Real estate lease guarantees

As is well known, a lease is the contract under which one party (tenant or lessee) remunerates the other (lessor) for the use and enjoyment of their property for the purpose of housing, season or business activity. Remuneration – or rent – is subject to free agreement, but the stipulation in foreign currency is prohibited, as well as its link to exchange variation or the minimum wage.

To guarantee the receipt of this consideration and all its other rights and credits, the lessor may demand guarantees that, however, only minimize the risk of loss, not eliminating them completely. If you do not want to opt for rental guarantees – and only in this case and in the case of seasonal rental –, the tenant may require the renter to pay the rent and charges in advance (until the sixth business day of the month to come).

Smart city lahore want you to know about all the facts and figures of real estate lease guarantees in the following article.

Find out how the main guarantees of the real estate market work in the lease agreement

If you do not opt for prepayment, you may, therefore, resort to one of the types of lease guarantees provided for in art. 37 of Law no. 8245/1991 ( Tenancy Law ), namely: security , secure bail , bail and the assignment of investment fund shares , is not allowed the option of more than one of these modalities in the same lease, under penalty of nullity. This right will be recognized only to lessors who formalize the contract in writing, therefore not reaching those verbal negotiations, but it is worth noting that the guarantee, however, extends to the effective return of the keys, unless otherwise stipulated.

Security deposit: Guarantee for real estate lease contract

The guarantee can be given in movable or immovable property and also in currency, bonds and shares. The security deposit on movable property must be registered at the registry of titles and documents and the one on real estate registered with their registration. The cash deposit can never exceed the amount equivalent to three months’ rent, and must be deposited in a savings account, reversing, to the benefit of the lessee, the benefits arising from this when withdrawing the deposited amount.

Lease Guarantee: Guarantee for real estate lease contract

The lease guarantee, in turn, consists of a personal and accessory guarantee from third parties to the lease agreement, and is currently the most adopted modality in the Brazilian real estate market, due to its effectiveness in resolving conflicts between lessors and lessees. The institute has its concept brought by art. 818 of the Brazilian Civil Code that says “through the surety contract, a person guarantees that the creditor is satisfied with an obligation assumed by the debtor, in case the latter does not fulfill it”

Guarantor or Suretyship Insurance: Guarantee for real estate lease contract

It is sought, as guarantors, those people who have moral and financial integrity, as well as the free disposal of their assets, and none of the spouses – unless the regime is the total separation of assets – may provide surety without authorization on the other, under penalty of nullity. The guarantee will always be given in writing, via public or private instrument and the guarantor’s liability will be limited to what is expressly stated therein.

Despite the fact that suretyship is the most used modality in Brazil, the fact is that it has become embarrassing for the lessee to search for people who are willing to guarantee their lease, in which the surety insurance is an option not only safe for the lessor, as well as less inconvenient for the lessee. It is provided, in fact, by insurance companies hired at the expense of the lessee, who will have their registration status analyzed by them. This is a safe modality, however quite costly for the tenant, since it will add about 10% of the contract value in their expenses with the lease.

What is fiduciary assignment and how does it work in the guarantee for the lease?

Finally, one cannot fail to mention the existence of a fourth type of guarantee for the lease of real estate: the fiduciary assignment. It is made by means of investment fund shares or capitalization bonds, with financial investments given as a guarantee to the lessor, at the time of signing the lease agreement.

Investment Fund: Guarantee in the Real Estate Lease Agreement

The investment fund – traded or not on the stock exchange – is managed by the Brazilian Securities and Exchange Commission and its shares have the nature of a guarantee, being delivered to the lessor in the event of contractual default by the lessee. The latter or the assignor (third guarantor who has signed the lease agreement) will be notified extra judicially to pay off the debt, under penalty of having their shares taken to fulfill the obligations.

The lessor must request the fund manager to transfer, in full and irrevocable, quotas sufficient to settle the debt, given that he may also file a demand to charge any uncovered difference. It is worth mentioning that the shares of the guarantee fund are unavailable, inalienable and unsecurable while the lease relationship remains, provided, obviously, the guarantee has been previously registered with the administrator, by its holder – the lessee or the assignor.

It is a relatively recent guarantee and still little used, as it was included in the Tenancy Law in 2006. In any case, the truth is that the lessor and lessee should carefully analyze the guarantees made available to them, as a way to facilitate conducting the negotiations for the lease of real estate.

After all, the guarantees arise as a result of the lessor’s need for protection so that possible losses are reduced or eliminated, if they occur. They also end up securing the tenant, giving him support and ease in negotiating the lease of the property he needs for his home, leisure or business. That is why, at the time of hiring, it is essential that the analysis is carried out by a qualified professional, who allows the option made to please both parties – lessee and lessor.