The Tenancy Law provides for four ways to guarantee the payment of leasing and other charges established in the contract: Security deposit, guarantee, surety bond and investment quotas. All aim to protect the owner in case of indebtedness by the tenant and forcibly receive the amount not paid by the lessee. Below we will explain each type of guarantee and the risks of requiring more than one type of guarantee.
The surety is exercised through a guarantor, who in case of non-payment of rents will guarantee the debt with his own assets. For this reason, it is not always easy to find someone willing to take responsibility for the lease obligations assumed by the lessee, mainly because the lessor or real estate agent usually requires the guarantor to have a property in the city and another way to prove his financial capacity.
A good alternative to avoid the search for a guarantor is the Surety Bond. In this type of lease guarantee, the lessee hires the services of an insurance company that will be responsible for paying off the debts in case the lessee fails to pay. The annual cost of insurance, on average, is between one and three rentals, and can even be paid in installments, making it comfortable for the lessee and safe for the lessor.
Another widely used option is the Security Deposit, which, according to the Brazilian lease law, can be given for movable or immovable property. The deposit can also be paid in cash, as long as it is not greater than the value of three months of lease, and must also be returned, at the end of the lease, updated with rates used on savings account, or used to deduct any overdue and unpaid lease debts.
Movable goods are those that can be transported easily from one place to another, without deterioration of the good, for example, a car. For Security Deposit for movable property, the law provides that there must be registration at the notary of titles and documents (cartório de títulos e documentos). Real estate refers to everything that cannot be transported without harming its structure, such as a house or industrial machinery. In order to pledge any immovable property, the law provides that it must be registered in the respective registration of the property given as collateral.
Finally, the Brazilian Tenancy Law, in its article 37, also provides for the guarantee of rent for the fiduciary assignment of the investment shares, which, in general terms, means that an investment fund, traded on the stock exchange or not, will guarantee the debts in case of non-payment. In this case, the lessor must notify the lessee to make the payment within 10 days, under penalty of taking the shares.
In order to reduce the risks of the lease for the tenant and for the lease guarantees to effectively protect the lessor from any unpaid dues, it is important that the contract be prepared or reviewed by a lawyer specialized in the field of Real Estate Law, thus observing if the obligations contractual and legal requirements relating to the lease are in accordance with the requested demand.
Can the landlord be arrested for demanding more than one rental guarantee?
Yes. Attempting to guarantee payment of the rent by demanding more than one type of rental guarantee in the same contract constitutes a criminal misdemeanor, punishable by a simple imprisonment of five days to six months or a fine of three to twelve months of the value of the last updated monthly rent, reverted in favor of the lessee.
The lessor’s punishment is provided for in Article 43 of the Brazilian Tenancy Law and also extends to sublease contracts. The same article also protects the tenant from prepayment of rent on properties rented with a lease guarantee, also punishing the lessor with imprisonment or a fine.