The Property Banks Buyers Guide to Panama
Buying real
estate in Panama can be a confusing experience, and full of
uncertainty. You probably have never done it before and have a lot
of questions. Land Capital offers you transparency and an answer to
all your questions.
What are foreigners rights?
Foreigners can buy and own property in Panama with the same rights
and protections as Panamanians citizens. In 1998, the Investment
Stability Law was created to encourage foreign investment. 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 a company, 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, the government
also grants a one-time exoneration from import duties to help in
construction, remodeling, and furnishing of building.
What does titling mean?
The Republic of Panama is blessed with one of the most sophisticated
and reliable Public Registry systems in the region. The Public
Registry Office keeps record of all titled properties in all nine
(9) provinces of the Republic of Panama .
Persons interested in acquiring titled property must follow these
steps in order to successfully undertake and minimize the risk of
their transaction.
1. Perform a complete due diligence of the property, including a
complete title search, review of cadastral maps, verification of tax
good standing of the land, verification of good standing in utility
bills (water and sewage, electricity, telephone, etc.), as well as
verification of any other special characteristic, limitation or
encumbrance over the property.
2. Enter into a Promise to Purchase Agreement to secure the property
in order to have enough time to properly execute the due diligence
regarding the property, obtain financing and arrange details. This
agreement shall be duly recorded in the Public Registry in order to
affect third parties.
3. Enter into a Purchase and Sale Agreement. It is important to
include an indemnification clause in the event of hidden defects of
the property.
4. Ownership of any real estate property is confirmed once the
public deed containing such an annotation is duly registered.
Generally, payment is not delivered to owner until the proper
transfer of ownership is undertaken, while in others, the parties
agree to appointing an escrow agent (lawyer or banker) who receives
the funds under an escrow agreement which states that payment will
be made immediately upon presentation of the deed of transfer of
ownership of the property, duly recorded at the Public Registry
Office.
These types of investments are the ones that benefit the most from
the purchase of title insurance, which is very traditional and
popular in the United States of America . Title insurance has been
well received in Panama since it provides assurance of the
investment on both the land and the improvements to be made on the
same.
What are "Possession Rights”?
Not all properties in the Republic of Panama are of private domain
and are subject to registry in the Public Registry Office. Many
beach front properties, islands and real estate in special tourism
zones such as “Bocas del Toro” and “Portobelo” are owned and managed
by the national or local municipal governments and only “possession
rights” are granted for a determined period of time over these
lands.
Possession rights are basically land use acknowledgments which are
essentially recognized based on the occupation and use of a certain
area of land over time.
Persons interested in investing in projects located in these
restricted areas should ensure that the award of the “possession
right” or “Ltd ownership” be duly granted by the pertinent national
or local municipal government authorities. In this sense, it is
important to verify the following aspects before investing in this
type of real estate:
1. That the award of the piece of land is issued by the correct
authorities.
2. That the award contains a complete description, including limits,
boundaries, encumbrances, and other important details of the land. A
complete blueprint shall be drawn and approved.
3. That the the activity to be undertaken by the purchaser is
allowed, that is, that the construction or building to be made is
acceptable to the national or local government.
4. That the award be extensive for a period of time suitable for the
purchaser.
5. Due to the lack of uniformity regarding the granting entity for
“possession rights” it is of utmost importance to review each
purchase individually and make recommendations specifically for each
land option.
The length of the transaction process for the possession rights
transfer will vary and can take up to 6 months, depending on many
factors, such as the date of recognition of the possession rights,
inspection by the granting entity, among others.
Other Alternatives for Purchasing Property in Panama
Purchase of a property by means of the acquisition of a Panamanian
corporation which already owns the land is an alternative that may
be considered by investors interested in purchasing land, provided
that a full due ddiligence is made on the corporation and the seller
makes substantial representations assuming full responsibility for
the corporation's previous activities.
Other methods for the transfer of property are donations or
legacies, which follow a completely different procedure, and most
likely will not be an alternative for foreign investors looking to
invest and/or retire in Panama .
Can I get residency?
If you want to work or live in Panama you need some type of a
permanent visa. This must be done through a Panamanian lawyer or law
firm. Panama 's immigration law is not found in just one section of
the law. There are many laws having little to do with immigration
which contain provisions to attract immigrants who will invest in
farming (agriculture), tourism, scientific research and other worthy
goals.
The least amount of hassle and paperwork is the pensioner visa.
However, this is not the only alternative for residency in Panama ,
and is obviously only available to those persons who receive
pensions or social security payments.
The options available:
Reforestation visa – invest at least $40,000 in a reforestation
program
General Investor — you must invest at least $150,001 in a business
that the government considers socially beneficial;
Pensioner or Retiree — you must show that a retirement or disability
pension from abroad yields you a monthly income of at least $500,
plus another $100 per month for each dependent;
Self Economic Solvency – you must show sufficient economic means to
provide for yourself and family. This may be depositing or
purchasing property for at $200,000 or more.