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Trends and prospects
What are the current trends in and future prospects for the real estate market (both commercial and residential) in your jurisdiction?
Peru is a country with great potential for real estate development. This is due, among other things, to:
- the lack of formal housing, mainly in socioeconomic sectors such as C and D – the national deficit is estimated to be around 2 million housing units, with Peru having the third highest housing deficit in Latin America (source: RPP Noticias, December 2 2016);
- government support for subsidised social programmes such as Fondo MiVivienda and Programa TechoPropio, as well as a recently approved alternative which would allocate up to 25% of pension funds (previously untouchable) for the acquisition of housing; and
- the growth of cities outside Lima such as Arequipa, Trujillo, Piura and Chiclayo, where there is also a formal housing deficit and land is more accessible for real estate projects (whether commercial, industrial or housing) compared to Lima.
The economic slowdown of the last three years has had an impact on the sector and led to greater caution among banks when it comes to lending (especially to sub-sector C, which registered higher delinquency rates) and an adjustment in the sales rhythm (source: Semana Económica, May 24 2015). However, since last year, some sub-sectors have stabilised – this includes housing, which has seen an increase in mortgage loans and falling vacancy rates for prime office space (source: Semana Económica June 11 2016). Commercial real estate developments (eg, malls) also grew by around 10% in 2016 over the previous year.
Due to the specific needs of the real estate sector, an early recovery looks likely. It is estimated that the recovery or rebound of the sector will only be postponed until 2018 (source: Mercado & Regiones May 1 2017).
Rights and registration
What types of holding right over real estate are acknowledged by law in your jurisdiction?
The main rights over land recognised in Peru are:
- the right of possession;
- the right of ownership;
- surface rights;
- use; and
Regarding real estate guarantees, the most important rights in Peru are mortgages and pledges.
Are rights to land and buildings on the land legally separable?
Yes, surface rights allow beneficiaries to hold ownership in the building constructed above or below the ground owned by the landlord.
Which parties may hold and exercise rights over real estate? Are there restrictions on foreign ownership of property?
As a rule, anyone can hold and exercise rights over real estate. The only constitutional restriction is based on reasons of national security, whereby foreigners cannot acquire real estate properties within 50 kilometres of the national borders unless the Council of Ministers has expressly declared the purchase a public necessity.
How are rights, encumbrances and other interests over real estate prioritised?
Although Article 2016 of the Civil Code states that registration is not mandatory in Peru, priority at the time of registration determines the rights’ priority. Thus, Article 1135 of the code states that if there are several creditors of the same real estate property to which the debtor was obliged to deliver, the creditor of good faith whose title was first registered will be preferred.
In default of registration, the preferred creditor will be the one with the oldest title. In such cases, titles that appear in a document with a reliable date are preferred.
Must real estate rights, interests and transactions be registered in your jurisdiction? What are the legal effects of registration?
While registration in Peru is voluntary, it does offer the highest level of enforceability and safety against third parties. Registered rights are presumed to be known by everyone.
Not all land is registered in Peru. The state is constantly conducting promotional campaigns to create a culture of registry among the population.
Only mortgages have to be registered to become valid and produce legal effects.
What are the procedural and documentary requirements for entry into the national real estate register(s)? Can registration be completed electronically?
Sales of real estate are usually executed by a written contract (sale agreement), which is formalised by a notary public who prepares the public deed and registers it in the real estate property register.
Evidence of payment of transfer tax (impuesto de alcabala) by the notary public who prepares the public deed is required for the registration of the acquisition.
Currently, it is not possible to register titles electronically. Parties can use electronic services only to request the correction of non-material errors in the registry files or to obtain copies of registry files. However, notaries can electronically submit the registration of a bloqueo registral, which blocks the registry file of the property involved in the transaction until the new title is registered.
Electronic access to the public registry information is available in Spanish at https://enlinea.sunarp.gob.pe/.
What information is recorded in the national real estate register(s) and to what extent is such information publicly available?
The main information registered in the registry file of each property is:
- a description of the property (ie, location, area and buildings);
- ownership; and
- encumbrances (ie, mortgages, easements and usufructs).
The main documents registered are:
- judicial decisions;
- administrative resolutions;
- awards; and
- notarised transcriptions of the public deed (parte notarial) issued by a notary public.
Documents registered in the real estate property registry are public. The only restriction on accessing the registry is when the requested information affects a third-party right of privacy (eg, registry of wills).
Is there a state guarantee of title?
The Peruvian registration system does not provide a state guarantee of title.
Compensation is available for registry errors (Article 3 of the Law of Creation of the National System of the Public Registry and Superintendence of the Public Registry (Law 26366)). The affected party can claim compensation for damages and losses in a judicial procedure.
Sale and purchase
How are real estate brokers regulated in your jurisdiction (eg, through caps on commission or disclosure obligations)?
Real estate brokers are regulated by the Law Creating the Real Estate Agent Registry of the Ministry of Housing, Construction and Sanitation (Law 29080) and its regulation (approved by Supreme Decree 010-2016-Housing). These rules state that broker intervention is not mandatory in real estate transactions in Peru. This intervention is optional for the parties involved in the transaction.
Real estate brokers usually charge a fee of about 3% on the selling price.
What due diligence should be conducted before conclusion of a real estate sale contract?
Before any real estate purchase, a full review of title is performed covering, among others:
- titles and deeds;
- registry information;
- licences and permits and building urban status, if any;
- zoning and urban parameters;
- technical reports on location, area and boundaries;
- information on possession of the property; and
- information on registration and taxation in the municipality.
However, the extent of this depends on the scope of the project.
It is usual to engage technical staff (engineers and architects) to issue technical reports and plans for the property’s location, area and boundaries.
Are any preliminary agreements typically entered into before conclusion of a sale contract?
Both a commitment to contract and an option contract are the most common preliminary agreements used in real estate deals. These are valid and legally binding.
However, it is usual to sell real estate units before or during the construction process through contracts called future asset sale contracts. These are definitive agreements conditional on completion of the real estate units.
Must sale contracts be concluded in writing? If so, must they be notarised?
Peruvian law does not impose minimum formalities on the sale of real estate. Mere consensus among the parties (an obligation to dispose of the land) is sufficient to transfer property rights, unless there is a different legal disposition or it is agreed otherwise (Article 949 of the Civil Code). However, sales of real estate are usually executed by a written contract (sale agreement), which is formalised by a notary public who prepares the public deed and registers it in the real estate property register.
Evidence of payment of transfer tax (impuesto de alcabala) by the notary public who prepares the public deed is required for the registration of the acquisition.
Registration of the sale agreement is not mandatory but it is recommended for the highest level of enforceability and protection against third parties.
Can sale contracts be concluded electronically?
Yes. As mentioned above, Peruvian law does not impose minimum formalities for the sale of real estate. This means that a sale contract can be concluded electronically. Moreover, the electronic conclusion of agreements is recognised by the Civil Code.
However, currently a notary public cannot formalise these electronic agreements. Also, it is not possible to register titles electronically in the public registries.
What provisions are usually included in a sale contract?
The main provisions of a real estate sale contract are:
- identification of the parties involved in the sale contract – if any are represented by a third party, the representative must to be duly identified in the contract, indicating whether the relevant power of attorney is registered in the public register or contained in a public deed only;
- description of the real estate to be transferred, including its address (for urban properties) or location (for rural properties), and registry file number, if applicable. If the property is involved in a special title regime (eg, a condominium) or is part of a major structure, this must be specified;
- determination of the sale price and how it will be paid, including the mechanism to be used, the date of payment and the number of instalments (if applicable);
- description of the date of delivery of the property;
- seller's representations and warranties about the legal status of the property (eg, that it is free of encumbrances and legally available to be sold); and
- determination of the costs and expenses that each party must pay (eg, notary public fees for granting the public deed or tax that must be paid to register the sale contract in the property's registry file).
Obligations and liabilities
What are the seller’s disclosure obligations and other liabilities, and what are the consequences of breach?
Under the principle of good faith in the negotiation, conclusion and execution of contracts (Article 1362 of the Civil Code), the seller has a duty to disclose all relevant information about the property. He or she can be liable to the buyer for misrepresentation in case of eviction, hidden defects and issues on the property caused by the seller which do not allow the buyer to use the real estate for the purposes for which it was acquired or which reduce its value (obligaciones de saneamiento). The Civil Code also protects the buyer if the seller misled him or her by giving false information, which provides grounds for annulment of the purchase agreement.
In case of a breach of the contract by the seller, the law entitles the buyer to initiate a judicial procedure to force the seller to fulfil the breached obligation or to terminate the contract due to the breach – the buyer may claim damages and losses in either case. These procedures can be initiated and conducted through arbitration if the sale contract contains an arbitration clause.
What contractual warranties are usually given by the seller?
It is unusual for sellers to give contractual warranties to buyers. However, in certain transactions, buyers require contractual terms to protect their investment (eg, temporary reservation of part of the purchase price).
In major operations, participants often use mechanisms such as trusts or escrow accounts.
Are there any other obligations on the buyer, aside from paying the purchase price?
According to the Civil Code, the buyer is obliged to pay the price in the way and opportunities agreed with the seller in the sale contract. Also, the buyer is obliged to receive the property at the time agreed by the parties.
What taxes are payable on the sale and purchase of real estate? Are any exemptions available?
Transfers of real estate are subject to a municipal transfer tax (impuesto de alcabala) to be paid by the buyer. A tax rate of 3% applies to the highest of the sale price or the value of such real estate property informed to the corresponding municipal government (autoavalúo), with a deduction of 10 tax units (unidad impositiva tributaria). For 2017, the tax unit approved by the government is equivalent to about $1,266.
The first sale of properties by construction companies is not subject to transfer tax, except for the value of the land based on a tariff value. The Municipal Tax Law provides other exceptions, such as:
- transfers resulting from an inheritance or because contract termination occurred before the price was paid; and
- acquisitions by certain entities, such as the central government, foreign governments, international organisations and religious entities.
Transfer of title
When does title in the property transfer?
In accordance with Article 949 of the Civil Code, mere consensus among the parties (an obligation to dispose of the land) transfers property rights, unless there is a different legal disposition or it is agreed otherwise by the parties.
Nonetheless, sales of real estate are usually registered in the real estate property register to protect the buyer’s ownership. If a third party acquires on an onerous basis a right of a person who appears on the public register to have the authority to grant it, the third party maintains his or her acquisition once it is registered, even if the seller's right is later annulled, rescinded, cancelled or resolved due to causes that did not appear in the registry file of the property or in the archived titles which support it.
What is the typical duration of a sale transaction?
The duration of a real estate transaction in Peru will depend on its complexity and scope. This in turn may depend on the nature of the property object of the transaction – for example, if the real estate is an urban property or a rural extension of land, or if it is owned by a corporate legal entity or by a peasant community, among others.
The average time to close a straightforward transaction involving an urban property is between one and two weeks from the beginning of negotiations. In case due diligence is performed, the average time may go up to three to four weeks, depending on the scope of this.
Must a lease agreement be concluded in writing?
Leases have no formal legal execution requirements, regardless of whether the parties are companies, partnerships or individuals.
However, a lease will be enforceable against third parties only if it is registered in the real estate public registry (if the leased premises qualify as a registrable asset). A deed issued by a notary public is required for such registration. All real estate premises (eg, land itself, buildings, offices, apartments, deposits and parking lots) are registrable assets for Peruvian public registries.
Are there any regulations setting out mandatory or prohibited provisions in lease agreements?
In principle, contractual lease provisions are freely negotiable by the parties. However, there are some mandatory provisions under the Civil Code. For example:
- The lease term cannot exceed 10 years and will be capped at six years if the owner is a public entity or lacks legal capacity.
- If any of the parties incurs a material breach of contract, the affected party can terminate it and claim damages.
- A judicial administrator, a liquidator and any other kind of officially named administrator is barred from being a tenant at any of the properties under his or her management.
What provisions are typically included in lease agreements?
Typical provisions for leases of business premises are as follows:
- length of term – the lease term cannot exceed 10 years and will be capped at six years if the owner is a public entity or lacks legal capacity;
- rent increases – it is common to include an annual increase of around 3%;
- right to sell or sub-lease – only the owner (landlord) can sell the premises, the tenant must be authorised by the landlord to sub-lease the premises; authorisation may be previously granted;
- insurance – insurance clauses covering destruction of, or damages to, the premises are usually included in lease contracts of business premises;
- change of control of the tenant – change of control should not be relevant as the tenant will not change. However, it is common in some business leases to establish a specific provision in the contract regulating this matter;
- repairs – unless otherwise agreed, the landlord is obliged to perform any necessary repairs during the term of the lease. If necessary repairs are urgent, the tenant must make them and the landlord will reimburse him or her.
The cost of maintenance will be charged to the tenant, unless otherwise agreed.
What are the standard forms of lease agreement used in your jurisdiction?
The general lease for any purpose (ie, housing and commercial) and financial leasing.
Length of term
Are there any regulations on minimum and maximum terms of leases?
The lease term cannot exceed 10 years and will be capped at six years if the owner is a public entity or lacks legal capacity.
Are long-term tenants accorded any special rights as to extension or renewal of leases?
Long-term tenants have no special rights with regard to extension or renewal of leases.
However, parties can agree to extend or renew leases. Any extension cannot exceed the maximum term of 10 years.
What regulations (if any) govern rent increases?
It is common to include an annual rent increase of around 3%. There is no legal provision on this point.
What regulations (if any) govern rent security deposits?
There is no legal provision regulating security deposits in Peru. However, it is common for tenants to provide a security deposit at the beginning of the lease to ensure or guarantee their obligations.
Can the tenant withhold rent payments on any legal grounds?
The tenant is entitled to withhold rent payments temporarily as a contractual remedy against a breach of the landlord's obligation to grant and maintain the tenant’s use of the leased premises.
Under what circumstances is sub-letting typically allowed?
The Civil Code states that the tenant cannot dispose of the lease, assign or sub-let it in favour of third parties without the landlord’s express authorisation. This authorisation can be granted in advance by the lessor. For instance, it can be incorporated in the lease agreement.
Obligations and liabilities
What are the general obligations and liabilities of the landlord in respect of the property and what are the consequences of breach?
In general terms, according to the Civil Code the landlord’s main obligation is to grant and maintain the tenant’s use of the leased premises as set out in the contract.
If the landlord breaches the lease, the law entitles the tenant to initiate a judicial procedure to force it to fulfil the breached obligation or to terminate the lease due to the breach. These procedures can be initiated and conducted through arbitration if the lease contains an arbitration clause.
Parties may contractually establish cases for automatic termination upon a breach and/or cases where the breach obliges the defaulting party to pay compensation to the affected one.
What are the general obligations and liabilities of the tenant in respect of the property and what are the consequences of breach?
In general terms, according to the Civil Code the tenant has an obligation to take good care of the leased premises and use them in a diligent way and in accordance with what has been agreed by the parties in the contract.
If the tenant breaches the lease, the landlord is entitled to initiate a judicial procedure to compel him or her to fulfil the breached obligation or to terminate the lease due to the breach. These procedures can be initiated and conducted through arbitration where the lease contains an arbitration clause.
Parties may contractually establish the cases for automatic termination upon a breach and/or where the breach determines that the defaulting party will be obliged to pay compensation to the affected one.
Are any taxes payable on rental income? If so, are any exemptions available?
The income earned by the landlord as a result of the lease is subject to income tax at an effective tax rate of 5% for domiciled individuals. In the case of domiciled entities (including the permanent establishment of non-domiciled companies) and individuals with a business (combination of capital and work), the general corporate tax rate of 29.5% will apply over net income. If the landlord is a non-domiciled entity or an individual with a business, the 30% tax rate must be applied over the 80% of the gross income derived from the lease, as a 20% deduction is applicable in the case of exploitation of assets subject to depreciation (including buildings). In turn, if the landlord is a non-domiciled individual, the applicable rate will be 5% of the gross income obtained.
Likewise, leases are subject to 18% value added tax (VAT) applicable over the consideration when the landlord is a local entity or individual with a business. VAT must be paid by the landlord to the tax authority but will be economically borne by the tenant. If the landlord is a non-domiciled entity or non-domiciled individual with a business, VAT will also be applicable but must be paid by the tenant.
Are the landlord and tenant bound by any insurance requirements?
There are no mandatory provisions requiring any party to obtain insurance for the leased premises. Parties can freely agree in regard to such matters in the contract.
Termination and eviction
What rules and procedures govern termination of the lease by the landlord and the tenant’s eviction from the property?
The rules and procedures for termination of the lease by the landlord are usually set out in the lease. The Civil Code also establishes that any party can terminate the lease if there is a significant breach (eg, default in payment of rent). Also, if the lease has no specific duration, the landlord can terminate it with 30 days' written notice.
If the tenant refuses to leave the property, a judicial procedure requesting his or her eviction shall be initiated by the landlord.
Notwithstanding the foregoing, as from August 2014, allanamiento anticipado entered into force (Law 30201). This is a clause which can be incorporated into any lease, whereby the tenant accepts in advance eviction for:
- expiration of the lease term; or
- termination of the contract for failure to pay the rent.
Using this clause, the landlord can initiate eviction before the courts under either of the two aforementioned grounds, and the defendant can defend him or herself only by proving that:
- the contract is still in force; or
- he or she had already paid the rent.
For its validity and enforcement, this clause must be executed with the signatures of the parties being certified by a notary public.
What are the typical providers of real estate financing in your jurisdiction? Are there any restrictions on who may provide financing?
The main source of funding is direct investment from national and foreign private companies and real estate investment funds. There are no restrictions on who may provide financing.
What are the most common structures used to secure real estate financing and how are these security interests perfected?
Typical security packages include the following:
- Mortgages, which are created by concluding a public deed between the owner of the affected property (usually, the debtor) and the lender, and by registering this in the public records. Only when the public deed is duly registered in the property's registry file will the mortgage be considered valid and enforceable against third parties.
- Share pledge agreement, which according to Peruvian commercial legislation must be registered in both the company's share register and the contract registry of the public records (registro mobiliario de contratos) to be effective against third parties.
- Warranty trusts, which have become common in lending transactions in Peru, particularly because they are seen as insolvency remote, in contrast to mortgages. They are created by concluding a public deed of warranty trust. To be effective against third parties, trusts must be registered in the public records. Specifically, if a trust affects real property, it must be registered in the property’s registry file, otherwise it must be registered in the contract registry of the public records (registro mobiliario de contratos).
What covenants are typically made in financing agreements?
Typical covenants in financing agreements include the following:
- compliance with laws and any governmental regulation applicable to the borrower or the project (including environmental legal requirements);
- the operation and maintenance of the project in all material respects, in accordance with any contractual and legal requirements;
- the preservation and maintenance of the main property assets of the project;
- the maintenance in full force and effect of any project document (including the construction contract);
- the payment of taxes, assessments and government charges;
- the maintenance in full force and effect of all governmental approvals required for the project’s development;
- the maintenance of insurance policies for the project’s main assets;
- the preservation of corporate existence;
- keeping financial records;
- inspection rights to visit and inspect any of the borrower's properties related to the project;
- the use of loan proceeds solely to develop the project;
- financial covenants; and
- additionally, lenders may request that the borrower grant a negative pledge over one or more assets (including receivables and account balances) of the borrower, to protect themselves against any event of default under the loan agreements.
Enforcement of security
How are security interests enforced in the event of default?
Lenders seek to ensure repayment of their loans through security packages. Typical security packages include mortgages, pledges over shares and warranty trust.
To enforce a mortgage, a judicial procedure is required, although these are not necessary to enforce a pledge over shares (through a sale or adjudication), or to enforce a management and warranty trust over property or other assets of a project.
What is the typical timeframe for the enforcement of security?
For enforcements that require a judicial procedure, the timeframe is three to four years. On the other hand, extrajudicial enforcements of securities usually take around one year.
What is the general climate of real estate investment in your jurisdiction?
The real estate market appears to be recovering after the economic slowdown of the last few years and the recent presidential elections. Some specialists and real estate experts agree that the real estate market in Peru is maturing. Although profitability for investors will be lower than some years ago, experts agree that it has not ceased. Sales rates are interesting and real estate companies are buying more land.
The recent Niño Costero phenomenon has made visible the lack of existing urban planning, the evident deficit of infrastructure and the necessary relocation of an important population group.
Who are the most common investors in real estate?
The majority of investors are pension fund managers, Peruvian insurance companies, real estate investment funds and real estate developers. With regard to the latter, in recent years the number of Peruvian developers has been increasing. However, there are still a large number of foreign real estate developers in Peru.
Increasingly, investors incorporate specific companies for projects, ensuring better fiscal transparency and management. It has also become common to prepare preliminary studies for companies interested in investing in projects.
Are there any restrictions on foreign investment in real estate?
Not for investment. There are some constitutional restrictions when it comes to foreign ownership or occupation of real estate (including foreign ownership of shares in companies holding real estate) for reasons of national security, whereby foreigners cannot acquire real estate properties near national borders, unless the Council of Ministers has expressly declared this to be a public necessity.
What structures are typically used to invest in real estate and what are the advantages and disadvantages of each (including tax implications)?
Investors seek to invest directly in real estate by buying shares in companies in this sector or by joint ventures, using mortgages, share pledges or management and guarantee trusts to secure their investment.
Other investors use pooled investment vehicles, such as trusts and investment funds. In recent months, the Peruvian government has granted certain tax benefits to real estate investment funds and trusts (FIRBIS and FIBRAS, respectively) which must comply with specific requirements. Tax benefits include the following:
- Distributions to investors are subject to a reduced income tax rate of 5%.
- Investors may defer income tax payments resulting from contributions to the FIRBIS or FIBRAS.
- Capital gains obtained from the transfer of participation certificates in a FIRBI or a FIBRA through the Lima Stock Exchange have been exempted, provided that such participation certificates attain a certain trade volume.
Investment funds and trusts must comply with the following requirements in order to qualify as FIRBIS and FIBRAS, respectively:
- At least 70% of the net worth must be invested in real estate assets capable of producing a rent.
- All real estate assets producing a rent may be transferred only four years after they were acquired or after they were completed.
- At least 95% of the annual net profits must be distributed.
- The participation certificates must be placed through a public offering among at least 10 non-related investors.
- The fund manager or the trustee, as the case may be, must appoint an investment or administration committee in accordance with applicable regulations.
Planning and environmental issues
Which government authorities regulate planning and zoning for real estate development and use in your jurisdiction and what is the extent of their powers?
Specific regulations about zoning and related matters concerning the use and occupation of land are decentralised to regional governments, as well as to provincial and district municipalities. The main regulations regarding the procedures followed by these authorities to organise urban and rural development are in the Regulation of Territorial Planning and Urban Development, approved by Supreme Decree 022-2016-VIVIENDA.
What are the eligibility, procedural and documentary requirements to obtain planning permission?
Any real estate project must be in accordance with the zoning of the respective area where it would be executed. Otherwise, the corresponding municipal licences will be denied by the competent municipality. Zoning is regulated by the provincial municipalities, as established in the Organic Law of Municipalities (Law 27972).
A modification to the corresponding zoning can be achieved, either on the initiative of the municipality or at the request of a third party. In the latter case, the results of a neighbourhood consultation must be provided. These results are not binding on the municipality but will be considered during evaluation of the request.
If the project is in accordance with the zoning, the next step is to evaluate whether the property is rural or has already been urbanised. In the first scenario, an urban habilitation procedure (ie, land development) must be carried out before starting to build any urban construction. In principle, constructions that will serve for human urban activities (eg, residential, commercial or industrial activities) can only be carried out on an already urbanised property.
To obtain either a land development licence or a building licence, the local municipality verifies whether the project complies with zoning regulations and permitted uses, as well as with urban and building regulations. It is not necessary to perform a public consultation for these purposes. It can also be requested that the competent municipality approve the draft building project, which involves making a decision on the viability of the real estate project before granting a definitive licence.
Can planning decisions be appealed? If so, what is the appeal procedure?
With regard to municipal licences, an adverse decision from the municipality can be appealed first at the administrative level. If the decision is confirmed by the corresponding municipal authority, it is then possible to appeal such decision at a judicial level.
On the other hand, a municipality decision regarding a change of zoning request can only be judicially appealed to overturn irregularities in the procedure which might have affected the result of the request.
What are the consequences of failure to comply with planning decisions or regulations?
A failure to comply with planning decisions or regulations will cause the denial of the requested construction licence for the execution of the project. An unlicensed construction is subject to demolition by the competent municipality, in addition to an economic sanction imposed on the offender.
If a licence has been granted and this contravenes the planning regulation, the licence will be nullified. If this happens, any construction carried out under the licence may be demolished by the competent authority.
What regime governs the protection and development of historic and cultural buildings?
Protection of historic monuments in Peru is mainly regulated by the General Law of National Cultural Heritage (Law 28296). The transfer of ownership between particular individuals of any real estate which forms part of the national cultural heritage must be notified to the competent authorities, under penalty of nullity, given that the state has a first right in any onerous transfer.
In addition, prior authorisation from the Ministry of Culture is needed to dismember, alter, construct, modify or restore, wholly or partly, any real estate which is part of the national cultural heritage.
What regime applies to government expropriation of real estate?
Article 70 of the Constitution provides that the state can expropriate real estate for reasons of national security or public necessity provided by the law, on payment of fair compensation and proven damages incurred by the owner.
Legislative Decree 1192 regulates the expropriation procedure, stating that it must be expressly authorised by the law issued by Congress and only in favour of the state.
Fair compensation includes the appraised commercial value of the property, determined by the Ministry of Housing, and proven damages incurred by the owner.
What is the required notice period for expropriation and how is compensation calculated?
Regarding the vacancy and delivery of the properties subject to expropriation, the notice period is as follows:
- In the case of unoccupied properties, the vacancy and delivery of the expropriated property must be carried out within a maximum period of 10 business days from the notification to the owner with the administrative resolution which ordered the execution of the expropriation procedure.
- In the case of occupied properties, the term is 30 business days.
In both cases this must take place under the warning of initiating a coercive enforcement procedure for the eviction or takeover of the property subject to expropriation.
Compensation must be deposited in favour of the owner within a maximum of 10 business days from the issuance of the administrative resolution. In cases of payments linked to trust funds or other complex operations, the term may be extended to up to 60 working days. Compensation is determined through a commercial appraisal, carried out by experts appointed by the corresponding authority.
The right of expropriation of the public entity in whose favour the expropriation was approved by law expires within 60 months from the date on which said law entered into force if the corresponding expropriation procedure has not been initiated.
What environmental certifications are required for the development of real estate and how are they obtained?
The Environmental Regulations for Projects related to Housing, Urbanism, Construction and Sanitation Activities (approved by Supreme Decree 015-2012-VIVIENDA and amended by Supreme Decree 019-2014-VIVIENDA) establish that title holders of new projects must submit an environmental management instrument before the Ministry of Housing, Construction and Sanitation before their development in order to obtain corresponding environmental certification.
These regulations classify the environmental management instruments as follows:
- environmental impact statement (declaración de impacto ambiental or DIA) – Category I;
- semi-detailed environmental impact assessment (estudio de impacto ambiental semidetallado or EIA-sd) – Category II; and
- detailed environmental impact assessment (estudio de impacto ambiental detallado or EIA-d) – Category III.
The applicable environmental management instrument for a real estate project will depend on the damage that such a project could do to the environment.
Annex II of the Regulations of the Law of the National System of Environmental Impact Assessment (Law 27446) approved by Supreme Decree 019-2009-MINAM, as modified, contains a list of real estate projects which require the approval of an environmental management instrument.
Given that the Ministry of Housing has yet to issue any special guidelines or regulations regarding specific environmental management instruments (ie, DIA, EIA-sd or EIA-d), the holders of these investment projects must request the project’s classification by submitting a preliminary environmental assessment (evaluación ambiental preliminar or EVAP) following the provisions set out by the Environmental Regulations for Projects related to Housing, Urbanism, Construction and Sanitation Activities.
After the EVAP has been evaluated, the ministry may determine:
- that the project is included in Category I, and therefore the text of the EVAP becomes the approved DIA; or
- that the project is included in Categories II or III, and therefore the title holder must elaborate either an EIAsd or EIAd, as appropriate, pursuant to the terms of reference approved by the ministry, and later submit it for its approval.
What environmental disclosure obligations apply to real estate sales?
There are no environmental disclosure obligations that apply to real estate sales. In a purchase or sale of real estate in Peru, it is not common to carry out environmental surveys and searches, or to obtain environmental insurance. However, buyers could carry out environmental due diligence to verify, among other things, that environmental licences are necessary for the development of the real estate project and ongoing administrative procedures and litigation regarding environmental matters (ie, contaminated land). This occurs mainly in transactions were, due to the nature or location of the land, a potential risk of environmental issues could be expected (a site visit performed by a technical adviser could be necessary).
What rules and procedures govern environmental clean-up of property? Which parties are responsible for clean-up and what is the extent of their liability?
There are no specific regulatory measures with respect to environmental clean-up.
However, under the cost internalisation principle and environmental liability principle embedded in the General Environmental Law (Law 28611), an agent who, by use or exploitation of an asset or carrying out an activity, causes degradation to the environment, its components or the quality of life, health or assets of one or more individuals is required to adopt measures for its restoration, rehabilitation or reparation, as appropriate, and to assume all the costs related to prevention, mitigation, surveillance and monitoring of such activities. These measures could involve clean-up actions.
Therefore, the polluter is always liable for clean-up, regardless of whether it is the occupier or owner of the property. In this regard, in a purchase of real estate the buyer is not liable for investigation and clean-up of contamination on the land.
If the original polluter cannot be identified, is insolvent or is otherwise unable to undertake the clean-up, the buyer cannot assume liability for the environmental pollution as the current owner or occupier.
Without prejudice to this, environmental liability, responsibility or risk can be contractually transferred to a third party in the sale contract of the property, but this would only legally bind the parties to the contract.
Additionally, the Environmental Regulations for Projects related to Housing, Urbanism, Construction and Sanitation Activities provide that the Ministry of Housing’s General Bureau of Environmental Affairs shall promote decontamination plans and the recovery of deteriorated/altered sites regarding activities in this sector. Decontamination plans shall be formulated under the criteria established for this purpose by the Ministry of the Environment. However, to date, the ministry has yet to develop applicable criteria for said remediation instruments.
Are there any regulations or incentive schemes in place to promote energy efficiency and emissions reductions in buildings?
There is no specific legislation requiring buildings to meet certain minimum efficiency criteria. However, the National Environmental Policy has, as part of its objectives, fostered appropriate technologies to adapt to climate change and the mitigation of greenhouse gas emissions. The government has enacted Supreme Decree 009-2009-MINAM to implement eco-efficient measures in the public sector. These measures are binding on all public entities and are also intended to apply to anyone offering their services to the state.
The Environmental Regulations for Projects related to Housing, Urbanism, Construction and Sanitation Activities include some environmental measures that apply to new and existing buildings. Title holders of activities in this sector which were operating before October 14 2012 and have no environmental certification must submit an environmental management and adequacy programme (programa de adecuación y manejo ambiental or PAMA) before the competent authority, in this case the Ministry of Housing.
On the other hand, as mentioned above, title holders of new projects, before their development, must submit an environmental impact assessment before the ministry to obtain environmental certification.
The ministry’s General Bureau of Environmental Affairs is responsible for promoting, among other things, research and scientific and technological development in sectoral environmental matters in order to generate clean environmental technologies applied to construction activities.