Brazilian Supreme Court denies seizure of property belonging to guarantor in commercial lease agreement.

The Brazilian Supreme Court (STF) has ruled that the property of a guarantor in a commercial lease agreement is exempt from seizure. There are decisions in both chambers that diverge from the understanding reached in a 2010 ruling with general repercussions. According to the justices, the decision that deemed the provision for seizure constitutional only applies to residential leases.

According to experts, this understanding makes it difficult to accept guarantees in the real estate market. It mainly affects small businesses and companies that, due to the rental value and the financial conditions of the tenants, need a guarantor, says Adriano Sartori, Vice President of Asset Management and Leasing at Secovi-SP. "Street-level businesses, for example, which are already being so negatively impacted by the pandemic, may have difficulty finding another form of guarantee," he says.

There is no consolidated research on the importance of a guarantor in the commercial sector, only in the residential sector. The Secovi-SP Rental Survey, for example, shows that in 44.5% of contracts signed in November, a guarantor was used as security.

The discussion began after the Supreme Federal Court (STF) Plenary (RE 612 360) considered the seizure of a guarantor's family home to be legitimate in general. This measure is provided for in Article 3, item VII, of Law No. 8,009 of 1990, which deals with family property. The issue is also settled in the Superior Court of Justice (STJ), through Precedent No. 549.

After the ruling, guarantors of commercial leases began to question the application of the understanding, arguing that the case in question involved residential property, which led the ministers to reconsider the issue.

They came to understand that, in the case of a commercial property contract, the guarantor's right to housing should prevail, since it does not concern the tenant's right to housing, who rents for business purposes.

Attorney Artur Ratc, partner at the law firm Ratc & Gueogjian Advogados, recently obtained a favorable ruling for his client. He argues that the general precedent ruling cannot be applied in these cases because the situations are different. "Commercial contracts have their peculiarities. When a legal entity is sued for non-payment of rent, the one who should suffer the consequences is its actual debtor [owner or partner of the company] and not the guarantor, who suffers a disproportionate measure with the seizure of their only asset," he says.

In her decision, Justice Cármen Lúcia, of the 2nd Panel (RE 1296835), highlights that, although the Supreme Court has recognized the constitutionality of seizing a guarantor's family home in a lease agreement (General Repercussion Theme 295), this understanding does not apply to commercial real estate. She cites in her opinion decisions from both the 1st and 2nd Panels, as well as monocratic decisions (granted by a single justice).

One of the decisions, from the 2nd Panel, is authored by Justice Edson Fachin (RE 1277481). He states that "it is observed that when dealing with residential lease agreements, it is possible to contrast the right to housing of guarantors with the equally relevant right to housing of tenants, which is not the case in the guarantee of a commercial lease agreement."

The First Panel also holds a similar understanding. In a case judged in February 2019, the rapporteur for the judgment, Minister Rosa Weber, states that the family property of the guarantor cannot be seized, "intended for their residence, the sacrifice of which cannot be demanded under the pretext of satisfying the credit of a commercial property lessor or stimulating free enterprise" (RE 605709).

Lawyers in the sector, however, disagree with the new understanding in the Supreme Court. Luís Rodrigo Almeida, partner at Dib Almeida Laguna Manssur, points out that the rulings are not unanimous and the issue was not analyzed from this perspective in a case with general repercussions. For him, it would be more reasonable for the understanding of the ministers who are currently in the minority, such as Luís Roberto Barroso and Dias Toffoli, to prevail.

According to the ministers, the guarantor agreed to guarantee the debt of his own free will and agreed to pay the debt jointly and severally if the tenant fails to pay it. "He assumed this risk, knowing that the law, since the 1990s, is clear that his family home can be seized," says Almeida.

Rodrigo Karpat, from Karpat Advogados, also agrees. "These rulings go against what the Supreme Court had already defined in general and also against how the market operates," he says.

Jaques Bushatsky, a partner at Bushatsky Law Firm, points out that the law governing the seizure of family property makes no distinction between commercial and residential contracts. In his opinion, this new interpretation also undermines legal certainty, since the contracts were signed taking into account what the law stipulates.

For the real estate market, the understanding reached by the Supreme Federal Court (STF) panels could also be detrimental. According to lawyer Luís Rodrigo Almeida, the new decisions may discourage the use of the most common and only free form of guarantee in commercial rentals. He adds that it could also increase the cost of other forms of guarantee, such as insurance or security deposits, if the STF rules on this matter with general repercussions.

Source: Valor Econômico