STJ defines the effects of the settlement of overdue installments in fiduciary transfers of real estate

The Superior Court of Justice (STJ) has clarified how the regularization of payment defaults in real estate financings secured by fiduciary transfer of property should be treated, particularly following the changes introduced by Law No. 13,465/2017.

The decision was issued under the repetitive appeals procedure (Theme 1,288) and standardizes the interpretation regarding when a debtor may reinstate the contract and when the debtor will only have a right of first refusal to acquire the property. The ruling must be followed by all courts across the country.

What is at stake?

In fiduciary transfer arrangements, the resolvable ownership of the property is transferred to the creditor until the debtor fully repays the debt. If installment payments fall into default, ownership may be consolidated in favor of the creditor.

When payment default occurs, the debtor may cure the default (purge the default) by paying the overdue amounts, thereby regularizing the contract and preventing consolidation of ownership in the creditor’s name.

What did the STJ decide?

The STJ distinguished between two scenarios:

• Situations prior to Law No. 13,465/2017: if the default is cured after the consolidation of ownership, the consolidation must be reversed and the contract reinstated.
• Situations after Law No. 13,465/2017: if ownership is consolidated without the default having been cured, the debtor may no longer reinstate the contract and will only have a right of first refusal to acquire the property at auction, pursuant to Article 27, §2-B of Law No. 9,514/1997.

Which reference date applies?

According to the reporting justice, Justice Ricardo Villas Bôas Cueva, the determining factor is not the date of the contract, but rather:

• the date of consolidation of ownership in favor of the creditor; and

• the date on which the default is cured.

If the default was cured before the entry into force of Law No. 13,465/2017, reinstatement of the contract remains possible, even if ownership had already been consolidated. After the law came into effect, the default must be cured before consolidation, otherwise the debtor will retain only a right of first refusal to purchase the property.

In the case under review, the São Paulo Court of Appeals had allowed the debt to be settled until the moment the property was auctioned. The STJ overturned this decision, holding that after the new law, regularization must occur before consolidation of ownership.

The decision:

• standardizes the interpretation regarding the regularization of payment defaults;

• increases legal certainty in extrajudicial foreclosure procedures; and

• clarifies that, after 2017, once ownership is consolidated, the debtor is limited to exercising the right of first refusal.

In short, following Law No. 13,465/2017, the curing of default must occur before consolidation of ownership. Otherwise, the debtor loses the contract and retains only the right of first refusal.

Our Corporate team closely monitors developments related to Theme 1,288 and remains available to clarify questions and assess the practical implications of this decision for creditors, debtors, and investors in the real estate sector.