On December 15, 2020, the Brazilian Senate approved Bill of Law No. 2,963/2019 (“Bill 2963”), which will enact new rules on rural land acquisition by foreigners. The text will now go to the House of Representatives, where new debates will take place before the matter can be put up for voting.
In opposition to the current regulation of Law No. 5,709/1971, Bill 2,963 seeks to lift restrictions currently in force on Brazilian legal entities incorporated or controlled by foreign entities or individuals for the acquisition and possession of rural land, as a rule. Only exceptionally and in the cases stipulated in the legislation will prior authorization to be issued by the National Defense Council be required for the direct or indirect acquisition involving: (i) certain types of foreign non-governmental organizations, to be defined by law; (ii) foreign sovereign funds; (iii) private foundations incorporated by foreigners; and (iv) real estate located in the Amazon by Brazilian legal entities incorporated or controlled by foreign entities or individuals.
In addition to this measure, Bill 2,963 intends to validate acquisitions and leases already perfected under the effectiveness of Law No. 5,709/1971, which would be repealed if Bill 2,963 is enacted, provided that Brazilian legal entities incorporated or controlled by foreign entities or individuals will remain required to provide necessary information to the competent authorities.
It is worth noting that Bill 2,963 would maintain a territorial limitation as to the amount of land in each municipality that may be acquired by foreigners –which will be construed as less in relation to the current roll – adding to the current challenge for the real estate registry officers of maintaining a database that allows for this verification.
Finally, an important matter that Bill 2,963 seeks to govern: the constitution of collaterals over rural land. In line with the direction indicated by art. 51 of Law No. 13,986/2020, Bill 2,963, if passed, would allow that foreigners receive fiduciary property of rural land when enforcing such collaterals, provided that they are sold within 2 years.
Demarest’s Agribusiness and Real Estate teams are at your disposal for further clarification.