Adverse Possession of Property with a Smaller Area on Land with a Larger IPTU Area: How to Achieve Regularization

Adverse possession is a legal concept provided by the Brazilian Civil Code that allows a good-faith possessor to become the legitimate owner of a property after occupying it for a specified period. In many situations, this acquisition may involve areas where the IPTU is registered for a larger piece of land, but the actual possession of the property is of a smaller area. This situation creates several issues, especially regarding IPTU regularization and how past tax debts are handled.
In this article, we will discuss the step-by-step process for adverse possession of a smaller area within a larger plot of land, including IPTU regularization, the issue of tax debts, and the correct order of procedures, all based on Brazilian legislation and case law.

1. What is Adverse Possession?

Adverse possession is a legal institution provided for in the Civil Code, Articles 1.238 to 1.244, that guarantees the acquisition of ownership after prolonged and peaceful possession of a property, without contestation from the original owner. The possession must be peaceful, continuous, and with the intention of ownership. For adverse possession, it is necessary to meet requirements such as the period of possession (which varies from 5 to 15 years, depending on the type of adverse possession), and there must be no opposition from the former owner.

Requirements for Adverse Possession:

• Continuous and peaceful possession: The person must occupy the property for a set period without interruptions or contestation.

• Possession with intent to own: The possessor must treat the property as if it were their own, with the intention of being recognized as the owner.

• Time period: The number of years required for adverse possession can vary from 5 to 15 years, depending on the type of adverse possession (ordinary, extraordinary, special urban, or rural).

2. The Issue of IPTU with a Larger Area and Regularization

In many cases, the property is registered in the IPTU as having a larger area, but the possessor actually occupies only a part of that land. This may happen when constructions are divided among several people or when the actual possession does not correspond exactly to the area registered in the tax register. Regularizing the area to reflect the actual possession is a crucial step, but there is a correct process to follow.

First: Judicial Action for Adverse Possession

The first step is to file a judicial action for adverse possession. IPTU regularization must occur after the judicial recognition of possession. The adverse possession action will grant the possessor the right to be recognized as the legitimate owner of the occupied area, even if the IPTU registers a larger area.

The procedure involves initiating a legal action, where proof must be provided that the area in question has been occupied continuously and without contestation for the legally required period. Only with a favorable judicial sentence, recognizing the possessor's right to ownership, will it be possible to proceed with IPTU regularization.

After Adverse Possession: IPTU Regularization

Once the judicial sentence for adverse possession has been issued, the next step is to update the IPTU. The local municipality must be notified to alter the property record to reflect the area actually occupied, and not the originally registered larger area.

3. IPTU with Debts from Previous Years: What Happens?

In many cases, the larger area registered in the IPTU may have accumulated debts over many years, especially if the property was never regularized or if tax payments were neglected. The question that arises is: when the IPTU for the smaller area is opened, will the debt from previous years related to the larger area be transferred to the new record?

According to the National Tax Code (CTN), Article 138 establishes that IPTU debts will not be transferred to the new property if the original area, to which the debt was linked, is subdivided. Article 138, §2 of the CTN further states that, in the case of property subdivision, the debt will not follow the newly subdivided area, meaning it will not be transferred to the smaller area.

The Law and Practice of IPTU Subdivision

This subdivision of the IPTU implies that the accumulated debt related to the larger area will not be included in the new record for the smaller area. However, the regularization of the property and the new record with the municipality will only occur after the recognition of possession through adverse possession. In other words, the possessor of the smaller area will have the right not to assume the previous debt after IPTU regularization, but only after obtaining the judicial sentence for adverse possession.

4. Case Law and Practical Cases

There are several rulings that illustrate how Brazilian courts have treated situations where there is a difference between the area registered in the IPTU and the area actually occupied.

In a recognition of adverse possession case, the Superior Court of Justice (STJ), in REsp 1.493.147/SP (2015), decided that the area actually occupied should be the criterion for acquiring ownership, not the area registered in the IPTU. In this ruling, the STJ reaffirmed that land division and possession recognition should take precedence over what is administratively registered, provided the possession is continuous and uncontested.

Similarly, the São Paulo Court of Justice (TJSP), in Appeal No. 1003913-90.2016.8.26.0100 (2017), addressed a similar case, recognizing the right to adverse possession of a smaller area within a larger plot of land. The court also concluded that, after adverse possession, the IPTU debt related to the larger area could not be charged on the smaller area, as the debt was tied to the original property, which would be subdivided.

5. Final Considerations

The process of adverse possession of a smaller area within a property with an IPTU for a larger area involves several legal steps, with the judicial action for adverse possession being essential for recognizing possession and acquiring ownership. After this favorable judicial sentence, the possessor can request IPTU regularization, correcting the property record to reflect the actual area used, without transferring the accumulated debt from the larger area.

It is important to highlight that the National Tax Code (CTN) and case law ensure that, in the case of land subdivision, the debt related to the larger area will not be transferred to the smaller area, providing protection for the possessor of the occupied area.

This process, although simple in concept, requires careful attention to legal and judicial details to ensure the property regularization is done correctly and securely. Therefore, it is always advisable to seek guidance from a specialized lawyer who can assist throughout the process.

This article was written by Luana M. Arakaki, OAB SP 521.085, partner at Arakaki & Gargamala Law Firm.

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** This article refers specifically to the legal concept of "usucapião" under Brazilian law. While "adverse possession" is a similar concept in many legal systems, the requirements, procedures, and timeframes may differ in other jurisdictions. Please consult a legal professional for advice tailored to your specific location.