Real Estate Laws
 
Foreigners can buy and own property in Panama with the same rights and protections as Panamanians citizens. In 1998, the Investment Stability Law was created to encourage foreign investment. This law protects foreign investors for ten years and provides a guard from changes in tax, customs duties, and both municipal and labor laws.

If property is bought in the name of a company, a 20 year exoneration from real property tax is granted by the National Registry of Tourism. The exoneration covers the company as long as land is used for tourist activities. In addition, the government also grants a one-time exoneration from import duties to help in construction, remodeling, and furnishing of building. Property tax exemptions apply to all new construction on a sliding scale according to value.

The following was taken from the U.S. Embassy Website:

Panama Information
Purchasing Property
April 2005


INTRODUCTION AND SUMMARY. The following is general information on purchasing real estate in Panama. It is not to be construed as legal advice. The different categories of land make it imperative to engage professionals for more detailed information. Real estate laws on the mainland can be quite different than those on islands, coastal areas, and areas near national borders.

Generally, there are two very different ways to buy real estate: 1) the purchase of titled property, and 2) the purchase of rights of possession (derecho posesorio). Titled land, and the process of buying this, is similar in concept to that in the U.S., and land and deeds are duly recorded with the Public Registry (Registro P?blico). “Rights of possession” is an entirely different process, a kind of squatter's or concession rights. For rights of possession on the mainland, it might be possible to convert this later to a titled property; on islands and coastal and border areas, it is much more difficult if not impossible. Many areas in and around Bocas del Toro, including beachfront and island properties, are government property, and cannot be owned, although there are very limited and complicated exceptions. One should not buy "non-adjudicable" lands (?reas inadjudicables) unless the purchase is from the Government of Panama. Ultimately, there is only one way to acquire property in Panama to the fullest extent of the law: titled land. Rights of possession is not titled land.

TITLED PROPERTIES: Panama has a reliable Public Registry system, and this office maintains a record of all titled properties throughout most of Panama. Information regarding titled properties is readily available through the Public Registry, and is a fairly routine process to undertake through due diligence on a lot or property (finca). Your attorney can issue you in writing an abstract title of the land, along with any and all liens, mortgages, covenants, encumbrances, maps, verification of tax payments and utility bills, special characteristics, ownership history, fence lines, encroachments, shared driveways, and registered surface area, and can verify that the person who is selling the property is the actual owner.

RIGHTS OF POSSESSION: Not all properties in Panama are of private domain and thus are not subject to Public Registry registration. Such properties are public property, and can rarely be owned or titled outright. In such cases, it might be possible to obtain "rights of possession," a kind of squatter's or concession rights, as an alternative to title, permitting one to acquire a right to possess based on the occupation and use of a certain area of land over time. (Think of trying to "buy" parts or all of the Grand Canyon, New York's Central Park, or the Washington Mall. You obviously cannot. However, a U.S. rancher can buy grazing rights in a U.S. national park, a company can buy limited use of national lands for mining or drilling, and a company can gain a concession to build a restaurant within a national park. But none will ever hold title.) Much of the property in and around Bocas del Toro, beachfront properties, islands, and areas in rural, agricultural and special tourism zones, are government-owned. In some cases, titles are held by families from many generations back and obtaining rights of possession might be possible, but the buyer would still have to pay for the land when and if, he or she obtained the title. This is a risky method of acquiring real estate.

It is important that all properties undergo a title search before purchasing. There are potential conflicts in owning rights of possession. Properties can be subject to third-party and and/or conflicting claims of ownership, and the vagaries of Panamanian law and local politics. It might be possible that the original owner return to claim it, or the government could exercise its right to re-occupy it without compensation or warning. For titled property, no one can do this without following a condemnation process similar to that in the U.S., with the owner compensated for land and improvements. Rights of possession are handled and recorded by the Ministry of Agriculture's Agrarian Reform Office, not the Public Registry.

Although Panama law allows nationals and foreigners to purchase titled property in many parts of Panama, it is important to note that Article 121 of the Panamanian tax code states that foreigners and Panama corporations with foreign ownership cannot purchase property located less than ten kilometers from borders, or on most islands. Although some have contested the constitutionality of this law, until this situation is resolved, buying such property remains a risk to foreign investors. Exercise caution of "Panamanian corporations" that appear to grant entitlement to such lands.

Another important difference between titled property and rights of possession is that the latter cannot be mortgaged. This makes sense: if you do not actually own the land (hold title), you cannot mortgage it. The buyer should ensure that the activity contemplated is allowed, that the construction is acceptable to the government, and that the award be extensive for a period of time suitable to the purchaser. The length of the transaction process for the possession rights transfer varies and can take months, depending on many factors, such as the date of recognition of these rights and the granting entity's inspection, etc. Many land developers in these areas have already procured the rights of possession documents and transfer the ownership of them by means of the sale of a Panamanian corporation and its assets. Aside from the problems with this (stated above), be aware that corporations might have other businesses besides that related to the property, and there is no official registry of this.

LANDS IN NON-ADJUDICABLE AREAS (?reas inadjudicables or ?reas insulares). These are lands that the government has set aside and are NOT subject to title or rights of possession.

CONTRACTS IN ENGLISH HOLD NO LEGAL WEIGHT IN PANAMA. All juridical processes in Panama are conducted in Spanish. For any real estate transaction in Panama, a contract written solely in English carries no legal weight, and is generally not recognized. All contracts for property must be in Spanish on a formal public deed, and signed before a public notary, in order to be legally enforceable and to be filed at the Public Registry.

GET PROFESSIONAL HELP. Buying real estate in a foreign country should not be guesswork. As when purchasing real estate in the U.S., common sense should be the guiding factor. Again, engaging a reputable attorney and licensed real estate broker is recommended. Even some Panama City-based real estate lawyers might not be fully familiar with such intricacies as land law in certain areas, e.g., Bocas del Toro.

Panama's Bar Association and Supreme Court advise that the Supreme Court issues a "Certificate of Good Standing" to lawyers. The Court receives complaints about lawyers and decides whether to sanction them. This certification may be requested via fax or mail from the Panamanian Supreme Court from: Lic. Carlos Cuestas, Secretario General de la Corte Suprema de Justicia Organo Judicial, Calle Culebra, Edificio 236 and 237, Ancon, Panama, Republic of Panama. Tel: (507) 262-8358, Fax: (507) 262-2505. Note that such a certification is still no guarantee.

The Embassy also maintains a list of lawyers; write us at panama-acs@state.gov for the list. The Embassy assumes no responsibility for the professional ability or integrity of the persons or firms whose names appear on this list. They are, however, selected with care.

REAL ESTATE TRANSACTIONS IN PANAMA are usually done in two steps. The Promise to Purchase Agreement is a preliminary contract between the buyer and seller, and gives the buyer time to work out financing and due diligence before committing to buy. It also can be used to get the seller to meet certain commitments and conditions before the sale occurs, and list "contingencies" under which the buyer can be released from obligation to buy if questions are not resolved, or if hidden defects are later found. Only when the buyer is completely satisfied should the sale close. If the buyer is satisfied, a Purchase and Sale Agreement (or Contract) is made in the form of a public deed and registered at the Public Registry of Panama, at which time the buyer becomes the owner.

The safest way to pay is by an irrevocable letter of payment issued by a bank, contingent on receiving from the seller proper title to the property. The bank holding the funds issues the irrevocable letter of payment to the seller and pays it as soon as it is presented with the registered public deed transferring title to the buyer. The buyer often opens a bank account (or gets a mortgage) and then formally requests that the bank issue this letter, which is considered to be an appropriate form of payment. If the buyer does not obtain a mortgage, he pays the bank for this service.

Real estate agents normally get paid only when the sale closes. Contracts signed are legally binding documents, and you should ensure that you have read and understood them completely before signing. While a good real estate agent can help you through the steps of buying, he cannot provide you with legal advice; an attorney does that. Escrow and title insurance are not generally used or needed in Panama, as such functions are performed by the bank and Public Registry, as described.

COMMODITY SPECULATIONS: Commodity investments and speculations, such as for noni and teak require extreme caution. For these crops, proper growing climates and soil conditions are very specific. Teak is not native to Panama. Projections and assumptions about noni and teak involve highly uncertain factors such as availability, price, vagaries of season, changes in government, crop yields and quality. There are no guarantees.

 
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