CNJ confirms that private instruments can be used in real estate fiduciary sales

Brazil’s National Council of Justice (CNJ) has confirmed that private instruments can be used with the same effect as a public deed in the fiduciary sale of real estate and related acts, even if the parties involved are not participants in the Real Estate Financing System (SFI) or the Housing Finance System (SFH). In practice, the decision reduces the need for a public deed, strengthens legal certainty, and simplifies real estate guarantees outside the SFI and SFH.  

Who should pay attention?

Real estate developers, subdividers, funds, companies, private creditors, financial institutions, and other entities that use real estate as collateral or structure transactions involving real estate fiduciary sale.  

Background of the controversy

1. In 2024, the CNJ began requiring a public deed for certain fiduciary sale transactions outside the SFI and SFH (CNJ Rulings Nos. 172, 175, and 177).
2. The Federal Government formally requested remedial action, arguing that this restriction violated Article 38 of Law No. 9.514/1997.
3. Also in 2024, the CNJ granted an injunction suspending the restrictions until the final ruling on the case.
4. The Federal Council of the Brazilian Notarial College (CNB-CF) filed a motion for rehearing seeking to maintain the requirement for a public deed. The CNJ’s recent decision confirms the injunction granted in 2024, upholds the Federal Government’s request, and rejects the CNB-CF’s request.
5. It also mandates that Article 440-AO of the National Code of Standards be adjusted to the prevailing understanding.  

Legal basis for the decision

The CNJ aligned its interpretation with the Brazilian Federal Supreme Court (Writs of Mandamus Nos. 39.805/DF and 39.930/DF) and the Superior Court of Justice (Internal Interlocutory Appeal on Special Appeal No. 1.530.556/MS). The authority emphasizes that Article 38 of Law No. 9.514/1997 applies to acts and contracts referred to in the law or resulting from it, whether within or outside the SFI. Furthermore, requiring a public deed for agents not affiliated with the SFI or SFH could increase costs, add to bureaucracy, and disrupt competition.  

What changes in practice?

• Fiduciary sale agreements and related acts may be executed via private instrument with the same effect as a public deed.
• Individuals and legal entities may use this method even if they are not participants in the SFI, the SFH, or the capital market, except where federal law requires a public deed.
• The instruments may be registered with the competent Register of Deeds, pursuant to Law No. 9,514/1997 and the Public Records Law (Law No. 6,015/1973).
• Private instruments that meet the legal requirements cannot be refused reception, qualification, or registration solely because the parties are not part of the SFI/SFH or are not subject to specific regulation.  

Anticipated impacts on the market

The decision should benefit entities that use real estate as collateral, especially in arrangements outside the SFI and SFH. In practice, the decision can help to:

• Reduce transaction costs in transactions that do not require a public deed;
• Streamline the formalization of real estate guarantees;
• Expand access to capital secured by fiduciary sale;
• Strengthen legal certainty for transactions conducted outside the traditional scope of the SFI and SFH.

The CNJ also validated private instruments with the effect of a public deed executed before or during the period when provisions required a public deed, provided they complied with the applicable federal legislation.  

Key considerations for new transactions

The decision marks a significant milestone for the real estate and credit markets by reinforcing a broader interpretation of Law No. 9,514/1997. Even so, the flexibility introduced by the decision does not negate the need for review by registrars, who must verify compliance with applicable legal and registration requirements.

For ongoing or planned transactions, parties are advised to review the contractual structure and registration requirements before submitting the instrument to the competent registry office.

Demarest’s Real Estate and Agribusiness teams are available to provide further clarification.