Number of Major Constructors Taken to Court in Brazil Grows Over 150%

Brazilian housing built by Tenda As the growth of Brazil’s real estate market continues its rapid pace court statistics recently showed that the number of lawsuits being taken against the country’s major constructors has increased by 159 percent since 2008 (from 202 to 523).

The majority of issues relate to entry delays on pre-construction properties (‘na planta’) with some of Brazil’s prominent developers and incorporation companies coming under the spotlight. 

According to São Paulo based lawyer Marcelo Tapai, the problems truly began to commence when a number of major house building companies went public from 2007 onwards and subsequently lost some focus on transactional and post-sales processes.

MRV – nationally recognized as being prominent in the Minha Casa, Minha Vida (My Home, My Live) low cost housing sector – had 5 cases in September of 2008 which had grown to 70 by the same period this year.  Throughout 2010, the company has been witnessed scaling up their operations in response to rising construction costs. 

Tenda (forming part of the Gafisa group) has seen almost a doubling of lawsuits filed against them (at 196 in September 2010 compared to 95 in September 2008) but have been keen to point out that the number of cases is relatively insignificant when considering the level of their sales activity: in 2010, 26.8 thousand units would have been sold in São Paulo state alone. 

The company has also stated its intention to contest some of the plaintiffs due to the issues arising not as a result of their incompetence but rather via delays of local government authorities.

The news came on the back of reports from the Brazilian Institute of Consumer Study and Defense organization (IBEDEC) earlier this year that the number of complaints they were receiving with regards to pre-construction property had increased. 

The organization compiled a list of potential issues that have emerged and how they can be subsequently dealt with. 

Ruban Selvanayagam is a Brazil real estate and land specialist. For free e-books, state guides, up-to-date statistics, strategies, interviews, articles, weekly broadcasts and more head to the Brazil Real Estate and Land Investment Guide via the following link: http://www.brazilinvestmentguide.com/brazil-property-real-estate-land/

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