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| "Everyone Deserves A Place In The Sun." |
| Azuero Properties |
"Useful Tips On Buying
Property In Panama"
United States Embassy
in Panama
February, 2006
Property In Panama"
United States Embassy
in Panama
February, 2006
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.
Before handing over any money, make sure you consult with a professional and do a proper due diligence
investigation over the property to ensure you aren't buying a big problem! It is important to understand the rules
and process your property transaction correctly.
Panama has three different types of property;
TITLED PROPERTY
Titled property is not unlike "fee-simple" titles in the USA. The Panamanian Public Registry has jurisdiction over
the registration of titled properties throughout the country. Titled property is verifiable through the Public Registry
system and is guaranteed by the constitution of the Republic of Panama. Titled property can also be mortgaged.
The bank will register a lien against the title as collateral on the loan. Titled properties are subject to annual
property taxes when the registered value is over US$30,000 unless the buyer has obtained an exemption for the
construction of a new dwelling. This is a pro-rated tax exoneration based on the value of the dwelling. Buying titled
property normally requires the following procedure:
1. Promise to Purchase Contract: A small down payment is made at the signing of the promise to purchase
contract. The down payment secures the property and establishes time for the title search and to coordinate
payment arrangements for the closing. Registering this contract at the Public Registry ensures the property
cannot be sold to another party during the escrow period.
2. Title Search: A proper title search includes: a) verification that the seller in fact has title to the property and it
is free and clear of encumbrances, liens, or other issues that could affect the free disposition or transfer of the
title; b) a review of the official survey map, and a professional surveyor to physically verify the map points on the
property (to avoid future boundary conflicts); c) verification of utility debts (water and sewage d) verification of
payment of property taxes and/or of the tax exemption.
3. Buy-Sell Contract: This contract is registered at the Public Registry and the final balance is paid to the seller,
or an escrow agent. Payment is made when the title is transferred to the buyers' name. Payment can be issued by
a bank, contingent on receiving from the seller proper title to the property. The buyer can open a bank account
(or get a mortgage) and then formally request that the bank issue payment as soon as it is presented with the
registered public deed transferring title to the buyer. Real estate agents normally get paid only when the sale
closes.
4. Title Transfer: The buyer officially owns the property when the title is transferred to the buyers' name. The
transfer occurs when the buy-sell contract is signed by each party and registered at the Public Registry. If the title
is in the name of a corporation, there is no transfer of title, only a transfer of shares of the corporation. The buyer
can keep the same officers in the corporation or appoint new members. Buyers of corporate titled properties
through the purchase of the corporation itself, should ensure the annual corporation tax (Tasa Unica) is up to
date. A change of corporate officers cannot be officially recorded at the Public Registry if the tasa Unica is in
arrears.
POSSESSION RIGHTS PROPERTY
Possession Rights Property is not unlike "squatters rights" common in North America many years ago. This
property is government owned but is "occupied" or "used" by a Panamanian individual (or Panamanian
organization) for some time. Possession rights are generally certified by either municipal mayors, sheriffs, or other
government organizations such as the Agricultural Reform Department (Reforma Agraria). Possession rights do
not incur property taxes, although registered improvements on possession rights property may incur taxes at a
municipal and/or national level. Most Possession Rights properties can become titled through a procedure of
purchasing the land from the government, however, the law prohibits titling of possession rights properties in
some areas such as certain coastal areas, national parks, or islands. In these cases, as an alternative, the
"possessor" of the property can apply for an administrative concession over the land to guarantee the pacific use
of it.
Acquiring possession rights over a property normally requires the following procedure:
1. Promise to Purchase Contract: A small down payment is made at the signing of the promise to purchase
contract to secure the property, establish time for the title search and to coordinate payment arrangements for
the closing. Contracts related to the purchase of Rights of Possession cannot be registered at the Public
Registry, but can be authenticated by a public notary.
2. Due Diligence: The due diligence procedures on possession rights property is more complex since there is no
central database of information on possession rights properties. Buyers of possession rights should take extra
care in their purchase. The following due diligence investigation can be done on possession rights property:
3. Buy-Sell Contract: The final balance is paid to the seller, or an escrow agent, once the possession rights
certification is transferred or changed to the buyers’ name. Contracts relating with the purchase of Rights of
Possession cannot be registered at the Public Registry, but can be authenticated by a public notary.
4. Possession Rights Certification Transfer: Possession rights for the property are officially transferred to the
buyer when the Certification of Rights of Possession is transferred to the buyers' name. Transfer to the buyer’s
name occurs when the buy-sell contract is signed by each party. If the possession rights are in a corporations'
name, there is no transfer of certification, only a transfer of shares of the corporation. The buyer can keep the
same officers in the corporation or appoint new members. Buyers of corporate possession rights properties
through the purchase of the corporation itself, should ensure the annual corporation tax (Tasa Unica) is up to
date. A change of corporate officers cannot be officially recorded at the Public Registry if the tasa Unica is in
arrears.
CONCESSION PROPERTY
Concession property is not unlike “land lease” arrangements, common in Mexico or Hawaii. Concession Property
is government owned property, where the government has granted a concession to an individual or organization
for a specific purpose, such as a real estate development, hotel, or marina. Concessions in Panama are generally
granted for a maximum of 20 year (renewable) periods. Some concessions are granted for up to 40 years
(renewable) in specially designated areas such as the Amador Causeway or where there are commercial and
condominium developments currently being sold (Naos Harbor, for example).
Concession Property is often located on islands, in special coastal or other protected areas where titles are not
permitted by law. Real estate developments over concession property often offer investors time share or
fractional ownership arrangements. Unlike Possession Rights property, Concession property is guaranteed by the
government through a specific contractual agreement.
CONTRACTS IN ENGLISH HOLD NO LEGAL WEIGHT IN PANAMA
Contracts signed are legally binding documents, and you should ensure that you have read and understood them
completely before signing.
All judicial 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
where applicable, 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. 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. 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 issue 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.
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.
Before handing over any money, make sure you consult with a professional and do a proper due diligence
investigation over the property to ensure you aren't buying a big problem! It is important to understand the rules
and process your property transaction correctly.
Panama has three different types of property;
TITLED PROPERTY
Titled property is not unlike "fee-simple" titles in the USA. The Panamanian Public Registry has jurisdiction over
the registration of titled properties throughout the country. Titled property is verifiable through the Public Registry
system and is guaranteed by the constitution of the Republic of Panama. Titled property can also be mortgaged.
The bank will register a lien against the title as collateral on the loan. Titled properties are subject to annual
property taxes when the registered value is over US$30,000 unless the buyer has obtained an exemption for the
construction of a new dwelling. This is a pro-rated tax exoneration based on the value of the dwelling. Buying titled
property normally requires the following procedure:
1. Promise to Purchase Contract: A small down payment is made at the signing of the promise to purchase
contract. The down payment secures the property and establishes time for the title search and to coordinate
payment arrangements for the closing. Registering this contract at the Public Registry ensures the property
cannot be sold to another party during the escrow period.
2. Title Search: A proper title search includes: a) verification that the seller in fact has title to the property and it
is free and clear of encumbrances, liens, or other issues that could affect the free disposition or transfer of the
title; b) a review of the official survey map, and a professional surveyor to physically verify the map points on the
property (to avoid future boundary conflicts); c) verification of utility debts (water and sewage d) verification of
payment of property taxes and/or of the tax exemption.
3. Buy-Sell Contract: This contract is registered at the Public Registry and the final balance is paid to the seller,
or an escrow agent. Payment is made when the title is transferred to the buyers' name. Payment can be issued by
a bank, contingent on receiving from the seller proper title to the property. The buyer can open a bank account
(or get a mortgage) and then formally request that the bank issue payment as soon as it is presented with the
registered public deed transferring title to the buyer. Real estate agents normally get paid only when the sale
closes.
4. Title Transfer: The buyer officially owns the property when the title is transferred to the buyers' name. The
transfer occurs when the buy-sell contract is signed by each party and registered at the Public Registry. If the title
is in the name of a corporation, there is no transfer of title, only a transfer of shares of the corporation. The buyer
can keep the same officers in the corporation or appoint new members. Buyers of corporate titled properties
through the purchase of the corporation itself, should ensure the annual corporation tax (Tasa Unica) is up to
date. A change of corporate officers cannot be officially recorded at the Public Registry if the tasa Unica is in
arrears.
POSSESSION RIGHTS PROPERTY
Possession Rights Property is not unlike "squatters rights" common in North America many years ago. This
property is government owned but is "occupied" or "used" by a Panamanian individual (or Panamanian
organization) for some time. Possession rights are generally certified by either municipal mayors, sheriffs, or other
government organizations such as the Agricultural Reform Department (Reforma Agraria). Possession rights do
not incur property taxes, although registered improvements on possession rights property may incur taxes at a
municipal and/or national level. Most Possession Rights properties can become titled through a procedure of
purchasing the land from the government, however, the law prohibits titling of possession rights properties in
some areas such as certain coastal areas, national parks, or islands. In these cases, as an alternative, the
"possessor" of the property can apply for an administrative concession over the land to guarantee the pacific use
of it.
Acquiring possession rights over a property normally requires the following procedure:
1. Promise to Purchase Contract: A small down payment is made at the signing of the promise to purchase
contract to secure the property, establish time for the title search and to coordinate payment arrangements for
the closing. Contracts related to the purchase of Rights of Possession cannot be registered at the Public
Registry, but can be authenticated by a public notary.
2. Due Diligence: The due diligence procedures on possession rights property is more complex since there is no
central database of information on possession rights properties. Buyers of possession rights should take extra
care in their purchase. The following due diligence investigation can be done on possession rights property:
- a. Verification of Certification of Rights of Possession: A valid Certification of Rights of Possession is
issued by a competent government authority, and contains the possessors' name, correct description of the
property in terms of location, size (area), limits, boundaries and neighbors (to the north, south, east, and
west).
- b. Verification of Survey: A stamped, signed survey by a professional licensed surveyor or topographer,
identifying the possessors' name, location and reflecting the same information in accordance with the
Certification of Rights of Possession is recommended.
c. Inspection: An inspection will evaluate the physical occupation, no opposition by third persons, and
good faith. A physical inspection to identify and mark the points of the property as well as confirmation of
these points with the neighbors to ensure that there are no future boundary conflicts should be done by
your surveyor. Also, the property should be maintained and fenced to clearly delineate the boundaries.
d. Permitting Verification: If the buyers' intentions are to build a certain type of structure or project on the
possession rights property (for example, a marina, port, hotel, airstrip, etc.), it is necessary to verify any
national or municipal regulations that may prohibit those activities in the area.
3. Buy-Sell Contract: The final balance is paid to the seller, or an escrow agent, once the possession rights
certification is transferred or changed to the buyers’ name. Contracts relating with the purchase of Rights of
Possession cannot be registered at the Public Registry, but can be authenticated by a public notary.
4. Possession Rights Certification Transfer: Possession rights for the property are officially transferred to the
buyer when the Certification of Rights of Possession is transferred to the buyers' name. Transfer to the buyer’s
name occurs when the buy-sell contract is signed by each party. If the possession rights are in a corporations'
name, there is no transfer of certification, only a transfer of shares of the corporation. The buyer can keep the
same officers in the corporation or appoint new members. Buyers of corporate possession rights properties
through the purchase of the corporation itself, should ensure the annual corporation tax (Tasa Unica) is up to
date. A change of corporate officers cannot be officially recorded at the Public Registry if the tasa Unica is in
arrears.
CONCESSION PROPERTY
Concession property is not unlike “land lease” arrangements, common in Mexico or Hawaii. Concession Property
is government owned property, where the government has granted a concession to an individual or organization
for a specific purpose, such as a real estate development, hotel, or marina. Concessions in Panama are generally
granted for a maximum of 20 year (renewable) periods. Some concessions are granted for up to 40 years
(renewable) in specially designated areas such as the Amador Causeway or where there are commercial and
condominium developments currently being sold (Naos Harbor, for example).
Concession Property is often located on islands, in special coastal or other protected areas where titles are not
permitted by law. Real estate developments over concession property often offer investors time share or
fractional ownership arrangements. Unlike Possession Rights property, Concession property is guaranteed by the
government through a specific contractual agreement.
CONTRACTS IN ENGLISH HOLD NO LEGAL WEIGHT IN PANAMA
Contracts signed are legally binding documents, and you should ensure that you have read and understood them
completely before signing.
All judicial 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
where applicable, 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. 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. 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 issue 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.
