As a Foreigner in Panama if you were
to buy property you will have the exact
same rights and Protection as any Panamanian.
The 1998 Investment Stability law made
sure that foreign investment was protected
so that in the future, investment in
Panama by foreigners was seen as safe.
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
Panamanian Corporation, 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 to this the government also
grants a once in a life 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 below is taken from the US 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 Público). “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 (áreas 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
(áreas inadjudicables or áreas
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.
Index of Laws in English
http://www.loc.gov/law/guide/panama.html
