How Will Bitcoin Affect Real Estate?
Antonio Ricardo, an expert in real estate in Brazil, speaks on how the market is progressing:
“With legal safety and proper structure of the business, there are few chances of losing money in the real estate market in Brazil.”
With cryptocurrencies being all the rave, he touches on how Bitcoin will affect the real estate market and how the decline in 2017 sales will shape 2018.
The real estate sales are reported to have declined in 2017, what do you think accounts towards this and how has it affected your clients?
In 2017, the sales in the Real Estate market remained with numbers close to those of 2016, that is, with a market still in crisis. As an example, it is sufficient to remember that the unilateral cancellation, by waiver of the purchaser, of business in 2017 corresponded to 50.9% of all sales in the same period. Thus, with no new releases and with breach of the previous contracts, the market went through a serious crisis of liquidity in 2017, with strong reduction of cash flow and a significant increase of its inventories.
Such situation led us to two important conditions. One of them was, for sure, the re-adequacy of our prices so that they would continue compatible with the economical-financial time of our clients. And, of course, we carried out a strict revision of the contingency analyses for implementation of tools to avoid the outcome of the judicial cases at times of little liquidity of our clients; after all, the predictability of the good or poor results is the word every office needs to deeply understand in order to provide an efficient and effective service.
There are a few doubts that 2018 will be a year of great recovery and we will experience, at least, a decade of positive business with numbers strongly interesting that were always present in the Real Estate market.
What advice would you give to the clients interested in investing in the real estate sector in the current climate?
Five or six years ago it was possible – and common – to make real estate releases or make decisions of investment in the market based on less strict premises, without great validity tests; it is not possible anymore, even because it was checked that great projects on paper were, in practice, business of no feasibility in the real business world.
Unfortunately, within the next years, the decision of investment may not fail to consider the political, economical, and judicial risks, which vary, by reason of the size of the country and the federative organisation system, from state to state.
It is essential to serve the legal system of protection and defence of the Consumer in Brazil, even more when it is known that the low income market is with greater warm-up, since that, even when all technical studies are correct, it may not be ignored the influence of the Judiciary Branch in the regulation of the contracts, to the contrary of other countries where the freedom to contract is wider and less supervised by the State.
How do you think Bitcoin will affect the real estate market in Brazil within the next years?
Some real estate companies have already started to accept bitcoins for payment of part of the price. And I believe it is an irreversible trend, unless the price fluctuations lead the players to become more careful, remembering that the real estate market is, in its essence, traditional and less resistant to risks.
Since the original concept of the Bitcoin being the creation of a monetary reserve and not a currency of wide circulation, I believe that in the next five years we will not notice any relevant addition of sales due to the use of the bitcoin, even more because, recently, our regulatory body – Comissão de Valores Mobiliários (CVM), similar to SEC – issued discouraging considerations of such investment.
As the real estate market needs great liquidity and, in the case of the corporations, they may not remain with the Bitcoins and need to convert them into currency, it may be, in addition to the intervention of the regulatory bodies, one more obstacle to the expansion of the use of the cryptocurrencies in the real estate market.
It is especially true because, upon lending money to the production of real estate properties, the banks assume the “collateral” or “management and control” of the receivables of each sale, reason why they will establish, in such cases, entrance barriers, unless regarding the limits of the price to the use of the cryptocurrencies.
The real estate incorporation is a complex legal system of contractual relationships that fit and harmonise since the purchase of the land, going through the obtainment of the bank funding for the construction and ending at the delivery of the keys. When all such productive cases are interconnected, by the use or acceptance of the Bitcoin, the Real Estate market may see cryptocurrencies as an important field of use.
As professor of Faculdade de Magistratura of Rio de Janeiro State, what do you think are the most important questions the candidates to lawyers shall be aware of?
Law has changed very fast in the last decade. It is essential that the new professional knows that, increasingly, clients require from lawyer’s knowledge of the business that goes beyond the legal spectrum, highlighting that it is needed to understand the operation of the real estate industry to, in fact, be an aggregating agent of innovative and effective solutions.
The young lawyer needs to understand that, in the real estate market, the role shall predominantly be of an enabling agent of business and not only of a writer of contracts and documents or of a professional of disputes.
He/she does not make only a contract anymore; he/she needs to do business.
For such, the lawyer shall also be an agent forming strategic partnerships, able to prevent problems and find future solutions, even more that Brazil has a complex legal and licensing system, in addition to a set of rules and decisions that take into account excessive rights transmitted to the consumers, including removing rules contracted in detriment to the economical-financial balance of the system.
Upon submitting to strategic disputes during the real estate business, what are the three main things you have to approach to guarantee the best to your client?
Understand what the real expectancy of result thereof was before the start of the business, identify the political-strategical condition of the other party and, third, have accurate information on the results of demands similar or like those will lead.
It is the planning phase to a strategic dispute.
Understand what he/she would want with the business serves to explain to the client the possible results in that dispute, and how such results may meet his/her expectations.
In Brazil, the disputes involving commercial contracts have different solutions when the parties of the dispute have a differentiated political, economical, or strategical presence, and it naturally occurs as a result of the practical – and even involuntary – application of such factors.
When you know the other party in all such aspects, you may dedicate more attention to the rules of contractual compliance, or establish the proper strategy in the dispute.
Finally, although we do not have a justice of precedents, it is a fact that the volume of judicial disputes leads the Judges to create a base of decision criteria and it needs to be very well known by the law office to guarantee maximum performance in the defence of its clients.
Antonio Ricardo Corrêa
Avenida Rio Branco, 131 – 13o andar – Centro – Rio de Janeiro – RJ
antonioricardo@ebiondiadvogados.com.br
55 21 22627979
55 21 999758500
I am a lawyer graduated for 30 years. Since 1994, my actuation has developed for companies in the Real Estate market, having exercised positions of Legal Board between 1996 and 2011. From 2011, I undertook the position of CEO of a reputable law office and, from 2013, I created Eduardo Biondi, Antonio Ricardo Corrêa Advogados Associados, where I am CEO of the office, exclusively intended to the Real Estate market, including judicial disputes, mediation, structuring of business, and institutional representation before the Judiciary Branch.
Eduardo Biondi Advogados Associados is a law firm specialising in the civil area, especially in the business, contractual, real estate, administrative, consumer, supplier defense, real estate development and legal structuring of developments, being composed of a specifically trained and qualified legal body to operate effectively in these areas.
