Panama Investing Step by Step

A step by step guide for investing in Panama
We often remain unconfident, confused and hesitating when it comes to investing in real

estate. In most of the countries of the world, real estate purchases or investments can be

tiring and complicated process. Well, it is not so in case of Panama. Many say that

investing in Panama is as easy as buying a household item. The country has a very liberal

and convenient set of laws that regulate foreign investment in real estate sector. The

following write-up would try to give you a step-by-step guideline to secure a real estate

investment in Panama.

The Steps

Step One – Choose your property! This could be an intriguing experience. There are numerous

free brochures, publications and web sites that offer a wide range of Panama real estate.

Once you have made your choice, talk to the seller or real estate broker to negotiate terms

and price options.

Step Two – Select a qualified attorney for conducting an efficient due diligence and title

search. There are many professional attorneys in Panama. Choose from the ones that you know

or the one who is recommended by a successful investor amongst your friends or relatives.

Task him to establish necessary contacts with the broker, search for titles and other real

estate documents that your desired real estate must have.

Step Three – The hired attorney must then prepare a ‘Promise to Buy/Sell Contract” with

terms of the agreement written on it. This will facilitate a lock-in into the property and

transfer funds to escrow account and allow conducting due diligence.

Step Four – Attorney prepares a ‘Final Buy/Sell Contract’ once the real estate title has

been found genuine. A final closing is thus scheduled at the discretion of the parties

involved.

Step Five – Make payments to seller, broker and the attorney from the escrow account. This

step may also involve payments after property registration.

Step Six – The Buy/Sell Contract is finally registered at the Public Registry and the title

is transferred to the new owner.

We can help you

Your post-retirement plan may include investment in the tropical paradise of the Republic of

Panama by acquiring a land for reforestation, owning a second home or a beach-front

property. All these require a thorough knowledge about the property and associated

legalities involved. Knowledge like your property’s limits and boundaries, registered value,

tax and other liabilities, official blueprints etc. would add to the safety and security of

your ownership.

Property ownership can be achieved in different ways in Panama. We shall help you in owning

a property starting with the review of the ‘titled property’ with records of Public Registry

office. We shall also analyze the purchase of a ‘possession right’ and its related legal

affairs. ‘Possession right’ properties are basically those which are located in the

historically protected areas like Bocas del Toro, Portobelo etc.

‘Titled’ Properties

Panama’s Public Registry has the most reliable and modern systems in the region. It

systematically maintains records of all titled properties in all nine provinces of the

Republic. Readily available information regarding tiled properties makes the process of

preliminary due diligence quite simple.

Steps in acquiring a titled property

If you intend to acquire a titled property without the risks involved, you must follow the

steps below:

Step One – Carry out a thorough due diligence which includes complete title search, good

standing verification for tax and utility bills (water, sewerage, electricity, telephone

etc.), review of cadastral maps, special verifications, limitation and liabilities of the

property.

Step Two – To allow sufficient time and efficient execution of the due diligence, obtaining

finances and arranging other details, you should enter into the Promise to Purchase

Agreement that secures the desired property. This agreement is properly recorded in the

Public Registry office to affect third parties.

Step Three – Once the due diligence and its recordings are over, enter the Purchase and Sale

Agreement that allows inclusion of an indemnification clause. The clause handles the hidden

defects (if any) of the property.

Step Four – Arrange registering the public deed with appropriate annotations to confirm the

ownership. A proper transfer of ownership mentioned above initiates the payment.

Alternatively buyer and seller may mutually agree to appoint a lawyer or a bank as their

escrow agent. The agent holds the payment transfer under an escrow agreement till the deed

of ownership transfer is presented. This deed needs to be duly recorded at the Public

Registry office.

Purchases like the one mentioned above derive benefit from the ‘title insurance’ – a popular

insurance system in the U.S. and now in practiced in Panama. The insurance gives assurances

of the land and land-improvement investments.

Laws of the Republic of Panama allow foreign ownership of titled properties. However,

Article 121 of the Tax Code prohibits foreigners in owning a land which is less than ten

kilometers from the national frontier. The Article is also applicable for possession right

properties.

‘Possession Rights’ Properties

Real estate properties in Panama also include many properties at the tourist zones, beach

fronts or islands that do not belong to private domain and hence are not subject to Public

Registry. These properties are mostly nationally owned or owned by the local municipal

governments. Instead of ownership, ‘possession rights’ over these properties are granted to

interested real estate investors. The right is naturally limited to a timeframe. As the name

implies, ‘possession rights’ properties are in fact, land use acknowledgements that

establish occupation right over a period of time. They are at times called as ‘limited

ownership’.

Important issues to remember

If you are interested in investing in the ‘possession rights’ properties you need to check

very carefully that such awarding is granted by the competent authority of the local

municipal government. In this context please do the following:

Verify that the granted ‘possession rights’ is from appropriate authorities.
Check out the award for a complete description of the properties including liabilities,

limits and boundaries, cadastral maps, approved blue-prints and other associated details.
Confirm that your desired or planned activity on the acquired land like building a home or a

resort is allowed by the national or local governments’ rules.
Verify that the award is extensive for a time that meets your investment needs.
Due to variance in the details for granting the award, each ‘possession rights’ property

purchase should be individually handled and reviewed and recommendations made accordingly.
There are several factors that determine the length of time for a possession right transfer

like possession rights recognition date, inspection by authorities etc. Depending on these

the transaction process may vary and take up to six months.

Special caution needs to be exercised when transfer of possession rights involves a

Panamanian corporation. Many land developers buy the possession right titles and transfer

the ownership by selling corporate assets. These types of transactions may involve non-real

estate type businesses for which an official commercial registry is normally not available.

Possession rights properties are mostly located in the islands and in areas of Bocas del

Toro near the Panama-Costa Rica border. A special attention is to be given to Article 121 of

the Panamanian Tax Code that outlines the restrictions and legalities. Recently lawyers from

Business Panama have filed a lawsuit declaring the Article to be unconstitutional. A

commission formulated by the national government of the Republic is reviewing the issue. But

till the time there is a court verdict, the risks remain for the potential investors in

these areas.

Other property purchase options available in Panama.

Purchasing real estate properties through acquiring a Panamanian corporation that already

owns a land/property may be an alternative process of investment in Panama. This has to be

done with a thorough due diligence conducted on the corporation. Assumption of full

responsibilities for the corporation’s past activities and proper representation of the same

must be looked for in this investment option.

Besides the ‘corporation’ option, ‘donation of legacies’ is another way of acquiring real

estate properties. This option, however, may not be a good one for foreign investors due to

its procedural different and complexities.

Conclusion.

Investment in Panama offers you happiness and luxury that you dreamed all your life. In the

picturesque landscape of this tropical paradise of Panama, acquiring a real estate property

could give you highly profitable outcome. To secure a profit generating real estate

property, attention to legal issues and due procedures cannot be overemphasized. The above

text aimed to provide the necessary information for owning a hassle-free property. To sum up

the entire procedure of acquiring a real estate property in Panama following remain to be

the simple yet essential steps:

Conducting thorough due diligence of the desired property by a qualified attorney.
Promise to Purchase Agreement duly recorded in the Public Registry office.
Purchase and Sale Agreement with appropriate indemnification clause.
Payments after complete transfer of title ownership/possession rights through a Public deed.
Guarantee of investment by a comprehensive title insurance.
Once you follow the above steps with the assistance of a qualified real estate attorney,

your investments in the Republic of Panama would remain secured and properly documented.

Following appropriate procedures of real estate investment would grant you access to a host of financially lucrative and functionally effective investment incentives.