Embargoes expose execution and licensing risks in commercial developments

The collapse of a residential building in the Penha neighborhood, in the East Zone of São Paulo, last weekend left at least six people dead and two injured. An investigation has been opened to determine the circumstances that led to the collapse. According to the City of São Paulo, the construction had been subject to fines and stop-work orders since 2021.

The circumstances surrounding the accident are still being investigated amid suspicions of irregularities, raising concerns over technical procedures related to construction permits, embargoes and oversight of project execution.

Embargoes suspend construction work for an indefinite period and are typically imposed when there are violations of regulations, missing documentation or an imminent risk to workers or third parties.

The City of São Paulo notes that “among the most frequent violations are the absence of required documentation at the construction site, the lack of a completion certificate for finished buildings and the execution of renovation work without a permit. If a stop-work order is violated, the Subprefecture refers the case to the local police authority for the opening of an investigation into noncompliance, in addition to other applicable administrative and judicial measures.”

The commercial real estate market has seen developments stalled for a variety of reasons.

Prologis’ development in Cotia, São Paulo, was subject to a court-ordered embargo following a dispute over the project’s impact on the surrounding area. After a series of starts and stops involving the suspension and resumption of construction, the development still has no expected delivery date, amid reports of flooding in the region and mobilization by local residents. The initial argument was that the project had caused environmental impacts through the removal of native vegetation.

Following a series of protective measures ordered by the courts, construction resumed in 2024, just days after being halted, but only for a short period. A December 2025 ruling by the São Paulo State Court, favorable to the National Council for Citizen Defense (CONDEC), ordered the project to remain embargoed until technical studies and solutions were presented to ensure adequate drainage and soil protection and mitigate potential risks. The case remains before the courts, with no expected conclusion date.

REsource contacted Prologis for updates on the case but had not received a response by the time of publication.

In the corporate office sector, one of the most notable examples of a prolonged embargo was Fonseca’s Tower, which remained unused for nearly a decade after completion due to the lack of a Habite-se occupancy certificate, a municipal authorization confirming that the building complies with safety, infrastructure and environmental requirements.

The property owner did not confirm the reason for the delay in obtaining the documentation. However, some hypotheses were raised linking the development’s gross leasable area (GLA) to the maximum construction density allowed in the region, based on data from the São Paulo State Finance Department.

The purpose of the analysis was to understand what may have affected the issuance of the certificate, but no assessment reached a definitive conclusion. The Habite-se was eventually granted in the fourth quarter of 2025.

Mafon Empreendimentos, the building’s owner, was contacted for comment regarding the issuance of the building’s permit, but had not responded by the time this article was published.