Paying a developer in installments in Peru: what must the contract say?

When the developer is also your lender

Many developers in Peru let you pay the price in installments directly to them, with no bank involved. Ley 29571, the consumer protection code, treats that case separately. Article 77.3 says:

“77.3 Cuando el financiamiento del precio de venta o parte de este sea ofrecido directamente por el proveedor, debe informar previa y detalladamente e incorporar en una hoja resumen con la firma del proveedor y del cliente lo siguiente: […]”

(When the seller itself offers financing for all or part of the price, it must inform you in advance and in detail, and include the following in a summary sheet signed by the seller and the customer.)

Three things matter. The information must come before you commit. It must be detailed. And it must be in a summary sheet (hoja resumen) signed by the developer and by you.

If a bank lends you the money, the rule changes. Article 77.4 says the bank sets out the terms (“es esta la que detalla las condiciones”), under Ley 29571 and SBS rules. The general documents a developer owes you are covered in what documents a developer must give you when you buy off-plan.

What the summary sheet must say

Article 77.3 lists seven items:

Item d is the most useful. It forces one number showing what you will pay in total, next to the cash price.

On top of this, article 78.1 requires the sale contract itself to state the “precio de venta del inmueble ofertado” (sale price) and the “forma de pago y plazo” (method of payment and term).

You can pay early, without a penalty

Article 77.3(e) gives you:

“El derecho de efectuar el pago anticipado o prepago de los saldos, en forma total o parcial, con la consiguiente reducción de los intereses compensatorios generados al día de pago […] sin que les sean aplicables penalidades de algún tipo o cobros de naturaleza o efecto similar.”

(The right to prepay the balance, in full or in part, with the resulting reduction of compensatory interest as of the payment date, without penalties of any kind or charges with a similar effect.)

If you pay ahead or clear the balance, you stop paying compensatory interest that has not yet accrued. A clause charging you for prepaying runs against this item.

Interest: what the Civil Code says

The Civil Code separates two kinds of interest (article 1242):

“El interés es compensatorio cuando constituye la contraprestación por el uso del dinero o de cualquier otro bien. Es moratorio cuanto tiene por finalidad indemnizar la mora en el pago.”

(Interest is compensatory when it is the price for using money or another asset. It is default interest when its purpose is to compensate for late payment.)

Compensatory interest is the cost of paying over time. Default interest (interés moratorio) is what you are charged for being late. The key rules:

• There is a cap. Article 1243 says the maximum agreed rate, compensatory or default, “es fijada por el Banco Central de Reserva del Perú. Cualquier exceso sobre la tasa máxima da lugar a la devolución o a la imputación al capital, a voluntad del deudor” (is set by the central bank; any excess is refunded or applied to the principal, as the debtor chooses). You pick which.
• No agreed rate means the legal rate. If interest is owed and no rate was set, the legal rate applies (article 1245).
• No agreed default interest means none is invented. If the contract has no default interest, lateness only costs you the agreed compensatory interest or, if there is none, the legal rate (article 1246).
• Interest on interest. Article 1249 bars agreeing to compound interest when the debt is taken on, “salvo que se trate de cuentas mercantiles, bancarias o similares” (except for commercial, bank or similar accounts). Article 1250 only allows it later, in writing, and “siempre que medie no menos de un año de atraso en el pago de los intereses” (with at least one year of unpaid interest). The rule does not say whether developer financing falls within the exception. Our reading is that it is not a bank account, but the point is not settled.

We do not give the current maximum rate here because we did not read the current BCRP circular. How those caps work is explained in TCEA and the legal maximum interest rate.

The payment schedule and what happens if you fall behind

Article 77.3(c) requires you to know the number of installments, how often you pay and on which dates. Check that schedule against the total in item d.

For late payment, the Civil Code has a general rule for installment sales. Article 1561 says:

“Cuando el precio debe pagarse por armadas en diversos plazos, si el comprador deja de pagar tres de ellas, sucesivas o no, el vendedor puede pedir la resolución del contrato o exigir al deudor el inmediato pago del saldo, dándose por vencidas las cuotas que estuvieren pendientes.”

(When the price is paid in installments, if the buyer misses three of them, consecutive or not, the seller can ask for the contract to be cancelled or demand immediate payment of the balance, with all pending installments falling due.)

Two points to watch:

• A limit can be agreed. Article 1562 allows the parties to agree that once you have paid “determinada parte del precio” (a set part of the price), the seller loses the right to cancel and can only claim the balance. Look for that clause; it protects you if you have already paid a lot.
• If the sale is cancelled, you get your payments back, minus deductions. Article 1563 says the seller “devuelva lo recibido, teniendo derecho a una compensación equitativa por el uso del bien y a la indemnización de los daños y perjuicios, salvo pacto en contrario” (returns what it received, with a right to fair compensation for your use of the property and to damages, unless agreed otherwise). The contract can also say the seller keeps some installments as compensation. Read that clause before signing.

We did not check how article 1561 combines with a contract clause that sets a different number of missed installments.

Retention of title: the home stays the developer’s

Contracts often say the developer keeps ownership until you finish paying. Article 1583 allows this:

“En la compraventa puede pactarse que el vendedor se reserva la propiedad del bien hasta que se haya pagado todo el precio o una parte determinada de él, aunque el bien haya sido entregado al comprador, quien asume el riesgo de su pérdida o deterioro desde el momento de la entrega. El comprador adquiere automáticamente el derecho a la propiedad del bien con el pago del importe del precio convenido.”

(In a sale, the seller may keep ownership until all or a set part of the price is paid, even after handing over the property; the buyer bears the risk of loss or damage from handover. The buyer becomes owner automatically on paying the agreed price.)

What this means for you:

• You can already live in the home and still not own it.
• From handover, the risk of loss or damage is yours.
• When you pay the agreed price, you become owner automatically.

Article 1584 adds that for registered property, retention of title binds third parties “siempre que el pacto haya sido previamente registrado” (only if the agreement was registered first). More on this in rent-to-own and retention of title.

Mortgages and other guarantees

The other way to secure payment is a mortgage (hipoteca). Article 1097 says it charges a property as security “de cualquier obligación” (for any obligation), “no determina la desposesión” (does not take the property from you), and gives the creditor the rights of “persecución, preferencia y venta judicial del bien hipotecado” (to follow the property, to be paid first, and to have it sold by a court). You stay in the home, but if you do not pay, the creditor can ask for a court sale.

To be valid, a mortgage is made by public deed (escritura pública) unless the law says otherwise (article 1098). It must secure a determined or determinable obligation, for a determined or determinable amount, and be entered in the property registry (article 1099).

One rule protects the debtor. Article 1111 says that even if you do not pay, “el acreedor no adquiere la propiedad del inmueble por el valor de la hipoteca. Es nulo el pacto en contrario” (the creditor does not become owner of the property for the value of the mortgage; any agreement to the contrary is void). A clause saying the developer “keeps the home” if you do not pay does not work in those terms.

If there are guarantees or guarantors, article 77.3(f) requires the summary sheet to explain their scope and obligations.

What this page does not cover

We do not give the current BCRP maximum rate. We did not check whether a developer that finances on installments needs SBS authorization, nor Indecopi decisions on article 77.3. We also do not cover the foreclosure process (see mortgage foreclosure), Mivivienda or Techo Propio loans, or unfair terms in general, which we explain in adhesion contracts and unfair terms.