If you’re closing on a luxury property in Lima above US$500,000, the earnest money contract luxury property buyers sign in Peru behaves nothing like a standard Florida or Texas earnest money agreement. Peruvian Civil Code distinguishes confirmatory deposits (article 1477) from penitential or withdrawal deposits (article 1480), and the wrong choice can lock you into a deal you can no longer exit, or worse, leave you defenseless when the seller backs out. This guide breaks down the clauses your attorney must demand before you wire a single dollar, the standard 10% benchmark in Lima Top, the suspensive conditions that protect your capital, and how to handle defects discovered in the SUNARP registry.
Table of contents
- Earnest money in the Peruvian Civil Code: 1477 vs 1480
- Standard amount, timing and payment method on US$500k+ deals
- Suspensive conditions: appraisal, due diligence and financing
- Refund, forfeiture and registry-defect rectification clauses
- Firm reservation vs holding deposit: why they differ
- Jurisdiction, arbitration and penalty clauses
- FAQ
Earnest money in the Peruvian Civil Code: 1477 vs 1480
The first thing any foreign buyer needs to internalize before signing an earnest money contract luxury property in Peru is that the legal framework splits the figure into two distinct categories, and they behave very differently from a US-style earnest money deposit. Article 1477 of the Peruvian Civil Code regulates confirmatory deposits (arras confirmatorias): once delivered, the contract is considered concluded, and the deposit is credited toward the purchase price. If the buyer breaches, the seller keeps the deposit; if the seller breaches, the buyer recovers double (article 1478). Either party may also seek specific performance, meaning a court can force the sale to close.
Article 1480, by contrast, governs withdrawal deposits (arras de retractación or penitenciales). These are valid only in preparatory contracts (compromise to contract) and grant both parties the right to walk away from the deal. If the buyer withdraws, they forfeit the deposit; if the seller withdraws, they must return double. Unlike confirmatory deposits, neither party can force performance: paying the penalty buys you the legal right to exit. This is much closer in spirit to a US earnest money contract with a liquidated damages cap, although Peruvian law treats the figure with more formality.
For a US$850,000 transaction in San Isidro (Lima’s premier financial district), Miraflores (oceanfront luxury enclave) or Barranco (artistic boutique neighborhood), the choice between 1477 and 1480 reshapes your strategy. Confirmatory deposits favor sellers who want certainty; withdrawal deposits favor buyers who need an exit valve while completing due diligence. Watch the document carefully: if it just says “arras” without specifying the type, Peruvian case law defaults to confirmatory in real estate purchases. See our companion piece on how a purchase agreement works for luxury property for context. See our companion piece on how a purchase agreement works for luxury property. Before signing, also read our overview of buying a luxury apartment in Lima from abroad to understand the full closing sequence.
Standard amount, timing and payment method on US$500k+ deals
Lima Top market practice for an earnest money contract luxury property places the deposit between 5% and 10% of total value. On a US$850,000 apartment, that means wiring between US$42,500 and US$85,000. Notarial practice strongly recommends not going below 10% on premium properties: that figure operates as a deterrent, because if a competing offer comes in between deposit and notarial deed signing, doubling the refund (US$170,000) makes the seller think twice about breaking the deal. In Florida or Texas, earnest money typically runs 1% to 3%; in Peru’s premium segment, the math is structurally different.
Timing between deposit and minuta de compraventa (the notarized purchase agreement preceding the public deed) must be set in writing. For luxury deals, 30 to 60 calendar days is the reasonable range. That window covers registry due diligence, mortgage approval if applicable, professional appraisal and the calculation of the alcabala transfer tax. Anything shorter than 30 days is a red flag: it signals the seller wants you to skip verification of liens and encumbrances on the SUNARP registry.
Payment method matters as much as the amount. Never sign and pay in cash, even under broker pressure. Peru’s banking law (Ley 28194) requires formal payment methods for any sum above S/2,000 or US$500. On US$500,000+ deals, payment must run through wire transfer, cashier’s check or direct deposit to the seller’s account, leaving a clean paper trail. SUNAT (the Peruvian tax authority) will demand proof of formal payment to recognize your cost basis when you eventually sell. For foreign buyers, structuring the international wire correctly is critical; cross-reference our guide on the alcabala tax on high-value property to understand the full tax stack at closing.
Suspensive conditions: appraisal, due diligence and financing
This is where your attorney earns their fee, clause by clause. Suspensive conditions are future, uncertain events whose occurrence determines whether the contract becomes effective. A well-drafted earnest money contract luxury property in Peru should include at least three: favorable bank appraisal, clean registry due diligence and mortgage approval (if applicable). If any condition fails, your deposit returns in full, no penalty.
Bank appraisal is the first safety net. Major Peruvian banks (BCP, BBVA, Interbank) require professional appraisal for any premium mortgage. If the bank values the property below the agreed price, you’re trapped: you would need to cover the shortfall in cash. The clause should read: “if the bank appraisal performed by an SBS-authorized appraiser yields a value more than 5% below the sale price, the buyer may rescind the contract and recover the deposit in full, without penalty.”
Registry due diligence is the second net. Your attorney will pull the full electronic partida (registry record) from SUNARP and review ownership, recorded square footage, liens, encumbrances, lawsuit annotations and outstanding mortgages. A common scenario: a paid-off mortgage in favor of a bank that was never formally released. That’s fixable, but it delays closing. A pending lawsuit on the property gives you the right to walk. The third typical condition is mortgage approval: if the bank declines the loan for reasons not attributable to the buyer, the deposit returns. Standard timeframes: 45 calendar days to clear all three conditions in parallel. Cross-check our SUNARP consultation guide for luxury property in Lima for the registry walkthrough.
Refund, forfeiture and registry-defect rectification clauses
The earnest money contract luxury property must spell out refund and forfeiture triggers with surgical precision. Full refund applies when: (i) any pacted suspensive condition fails, (ii) the seller cannot cure registry defects detected during due diligence within the agreed timeframe, (iii) the property carries undeclared liens or encumbrances, (iv) hidden defects emerge before the minuta is signed and (v) force majeure prevents transfer. Anything less specific creates room for the seller to argue that you walked away unjustifiably and forfeited the deposit.
Forfeiture (or double refund from the seller) applies when the breach is attributable to one party without justified cause. Precise language saves the day: “if the buyer, with no suspensive condition having failed and for reasons attributable to them, fails to appear to sign the public deed within the agreed timeframe, they will forfeit the deposit to the seller as liquidated damages.” Sloppy clauses lead to litigation; tight clauses lead to clean exits.
Registry-defect rectification deserves its own subclause. The actual square footage of the property frequently does not match what is recorded in SUNARP, due to original measurement errors or undeclared additions. If the discrepancy exceeds 3% of total area, the buyer should be able to demand a proportional price reduction or rescind the contract. Other common scenarios: paid-off mortgages still showing on the registry, or extinguished lawsuit annotations. The contract should obligate the seller to cure these defects before the public deed, at their cost, within a maximum window (typically 30 business days). If they fail, the buyer rescinds and recovers the deposit. For developer-led projects, note that Indecopi (Peru’s consumer protection agency) has sanctioned developers for refusing to refund deposits on undelivered preconstruction units, citing articles 18 and 19 of the Consumer Protection Code (Law 29571).
Firm reservation vs holding deposit: why they differ
Many premium buyers walk into the negotiation thinking reservation, holding deposit (separación) and earnest money are interchangeable. Be careful: legally these are distinct figures, and confusion can cost you money. The separación or holding deposit is typical in preconstruction projects: you pay a small amount (usually US$1,000 to US$5,000) for the developer to pull the unit off the market while you decide. Holding deposits do not create a binding contract; if you back out, the developer typically refunds you minus an administrative fee.
Firm reservation goes one step further: the parties have already agreed on price and main terms, but the definitive contract has not yet been signed. In luxury deals, firm reservation is usually documented as a compromise to contract under article 1414 of the Civil Code. Reciprocal obligations exist: the seller commits not to sell the unit to a third party, and the buyer commits to sign the definitive contract within the agreed window. Breach by either party triggers a penalty.
Earnest money, finally, attaches to the definitive contract (in the case of confirmatory deposits) or to the preparatory contract (withdrawal deposits). On US$500,000+ deals, we recommend skipping plain holding deposits and going straight to confirmatory or withdrawal earnest money, depending on your strategy. A bare holding deposit on a US$850,000 property leaves you exposed if a higher bidder appears. Indecopi fined developers up to 6.18 UIT (around S/33,063) in 2025 for retaining holding deposits without grounds, so if you do sign a holding deposit, demand the refund conditions in writing. If your goal is protecting a major investment, see our analysis of why a Lima penthouse is a safe investment.
Jurisdiction, arbitration and penalty clauses
The closing clauses of the earnest money contract luxury property determine what happens when the deal turns ugly. Three elements cannot be missing: jurisdiction, dispute-resolution mechanism and penalty clause. For premium deals involving foreign buyers or buyers residing abroad, arbitration is practically mandatory. Peruvian ordinary courts can take years to resolve a real estate dispute; an institutional arbitration through the Lima Chamber of Commerce or AmCham Peru typically resolves in 9 to 14 months.
The arbitration clause must specify: administering institution, number of arbitrators (one or three, depending on the amount), language of the proceeding, seat of arbitration and applicable rules. For deals above US$1,000,000, a three-arbitrator tribunal is recommended; between US$500,000 and US$1,000,000, a sole arbitrator. A poorly drafted arbitration clause can be ruled null and force you back into ordinary courts, so do not leave this in the hands of a generic template.
The penalty clause complements the deposit framework with an additional sum for damages. Article 1341 of the Civil Code allows a contractual penalty that operates automatically on breach. In luxury deals, the penalty typically ranges from 15% to 25% of property value. Note: the penalty stacks with deposit forfeiture only if expressly agreed; otherwise, courts treat it as limitative. Your attorney should also check the notarial and registry fee clause (typically split 50/50), the alcabala transfer tax clause (always paid by the buyer per article 23 of the Municipal Tax Law) and the income tax on capital gains paid by the seller (5% of the gain, per SUNAT). The detail saves the deal.
FAQ
What your next move must protect
A well-drafted earnest money contract luxury property in Peru is not a formality: it is the instrument that turns intention into a protected transaction. The split between confirmatory and withdrawal deposits, the right percentage, suspensive conditions, registry-defect language and the arbitration exit are the five fronts where the deal is won or lost. If you are committing US$500,000 or more, the cost of a real estate attorney reviewing every line is trivial against the risk of forfeiting the deposit or being locked into a property carrying liens. Your money is defended before signing, not after.
Legal disclaimer
This content is informational and does not constitute legal or tax advice. Every case must be reviewed by a licensed Peruvian attorney or accountant. Peruvian regulations may have changed since publication; always verify the latest version with SUNAT, SUNARP or the relevant official source.
Closing a premium deal in Lima?
At Penthouse.pe we work with buyers handling tickets between US$500,000 and US$3,000,000 in San Isidro, Miraflores, Barranco and La Molina. If you would like an introduction to attorneys specialized in premium real estate transactions or want to explore our current inventory of penthouses and luxury properties, write to hola@penthouse.pe or browse our curated selection of available properties.
Penthouse.pe Editorial Team. Specialized coverage of luxury real estate in Lima’s premium districts. Inquiries: hola@penthouse.pe
