What is a trust divestiture? How it works, advantages and risks
According to Datafilha Institute, 87% of Brazilians dream about Own house. A fiduciary alienation appears, then, as a facilitator of this dream: a possibility of bank financing in which the property is considered as a guarantee of payment to the creditor.
Over time, trust divestiture became one of the main instruments of credit operations, encompassing financing of real estate, vehicles and loans in general.
But what, in fact, is trust alienation and how does this type of financing work? In this article, we will explore the risks and advantages of trust divestiture, as well as its differences from other types of security.
What is a trust divestiture?
To understand what trust alienation means, it is necessary to first unravel the term. “Alienate” comes from transference, or “transfer to someone”, while “trust” means “trust”. Thus, fiduciary alienation means “to transfer something with trust”.
Briefly, trust alienation is a form of loan in which the trusting debtor transfers to the trustee creditor, as security, the ownership of a property or fungible movable property (those that have unique characteristics and can be individualized).
In practice, the debtor continues to have direct possession of the asset, enjoying it, while the trustee creditor is the owner of the property, also having a real right to guarantee the asset.
By paying off the debt, the trusting debtor finally acquires ownership of the asset. Because of this, the trustee's property is resolvable, that is, temporary. In the event of default, however, the trustee creditor has the right to take possession of the asset directly from the debtor and make the sale to enforce the guarantee.
It is important to clarify that, by law, the clause in the contract concluded between the trusting debtor and the trustee creditor authorizing the creditor to keep the alienated asset as security is void if the debt is not paid on due date. However, if the debtor wishes, of his free and spontaneous will, he can give the property to the creditor to pay off the debt between them.
In Brazil, the modalities of fiduciary disposal are regulated by law and are provided for in the Civil Code. While Law 9,514 of 1997, with the modifications introduced in Law 10,931 of 2004, regulates the trust sale of immovable property, Decree-Law No. 911 of 1969 establishes the rules of procedure for the trust sale of movable property.
How does trust divestiture work?
On a daily basis, trust divestiture is commonly applied to vehicle and real estate financing, for example. Although each of them has specific and different rules, here is an example of how they work on a daily basis, in relation to the trust sale of movable property.
Suppose you want to buy a car but you don't have the financial resources to pay for it in cash. In this case, you can use financing offered by a financial institution. When opting for trust disposal, the car you are acquiring is given as security to the creditor (the financial institution).
The process takes place as follows: the vehicle will be registered in your name, but with a trust disposition clause in favor of the creditor. This means that you will be the “trustee” (debtor) and the creditor will be the “trustee”.
During the funding period, you will be responsible for paying the agreed installments. When you pay off the loan in full, the ownership of the car is permanently transferred to your name, and the trust alienation is extinguished.
However, if the debtor fails to fulfill its payment obligations, the financial institution will have the right to take the vehicle to pay off the debt, through a “search and seizure” action. To do this, you must prove the default and default. The financial institution must sell the vehicle to recover the amount borrowed plus collection expenses.
If there is a positive balance after payment of the debt, it is given to the debtor. But note, if the trustee debtor pays the full amount of the outstanding debt, he can recover the asset free of any burden.
It should be noted that the rules and procedures related to the divestiture of trustees vary according to the asset given as collateral, whether immovable or movable. Therefore, it is always recommended to seek more specific information on the matter from a specialist lawyer and financial institutions.
What are the differences between trust alienation and other guarantees?
Fiduciary disposal presents some peculiarities compared to other forms of security, such as the mortgage, as a rule, in the case of immovable property and the pledge, generally in the case of movable property.
In a mortgage, for example, immovable property is also given as security, but the debtor keeps both ownership and possession of the property. If you do not pay the debt within the agreed period, the creditor may legally request the sale of the asset given as security to pay off your credit. In addition, in a mortgage, it is possible that the same asset is given as security to two or more different creditors, that is, the same asset can hold several mortgages.
The common conventional pledge, on the other hand, refers to a security in which a movable asset (jewelry, securities, electronic equipment, for example) is given to a creditor as security, with the debtor losing possession of the property until the debt is repaid. Unlike a pledge, a trust transfer is more commonly used to secure debts related to the acquisition of durable assets, such as vehicles and real estate.
Another difference between the divestiture of trust and other guarantees is in what happens in the event of default. Fiduciary alienation allows the creditor to take direct possession of the alienated asset, with sufficient notification of the debtor, as provided by law.
In other guarantees, such as mortgages, judicial intervention is necessary so that the creditor can enforce the guarantee and take possession of the asset.
5 advantages of trust divestiture
Because they have a stronger guarantee, since the alienated asset is a guarantee for the payment of the debt, creditors usually offer several advantages for carrying out the financing through the sale of trustees. Get to know some of them:
Access to credit with lower interest rates
Because of the guarantee offered, the trust transfer allows the debtor to have access to credit with lower interest rates compared to other types of loans or financing. This makes this option more attractive to the debtor.
Agility in obtaining credit
Fiduciary disposal simplifies the process of obtaining credit, making it more agile and less bureaucratic. This occurs because the lender has greater security regarding the receipt of the amount borrowed due to the guarantee offered in exchange for the loan.
Flexibility for the debtor
By using the trust transfer as security, the debtor maintains possession and use of the alienated asset during the debt repayment period. This provides greater flexibility and convenience to the debtor, who can continue to use the asset while paying off the debt.
Lower input value
In some cases, the trust divestiture allows the debtor to finance a larger percentage of the asset's value, thus reducing the down payment required for the acquisition. This can facilitate access to higher-value properties or vehicles.
Longer payment period
Also due to the guarantee offered by the asset, trust financing tends to allow longer terms for high-value assets. With extended terms, the debtor has the opportunity to dilute the full amount of the debt over a longer period, making payment more feasible.
However, it is important to bear in mind that longer terms may also mean the payment of a larger total amount over time, due to the incidence of interest. Therefore, remember to analyze the conditions offered by the lender, including interest rates and Total Effective Cost (CET), to assess whether the longer term is truly advantageous for your specific case.
But what are your risks?
One of the significant risks of trust disposal is precisely the factor that makes this modality economically advantageous for the debtor: the fact that the asset sold as a guarantee of payment does not belong to the debtor, but to the creditor.
This implies that, in the event that the debtor faces difficulties to fulfill their financial obligations, the creditor has the right to sell the asset to pay off the rest of the debt. This situation puts the debtor at risk of permanently losing the asset if they are unable to honor their financial commitments.
In addition, during the period in which the asset is disposed of in trust, the debtor may have restrictions regarding the use and sale of the same. Depending on the contract and the applicable regulations, it may be necessary to obtain authorization from the creditor for certain actions related to the asset.
Fiduciary disposal contracts
The trust sale agreement is the legal instrument that formalizes the transfer of ownership of a fungible movable property or immovable property given as security to the creditor of a debt. This instrument must observe characteristics and requirements that are essential to its validity, efficacy and for it to produce effects before third parties:
I - Object of the contract
The object of the trust sale agreement must be a fungible movable or immovable property, duly identified and individualized, which will be transferred by the debtor to the creditor, as a guarantee of the obligation assumed.
II - Registration
The trust sale agreement, in order to take effect with third parties, must be registered with the competent Registry Office, which may be a Real Estate Registry Office or a Title and Document Registry Office, depending on the subject of the contract in question, or, in the case of a trust sale of vehicles, with the competent office for registration and licensing. The registration makes it possible to publicize the legal transaction and guarantees that interested third parties can obtain knowledge of the existence of the guarantee of the asset in question.
III - Mandatory clauses
The trust sale agreement, in general terms, must provide for: (i) the total amount of the debt; (ii) the payment term and terms; (iii) the interest rate and charges levied; (iv) the penalties in the event of a default on the debt; and (v) the conditions and procedures for the possible extrajudicial execution of the asset given as security.
IV - Consent of the parties
The formalization of the trust sale agreement, as well as all legal transactions concluded through a contract, must demonstrate the free declaration of willingness of the parties to agree with the conditions set out in the instrument. In order for the consent of the parties to be duly evidenced, the technology of digital signature, which, in addition to being secure and agile, is legally valid and can be used to register trust sale contracts.
However, it is worth mentioning that Brazilian legislation requires certain types of digital signature in specific situations.
In the case of the registration of the trust sale of property motionless, which requires registration with the competent Land Registry Office, the contracting parties may use electronic signatures Qualified or Advanced, depending on the real estate transaction carried out. See more details in this article.
On the other hand, in the case of the formalization and registration of the trust sale of assets moveable, Brazilian legislation does not provide specific requirements for the use of electronic signatures. Therefore, the parties may use any type of digital signature.
As a pioneer in the electronic document signature market in Brazil, Clicksign combines technology, speed and security to allow the electronic signature of documents from any device with internet access. With legal validity, provides its users with the possibility of carrying out any type of digital signature on any document through its platform.
