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. Property tax exemptions apply
to all new construction on a sliding scale according to value.
The following was taken from the
U.S. 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 |
