On January 12, 2018, the Federal Attorney's Office filed a Direct Unconstitutionality Action (“ADIN”) against the mayor of the Municipality of São Paulo and the president of the City Council of the Municipality of São Paulo claiming the unconstitutionality of Article 162 of Municipal Law No. 16,402, dated March 22, 2016, of the Municipality of São Paulo (Parceling, Use and Occupation Law of the Soil — "Zoning Law"), stating that it violates the State Constitution of São Paulo and the principle of non-retroactivity. Article 162 of the Zoning Law deals with the issue of "Protocol Right," the application of the law in force at the time when the project application was filed, which ensures legal certainty even if the law was modified during the approval process.

An injunction was granted by the Court of Justice of São Paulo on February 26, 2018, which led to the interruption of the review of all projects submitted before the Zoning Law was enforceable, until the ADIN is finally judged. Please note, however, that such injunction was granted based on a specific issue raised by the Federal Attorney's Office related to the protection of the environment, requiring that real estate development projects in the "ZEPAM" (Special Environmental Protection Areas) have to follow best practices for environmental protection, even if it is later than the date of the protocol.

A balanced environment, which is a right provided in the Brazilian Constitution, must be defended and preserved. However, claiming that the Protocol Right is unconstitutional based on a single situation may be a mistake because the Protocol Right guarantees security for those investing in real estate projects in São Paulo. The grant of the injunction may negatively affect the Real Estate sector, substantially impacting the city’s economy.