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Buying Real Property In Panama
he Difference between measured and properly recorded in
Titled and Rights of Panama’s Public Registry office
Possession Properties verify one’s real property
“title”. These verifiable,
There is a lot of confusion when guaranteed rights allow banks to
foreigners look to buy real issue mortgage loans for titled
estate in Panama. That’s because properties by registering liens
some sellers have actual “title” against one’s title as
and others only sell their rights collateral.
to “possess” a property.
Moreover, deeds of title are Purchasing titled property is
different in Panama from the simple by following these
United States or Canada. procedures:
Let’s clear up this confusion. a) Negotiation: If you are
Panama recognizes three different dealing through a real estate
types of real properties: Titled, agent, make sure all of the terms
Rights of Possession, and and conditions are clear and in
Concessions. writing. Make sure that the
written contract clearly sets
1. TITLED PROPERTY forth the payment amounts and
dates. If you are dealing
Titled property is similar to directly with the seller, all
“fee-simple” title in the United terms should be clearly
States and is the most secure understood before hiring an
form of real property ownership attorney to prepare the written
in Panama. The Constitution of contract.
the Republic of Panama guarantees
the right to own private b) Promise to Purchase Contract:
property. Titled properties Instead of a Purchase & Sale
Agreement (common in the United title. Title Search also includes
States), the buyer and seller reviewing the catastral survey
initially sign a Promise to map. In many cases, a
Purchase (the property) Contract. professional surveyor will verify
A small down payment when signing the map points on the property to
a written Promise to Purchase avoid future boundary conflicts.
Contract secures the property Finally, have your lawyer verify
while the buyer conducts a title the main utility debts (water &
search to verify the seller’s sewer) with the government agency
ownership. In the meantime, the providing them (IDAAN).
purchaser arranges for financing
(if not paying fully in cash) and d) Buy-Sell Contract: Upon
setting up a corporation (if conclusion of the Title Search,
applicable) to hold title. the parties sign a formal
Register this contract at the Buy-Sell Contract (also known as
Public Registry to prevent the Public Deed of Title Transfer).
seller from selling the property The escrow agent pays the
to another party prior to the seller’s final balance and
Closing. transfers title into the buyer’s
name. I highly recommend using an
c) Title Search: Once you sign established Escrow company to
the Promise to Purchase Contract, protect both parties.
you should hire a competent
attorney to conduct an e) Title Transfer: This process
investigation of the seller’s is known as the “Closing” in the
title at the Public Registry. The United States. Property ownership
lawyer will also verify that the officially transfers to the buyer
property is free and clear of any when both parties sign the
encumbrances, liens, and other Buy-Sell Contract (Public Deed of
issues affecting transfer of Title Transfer) and registers it
with the Public Registry. If of the title transfer in the
title is in a corporation’s name Public Registry. The “Promise To
and the buyer chooses to, the Pay Letter” guarantees payment to
seller merely transfers the the seller by a local bank while
corporation’s sharesto the buyer assuring the buyer that payment
without transferring title. In is not made until actual transfer
order to facilitate the Closing of title.
by assuring the seller will be
paid and the buyer will receive 2. RIGHTS OF POSSESSION
full Title; the attorney prepares
a “Promise To Pay Letter” from a This is similar to “squatter’s
local bank. This letter rights”. This is where government
guarantees full payment to the owned property is “occupied” by a
seller when the Title Transfer Panamanian (or entity) over time.
registers at the Public Registry. Possession rights granted to the
squatter through a simple
Problem Solved: The “Promise To certification document issued by
Pay Letter” solves a typical either municipal mayors,
Closing problem. Sellers usually sheriffs, or other government
require full payment when they agencies such as the Agricultural
sign the Public Deed of Transfer Reform Department (Reforma
prior to the actual registration Agraria). There are no property
of Title Transfer at the Public taxes because the possessor does
Registry. There have been not own the property. However,
instances when the seller any structures built on the
received full payment, but the property may incur municipal
Deed was not registered (or the and/or national taxes if they are
government rejected the deed). registered. Possession rights
The buyer did not become the new become titled by purchasing the
owner because there was no record property from the government.
However, certain coastal areas, procedures on Possession Rights
national parks, or islands are property is more complex. Panama
“protected properties” where the has no central database of
possessor can apply for an Possession Rights properties.
administrative “Concession” over Therefore, buyers of Possession
the land guaranteeing use of it. Rights should take extra
precaution during the due
To acquire possession rights over diligence process. Generally, the
a property, it is important to extent of the due diligence
follow these steps: investigation that one can
realize on Possession Rights
1. Promise to Purchase Contract: property is the following:
Pay a small down payment at the
signing of the Promise to a. Verification of Certification
Purchase Rights of Possession of Rights of Possession: The
Contract securing the property Certification of Possession
and providing enough time for the Rights validly issued from a
due diligence. During this time, competent government authority
the buyer coordinates payment containing the possessors’ name
arrangements for the closing. and correct description of the
Contracts for the purchase of property in terms of location,
Rights of Possession cannot be size (area), limits, boundaries,
registered at the Public and neighbors on all sides.
Registry; therefore, a public
notary should authenticate them. b. Verification of Survey: A
survey stamped and signed by a
2. Due Diligence: Unlike titled professional, licensed, surveyor
property that is easily engineer. This identifies the
verifiable through the Public possessors’ name, location and
Registry, the due diligence reflects the same information in
accordance with the Certification 3. Buy-Sell Contract: After
of Possession Rights. verification, the seller expects
the final balance at the signing
c. Inspection: The main elements of the Buy-Sell Contract. If you
to verify are: physical use an escrow agent, payment of
occupation, no opposition by the final balance is made once
third persons, and good faith. the Possession Rights
Your surveyor identifies and Certification transfers to the
marks the points of the property buyers’ name. Contracts for the
confirming these points with the purchase of Rights of Possession
neighbors to ensure that there cannot be registered at the
are no future Public Registry; therefore, a
boundary conflicts. This requires public notary should authenticate
a physical inspection. In them.
addition, the property should be
marked and fenced, delineating 4. Possession Rights
the boundaries. Certification Transfer: The
possession rights over the
d. Permit Verification: In some property officially transfers to
cases, if the buyers’ intentions the buyer in the Possession
are to build a certain type of Rights Certification. This occurs
structure or project on the immediately after each party
Possession Rights property (for signs the Buy-Sell Contract. If
example, a marina, port, hotel, the possession rights are in a
airstrip, etc.), it is necessary corporations’ name, the buyer
to verify if there are any agrees to purchase the
national or municipal regulations corporations’ shares. Then there
prohibiting those activities in is no transfer of Possession
the area. Rights Certification, only a
transfer of the corporation
shares to the buyer. ownership arrangements, which are
very common in Mexico and other
3. CONCESSION PROPERTY resort-type coastal areas around
the world. Unlike Possession
Concession property is similar to Rights property, the government
a land lease arrangement, common through a specific contractual
in Mexico or Hawaii. This is agreement guarantees Concession
where the government grants a property. Therefore, there is
Concession to an individual or an very little risk to the investor.
entity for a specific purpose, Title insurance companies
such as a real estate generally offer title policies
development, hotel, or marina. for Concession properties.
Most Concessions in Panama are
granted for a maximum of 20-year ACQUIRING TITLE OVER POSSESSION
(renewable) periods. However, PROPERTIES
some Concessions are granted for
up to 40 years (renewable) in “Titling Process” is the official
specially designated areas such administrative procedure to
as the Amador Causeway where purchase Rights of Possession
there are commercial and property from the Panamanian
condominium developments government. You are buying the
currently being sold. Concession property from the government and
Property exists in special registering the Buy-Sell Contract
coastal or other governmentally with the Public Registry. Island
protected areas where actual properties cannot become “Titled”
title is prohibited by law. In according to the Constitution of
many cases, real estate the Republic of Panama (only
developments on Concession mainland can become titled).
properties offer investors However, there are some titled
time-share or fractional Island properties registered
before the Constitutional real estate lawyer to prepare
restrictions existed which can be your Promise to Purchase
sold. All beachfront titled Contract, to conduct a thorough
properties require a 22 meter set Title Search, and to prepare your
back due to high tide. Buy-Sell Contract. Hire a good
Escrow company to ensure that all
TITLE INSURANCE documents registered with the
Public Registry before making
Even though Panamanian laws are final payment.
setup to protect foreign
investors, you should always take If you purchase Rights of
precautionary measures to insure Possession, hire a competent real
your investment. I recommend estate lawyer to prepare your
Title Insurance for every Promise to Purchase Rights of
property transaction. This is Possession Contract, conduct Due
readily available in Panama Diligence, and to prepare your
through major international title Buy-Sell Contract. Hire a
insurers, such as LandAmerica professional surveyor to verify
Lawyers Title and Stewart Title. all-important facts. Protect your
Title policy costs are minimal original documents from loss
and the peace of mind is because they will not be
definitely worth the cost. registered.
In Conclusion: Now that you have Obtain Concession rights for
learned the different types of using government property
real property rights in Panama, whenever you can. Again, hire a
you can take steps to protect knowledgeable real estate lawyer
your investments. Look for to prepare your contracts.
“titled” properties first. Make
sure that you use a competent Finally, purchase Title Insurance
to protect your investments. rights of ownership or possession
of your new real property
With these precautions, you purchases.
should be able to enjoy full
About the Author:
Steven Rich, MBA is the Marketing Manager for Panama Offshore Legal Services at:
http://www.panama-offshore-services.com
Read more articles by: Steven Rich
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