The following documents are involved:

• Due diligence report

Usually, the first step in a transaction is due diligence on the real estate, which the buyer requests. This includes a title and zoning review and a review of any burdens and liens on the property. The buyer’s lawyer will also provide a title opinion to the buyer.

• Purchase and sale agreement

When the due diligence is satisfactory to the buyer, negotiations for the real estate acquisition commences, normally by execution of the purchase and sale agreements between the buyer and the seller.

This agreement should contain all the necessary business terms for the transaction, including the description of the land, purchase price, deposit (if any), the closing date and any other special terms. These agreements also typically contain conditions for the benefit of the buyer as well as representations and warranties by the seller.

The recent trend is for sellers to give limited representations and warranties. So, if a contingency to closing is not satisfied during due diligence, which cannot be removed before the purchase, the seller warrants to indemnify the buyer in case the contingency prejudices the buyer.

However, a seller indemnity is not normal and customary. What is normal and customary is that once the land is sold, the seller does not assume any responsibility because the buyer has performed its own due diligence (barring willful misconduct during negotiations).

Notwithstanding the general rule above, the Peruvian Civil Code requires the seller to compensate the buyer if the buyer is latter deprived of the use and possession of the real estate by virtue of a judicial decision confirming that a third party obtained a right over the real estate before the sale.

Parties are legally bound as soon as they execute the sale and purchase agreement, unless otherwise agreed.

Generally, title is transferred as soon as the buyer and seller execute the sale and purchase agreement, unless there is an agreement of “reserve of property” or unless otherwise agreed by the parties; for instance, the parties may agree that the title will be transferred at the registration of the sale.

The buyer usually pays for the following:

• The buyer’s legal fees
• Due diligence costs for consultants who have prepared building condition reports, review of titles, valuation appraisals, and real estate surveys
• Due diligence inquiries made to governmental entities
• Notarial and registration fees
• Transfer taxes

The seller usually pays for the following:

• The seller’s legal fees
• Income tax on any profit made on the sale of the real estate