purchaser should take all possible precautions, such as requesting encumbrance certificates, verifying the property’s regularity with the registry office, and checking the seller’s fiscal status.
Conclusion
Protection of the good-faith purchaser is a cornerstone of Brazilian real estate law. The public registry system, together with objective good faith, provides the buyer with legal security in their transactions, especially when they act diligently and transparently. However, fraud and irregularities can still put their rights at risk, requiring adequate support from legislation and jurisprudence.
The STJ’s jurisprudence has been clear in protecting the good-faith buyer whenever they have followed the required steps for transaction regularity. Adherence to registry transparency standards, along with fulfillment of contractual obligations, is essential to ensure that the buyer’s rights are upheld, even in the face of fraud or title disputes. Therefore, good faith not only protects the purchaser but also strengthens the legal security of the real estate market.