Brazil Counsel

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Buying a Condo Under Development is Fraught with Risk

More and more, American investors are buying properties under development in Brazil. Florianópolis is a big hit with foreigners who are enticed with pictures of condos overlooking the ocean. But unlike a traditional sale and purchase transaction, investing in a project that’s still under construction is fraught with risk.

In a traditional real estate transaction, the buyer pays the purchase price and the seller delivers title to the property. It’s relatively straightforward (or should be). But developers are now seeking ways to lock in buyers with, in some cases, little in return. Remember, you won’t get the deed until after the condo is built.

If you’re asked to sign a contract for a property that’s still being developed, check your payment schedule versus the delivery schedule. Odds are there’ll be a list of dates by which you must make payments. The delivery schedule for the unit, however, will likely be missing.

Even if there’s a delivery schedule and other seller obligations in the contract, you’ll still want to consider the practical consequences of enforcing the contract in the case of a breach. If the developer fails to perform, are you going to spend additional money litigating the dispute in Brazil? Are you willing to wait years for the trial?

While a brand new condo with water views might sound great today, it could easily turn into a real headache. If you’re still thinking about it, at the very least, consider hiring legal counsel to review the contract before you sign it.