Penalty for cancelling a home purchase in Peru: is it valid?

First: have you signed the purchase contract?

This page is about the case where you already signed the purchase contract (the minuta or the developer’s contract) and then decide not to go ahead. If you only paid a reservation fee (separación) before signing, different rules apply; see reservation payments on an apartment or house.

Once signed, the contract binds you. Article 1361 of the Civil Code says it in one line:

“Los contratos son obligatorios en cuanto se haya expresado en ellos.”

(Contracts are binding as to what is expressed in them.)

We found no rule giving a home buyer a general right to withdraw at no cost. So if you stop paying or refuse to sign the public deed, in practice you are in breach. That is our reading of the rules, not a sentence in the law.

What the developer can do if you do not perform

Article 1428 gives the party that did perform two options:

“En los contratos con prestaciones recíprocas, cuando alguna de las partes falta al cumplimiento de su prestación, la otra parte puede solicitar el cumplimiento o la resolución del contrato y, en uno u otro caso, la indemnización de daños y perjuicios.”

(In contracts with mutual obligations, when one party fails to perform, the other can ask for performance or for termination, and in either case for damages.)

Many contracts also include an express termination clause (cláusula resolutoria). Article 1430 allows the parties to agree that the contract ends when one of them fails to perform “determinada prestación a su cargo, establecida con toda precisión” (a specific obligation, stated precisely). Termination then takes effect automatically once the other party says it is relying on the clause. If your contract says it ends when you miss a payment, read exactly which obligation it names.

What happens when you fall behind on installments without meaning to cancel, with interest and deadlines, is a separate topic. Here we focus on the decision not to go ahead with the purchase.

The penalty clause: what it is and its limits

The penalty (cláusula penal) is the amount agreed for the case of breach. The Civil Code covers it in articles 1341 to 1350. What matters to you:

It caps what they can charge. Article 1341 says:

“El pacto por el que se acuerda que, en caso de incumplimiento, uno de los contratantes queda obligado al pago de una penalidad, tiene el efecto de limitar el resarcimiento a esta prestación y a que se devuelva la contraprestación, si la hubiere; salvo que se haya estipulado la indemnización del daño ulterior. En este último caso, el deudor deberá pagar el íntegro de la penalidad, pero ésta se computa como parte de los daños y perjuicios si fueran mayores.”

(An agreed penalty limits compensation to that amount, plus the return of any counter-performance, unless the contract also provided for further damages. In that case the debtor pays the full penalty, but it counts as part of the damages if these are higher.)

So if the contract did not provide for further damages (daño ulterior), the developer collects the penalty and nothing more for that breach.

No proof of loss is needed, but the fault must be yours. Article 1343:

“Para exigir la pena no es necesario que el acreedor pruebe los daños y perjuicios sufridos. Sin embargo, ella sólo puede exigirse cuando el incumplimiento obedece a causa imputable al deudor, salvo pacto en contrario.”

(The creditor does not need to prove damages to claim the penalty. But it can only be claimed when the breach is attributable to the debtor, unless agreed otherwise.)

If the penalty clause falls, the contract does not. Article 1345: “La nulidad de la cláusula penal no origina la de la obligación principal.” (A void penalty clause does not void the main obligation.)

How an excessive penalty is reduced

Article 1346 is your main tool:

“El juez, a solicitud del deudor, puede reducir equitativamente la pena cuando sea manifiestamente excesiva o cuando la obligación principal hubiese sido en parte o irregularmente cumplida.”

(A judge, at the debtor’s request, can fairly reduce the penalty when it is manifestly excessive or when the main obligation was partly or irregularly performed.)

Three things to note:

• A judge decides the reduction, not the developer or Indecopi, and only if you ask.
• The article sets no percentage. “Manifestly excessive” is judged case by case.
• If you have already paid a large part of the price, the second ground (partial performance) may also help you.

If what you paid were arras

Many contracts call the first payment arras. If they were confirmatory arras, article 1478 says that if the party who paid them “no cumple la obligación por causa imputable a ella, la otra parte puede dejar sin efecto el contrato conservando las arras” (fails to perform for a reason attributable to it, the other party can cancel the contract and keep the arras). And the other way round: if the developer is in breach, you can claim double. The types of arras are explained in buying a home and how arras work.

What consumer law requires of the developer

If you buy from a real-estate developer, Ley 29571 requires the contract to include, at a minimum:

”[…] g. Plazo, fecha o condiciones expresas de entrega del inmueble y penalidades por incumplimiento que se hubieran pactado. h. Supuestos en los cuales se aplican penalidades y el monto de las mismas.”

(The delivery date or conditions and any agreed penalties for breach; the cases in which penalties apply and their amount.)

Indecopi’s Guide on real-estate products and services says the same:

“El proveedor debe informar previamente al consumidor sobre los montos que serán retenidos bajo el concepto de gastos administrativos o penalidad en caso de incumplimiento, precisando a cuánto ascienden.”

(The developer must tell the consumer in advance the amounts it will withhold as administrative costs or penalties in case of breach, stating how much they are.)

If the penalty they want to apply is not in the contract with its amount and the cases it covers, or you were not told about it beforehand, you have grounds to complain to Indecopi.

One more point if, instead of cancelling, you want to pay off early: under the Guide, early payment of the balance “no puede estar afecto al cobro de penalidades, multas o cobros de naturaleza similar, por parte del proveedor” (cannot be subject to penalties, fines or similar charges by the developer).

Is a penalty that falls only on the buyer unfair?

The honest answer: it depends, and the law does not settle it in one sentence.

Article 50 of Ley 29571 lists unfair terms “de ineficacia absoluta” (with no effect at all). None of its items mentions penalties. The closest is literal b, on clauses that “faculten al proveedor a suspender o resolver unilateralmente un contrato, salvo disposición legal distinta” (allow the provider to suspend or terminate a contract unilaterally, unless a legal provision says otherwise). We found no rule or decision explaining how that item applies to a termination clause triggered by the buyer’s breach.

The general rule is in article 49.1:

“En los contratos por adhesión y en las cláusulas generales de contratación no aprobadas administrativamente, se consideran cláusulas abusivas y, por tanto, inexigibles todas aquellas estipulaciones no negociadas individualmente que, en contra de las exigencias de la buena fe, coloquen al consumidor, en su perjuicio, en una situación de desventaja o desigualdad o anulen sus derechos.”

(In standard-form contracts, any term not individually negotiated that, against good faith, puts the consumer at a disadvantage or in an unequal position, or cancels their rights, is unfair and unenforceable.)

Our reading is that a high penalty applying only to the buyer, in a contract you did not negotiate, can be challenged under this rule. But it is a case-by-case analysis. More in adhesion contracts and unfair terms.

What to do

1. Read the penalty clause, the termination clause and any arras clause. Note amounts and triggers.
2. Compare them with what you were told before signing.
3. Before you stop paying, propose a way out in writing: for example, ending the contract by mutual agreement, or asking whether they would accept another buyer in your place.
4. If they apply a penalty that was not disclosed or is unfair, complain in the libro de reclamaciones and then to Indecopi. The channels are in how to file a complaint with Indecopi and in the general guide to buying a home.
5. If the penalty is manifestly excessive, talk to a lawyer about asking a court to reduce it (article 1346).

What this page does not cover

• Indecopi decisions or court rulings on real-estate penalties: we did not review them.
• What penalty percentage is “normal” or “excessive”: no rule we read sets one.
• Late installments, default interest and when the developer can terminate for non-payment: a separate topic.
• Reservation payments made before signing: they have their own page.
• Purchases with a mortgage loan, where the relationship with the bank has its own rules.