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.