Laudêmio: the ‘prince tax’ in Petrópolis
Fair or not, collection originates from a private law relationship and cannot be confused with taxes
The regrettable tragedy that occurred in Petrópolis (RJ) last week has drawn attention to the collection of laudêmio, referred to by the press as “the prince’s tax”, which is reverted to the “imperial family”. Here it is worth drawing some lines about the legal institute behind it.
Despite not existing as an “imperial family” for Brazilian law since the proclamation of the Republic in 1889, the descendants of Dom Pedro II are shareholders and directors of Companhia Imobiliária de Petrópolis, which is the effective owner of part of the properties located in Petrópolis, with the useful domain being handed over to the owners of the properties by the legal institute of emphyteusis.
In other words, the owners of the properties (contractors or renters) can act as owners – they can use, enjoy and dispose of the assets – being, however, subject to two limitations: the annual payment of the forum (in addition to the cost of property taxes of the property: IPTU or ITR); and the payment of the laudemium for each transfer of the useful domain (in addition to the cost of transfer taxes levied: ITBI or ITCMD).
The emphyteusis was not maintained in the Civil Code of 2002, and the constitution of new or sub-emphyteusis was prohibited (art. 2038), but it remains valid for those assets that were already in this situation, being disciplined by the Civil Code of 1916, whose article 679 provides that the “emphyteusis contract is perpetual”.
Among the provisions on the emphyteusis, there is the right of preference for the acquisition of the useful domain by the owners, in equal price and conditions. If it is not exercised within 30 days, the leaseholder can transfer it to third parties, and must pay a 2.5% laudémium, if no other amount has been stipulated in the contract for the constitution of the useful domain.
According to the balance sheets of Companhia Imobiliária de Petrópolis, annual revenue for 2019 and 2020 was around BRL 5 million, of which around BRL 4.8 million comes from the operational area. The company does not disclose in detail the revenue from laudémio or even from the annual forum.
It should be clarified that calling laudêmio the “prince tax” is imprecise: these amounts do not have a tax character, since their origin is a contractual relationship, of private law. Its destination is for the company that owns the properties and not for the public administration. Although, in the case of Companhia Imobiliária de Petrópolis, its shareholders are descendants of former holders of power in Brazil, this value cannot be confused with taxes of any kind.
In the same way, demanding that such resources be applied in urban improvements, such as the prevention of floods and landslides, does not seem to be related to the private nature of this money, whose destination must be decided by the company’s management.
With this, it is clear that the existing legal model in Petrópolis is legal. However, the questions remain: is the collection of these amounts fair? Should it stay?
The properties located in the area of the former Imperial Farm are owned by Companhia Imobiliária de Petrópolis, whose corporate purpose is the exploitation of assets and rights in rem. The emphyteusis is constituted on such properties, which, as explained, gives rise to annual and laudémium payments.
Therefore, it is a matter of private property, governed by Civil Law.
Private property is protected by the Federal Constitution, as a fundamental right of man, in its article 5, item XXII. Item XXIII provides that the property must respect its social function, that is, in general terms, it must have a rational and adequate use, with adequate use of available natural resources and preservation of the environment, and, being urban, it must meet the fundamental requirements for ordering cities expressed in its master plan.
Disrespect for the social function of property can generate sanctions, including expropriation of the property. The way in which the properties in Petrópolis have been used — via transfer of useful domain — allows the properties to be properly used, eliminating the possibility of non-fulfillment of their social function.
When looking for a property located in this region, the interested party must have access to information regarding the useful domain, acquiring the property aware of the current legal regime and the costs involved, being free to decide whether or not to purchase the property.
With that, based on the current legal system, respecting fundamental rights and the principle of economic freedom, I believe it is a legitimate form of exploitation of private property, albeit quite costly for the holders of the useful domain.
The Civil Code of 2002 could have brought a transition rule that allowed the gradual replacement of emphyteusis by the use of business models more consistent with the present day, instead of perpetuating the validity of an institute that, long ago, had fallen into disuse. .
This is not a privilege of the “imperial family”: it is worth remembering that there is emphyteusis over public lands belonging to the Union — the so-called “marine lands”. According to Decree-Law 3438/41, “these are navy lands, at a depth of 33 meters, measured for the land part, from the point where the 1831 average high tide line passed: a) those located on the mainland, on the coast and on the banks of rivers and lakes, as far as the influence of the tides is felt; b) those around islands located in an area where the influence of the tides is felt.”
Without going into the point regarding the alterations suffered in this line of the medium high tide from 1831 to the present day, we have that many coastal properties are located on marine land and subject to the same payments: annual fee and laudémium in transmissions.
Fair or not, they are institutes that exist in our legal system and are widely used.