By Antonio Carlos C. Mazzucco

In view of the numerous requests for judicial recovery by real estate developers, it is extremely important to carefully examine the regime of the affected assets in real estate developments. This is a regime established by Law 10.931/2004 and its purpose is to guarantee the completion of the development and the delivery of the real estate units to the purchasers.

This is an option, and not an obligation, of the developer whereby the land and the accessions that are the object of the real estate development, as well as the other assets and rights linked to it, will be separated from the developer's assets and will form the so-called Affected Assets. It is a way of prioritizing the realization of the development and subsequent delivery of the real estate units, isolating this asset that cannot be reached by the developer's creditors in the event of financial difficulties.

Likewise, the Asset Allocation regime of a given undertaking is not confused or communicated with the Asset Allocation regime of other undertakings of the same developer, nor with the legal entity of the developer or any other legal entity associated with or related to the developer.

The law is clear that the effects of the bankruptcy or civil insolvency of the incorporator do not affect the assets that have been set aside, and the land, accessories and other assets, credit rights and obligations and charges that are the object of the incorporation are not part of the bankruptcy estate.[1]

The institute was also addressed in the bankruptcy and corporate recovery law itself.[2] According to this law, in the event of the incorporator's bankruptcy, the Affected Assets will comply with the provisions of the respective legislation and will remain separate from the bankrupt's assets until the respective term expires or until their purpose is fulfilled, at which time the judicial administrator will collect the balance in favor of the bankrupt estate or register in the appropriate class the credit that remains against it.[3]

The 2nd Chamber Reserved for Business Law of the Court of Justice of São Paulo, upon examining the substantial consolidation proposed by the developer Viver, which included projects with Affected Assets, decided to exclude these projects from the judicial recovery. In a subsequent decision, it was determined that these projects would need individual recovery plans, and that their debts and respective creditors could not be consolidated with the other debts and other creditors of the group.

Recently, in the judicial recovery of PDG, the judicial administrator endorsed, with reservations, the proposal of the recovering company to maintain, in the judicial recovery process, all real estate projects that have earmarked assets, presenting individual plans for each of them. In the face of negotiations with creditors, PDG chose to exclude all Earmarked Assets from the judicial recovery, thus hindering the discussion of the issue. The discussion, therefore, both from a legal and economic point of view, concerns the existence or not of an impediment to using the remedy of judicial recovery for projects with Earmarked Assets. The solution seems to be moving towards accepting such a remedy as long as there is segregation of assets, lists of creditors and plans of sale.

[1] Law 10.931/2004, Art. 31-F.

[2] Law 11.101/2005.

[3] Law 11,101, Art. 119, IX.