Real Estate Investment Funds (FII) are a form of investment that has become increasingly popular among Brazilian investors. They are an alternative for those who want to invest in real estate without having to buy a physical property. But, just like any other type of investment, it is important to understand the legal aspects of Real Estate Funds before investing.

FIIs are governed by CVM Instruction 472, of October 31, 2008, which establishes the rules and conditions for the operation and administration of FIIs. This instruction is an update of CVM Instruction 205, of January 14, 1994, which created FIIs in Brazil.

According to CVM Instruction 472, FIIs are constituted in the form of a closed condominium, that is, the redemption of shares is not allowed. The only way out of the investment is to sell the shares on the stock exchange. In addition, FIIs must be managed by financial institutions authorized by the CVM.

FII resources must be invested in real estate projects, which can be ready-made properties (such as office buildings, shopping malls and logistics warehouses), properties under construction, land for the construction of properties, or even shares in other FIIs. The income of the FIIs comes mainly from the rental of properties, but can also come from the sale of properties or the appreciation of shares.

The FIIs are required to distribute at least 95% of the profits earned, calculated according to the cash basis, to the shareholders, up to the tenth business day of the month following the receipt of funds. This distribution is exempt from Income Tax for individuals, provided that the FII has at least 50 shareholders and that the shareholder benefiting from the exemption does not hold 10% or more of the FII shares.

Another important legal aspect of FIIs is the mandatory disclosure of information. FIIs must prepare and publish monthly management reports, quarterly reports, semi-annual and annual financial statements, and hold annual general meetings to render accounts to shareholders. In addition, any material fact that may affect shareholders must be disclosed immediately.

Investment in FIIs is also subject to the payment of fees, such as the management fee, which remunerates the FII administrator, and the performance fee, which is charged when the FII's yield exceeds a predetermined benchmark. These fees must be explained in the FII regulations and informed to shareholders.

Finally, it is worth remembering that, like any investment, FIIs present risks. The main risk is the market risk, which is the risk of devaluation of shares or a drop in real estate yields. Other risks include liquidity risk, which is the risk of not being able to sell the shares when you want to, and credit risk, which is the risk of default by property tenants.

Therefore, before investing in FIIs, it is important to read the FII regulations, understand the characteristics of the investment, assess the risks involved and, if necessary, seek guidance from an investment professional.

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