Property going to auction in Brazil: what can still be done

If your property in Brazil is going to auction, the first step is to find out which kind of auction it is: the bank’s auction, for a financed property, or a court auction, in a debt collection lawsuit. Each has its own rules and deadlines, and in many cases there is still something that can be done before the auction date. For a financed property, for example, the law allows the overdue installments to be paid and the contract kept until ownership is consolidated in the bank’s name and, after that, guarantees the right to buy the property back until the second auction (Brazilian Law 9.514/1997, arts. 26-A and 27).

The bank’s auction or a court auction?

The bank’s auction: happens with a property bought through financing in which the property itself was given as collateral, what the contract calls a fiduciary lien (alienação fiduciária). Collection is handled by the real estate registry office, without a judge.
A court auction: happens with a property seized in a collection lawsuit, such as a debt with a bank, condominium fees, IPTU property tax, other taxes or a court judgment. The judge sets the auction.

To know which applies to you, look at who sent the notice. A letter from the registry office asking for payment within 15 days points to the bank’s auction; a notice with a case number points to a court auction. The property’s updated registration certificate (certidão de matrícula), requested at the registry office, shows both situations.

Financed property: the steps before the auction

Notice to pay. With overdue installments, the registry office notifies the borrower to pay, within 15 days, the overdue installments, interest, charges and expenses (Law 9.514/1997, art. 26, §1). Once paid, the contract continues.
Consolidation of ownership. Without payment, the registry records the property in the bank’s name (art. 26, §7). When the financing was for buying or building the home the person lives in, this record only happens 30 days after the deadline ends, and until then it is still possible to pay the overdue installments and expenses and keep the contract (art. 26-A, §§1 and 2).
The two auctions. The bank holds the first auction within 60 days of the consolidation. If nobody offers at least the property’s value, a second auction takes place within the following 15 days (art. 27, caput and §1). The dates, times and places must be sent to the borrower by mail to the addresses in the contract, including the email address (art. 27, §2-A).
Right to buy it back. After consolidation and until the second auction, the former owner has priority to buy the property for the amount of the debt plus expenses, charges, taxes and the property transfer tax (art. 27, §2-B).
If nobody buys at the second auction. For financing of one’s own home, if the second auction has no bid of at least the debt plus expenses, the debt is considered extinguished, with a full release for both sides (art. 26-A, §§3 and 4). In other financing with this type of collateral, the bank may accept a bid of at least half the appraised value (art. 27, §2).

Court auctions

Advance notice. The debtor must be notified of the auction at least 5 days in advance (Brazilian Code of Civil Procedure, art. 889, I).
Unreasonably low price. A bid below the minimum price set by the judge in the notice, or, if none was set, below 50% of the appraised value, is not accepted (art. 891).
Paying the debt beforehand. Until the property is sold at auction, the debtor may pay the updated debt, with interest, court costs and attorney’s fees, and end the collection (art. 826).
After the auction. A sale made at an unreasonably low price or with another defect can be challenged within 10 days (art. 903, §§1 and 2).
The family home. As a rule, the home where the family lives cannot be seized (Law 8.009/1990). The exceptions include the debt from financing that same home, IPTU and fees on the property, child or spousal support, and a mortgage given by the couple as collateral (art. 3).

What to do now

Find out which auction it is: read the letter or the notice and request the property’s updated registration certificate.
Write down the dates: of the notice, of the consolidation (shown in the registration) and of each auction.
Keep the contract, the receipts for the installments paid and every letter from the bank, the registry office or the lawsuit.
Check the address and email in the contract: that is where the auction notices are sent.

Each case depends on the type of auction, the dates and how the notices were given. See how defense in enforcement proceedings and auctions works.

Sources

This text is for information only and does not replace a lawyer's review of your case. The rules cited are Brazilian law as of the article's last update.