Panama different properties and laws that regulate them.
Below we will cover the different types of property and the laws that regulate the real estate business.
Property Titles in Panama:
Panama's land titles are very similar to those of "full ownership" in the United States.
Panama has a very sophisticated Public Registry with a Cadastre Department that oversees the registration of property titles in the country's nine provinces. The property title is the preferred type since it is easily verifiable in the Public Registry System, as well as providing the greatest security of Panamanian real estate laws, as well as an accurate point of view on investments, since private property is guaranteed by the Constitution of the Republic of Panama.
Generally, banks make mortgage loans on titled property, registering liens or liens on the title as collateral for the loan. Titled properties are usually subject to annual property tax payments when the registered value is greater than thirty thousand (US$30,000) US dollars.
Buying a titled or navigation property in Panama tied to the laws that regulate these transactions is very simple and generally requires the following procedures:
1. Purchase Promise Agreement:
Generally, the payment of the initial fee of the property is made at the time of signing the promise of purchase contract and its purpose is to secure the property and provide sufficient time to carry out the search for the title, as well as the coordination of the payment mechanisms for the closing and configuration of a corporate ownership structure or "holding" (if applicable). This contract must be registered in the Public Registry of Panama to ensure that the property cannot be sold to a third party prior to the time of final closing.
2. Title Search:
You must hire the services of a competent lawyer in Panama, specialized in real estate procedures to carry out the investigation on the property title, which consists of:
- Verification in the Public Registry that the title is in the name of the seller and is free of encumbrances, embargoes or other problems that could affect the free disposition or transfer of the title.
- The Cadastre Certificate must be reviewed, and in some cases it is recommended to have a physical inspection carried out by a surveying specialist who exhaustively verifies all the points of the property to avoid future conflicts of boundaries and boundaries with the neighbors.
- Verification of payments from Public Services (water, sewerage, electricity, telephone, etc.).
3. Purchase-Sale Contract:
This contract must be registered in the office of the Public Registry of Panama, and the final balance will be paid to the seller, or in some cases, if the figure of the company of guarantees of funds had been contracted, the payment will be made once the transfer of the title of property has been made in the name of the buyer.
4. Transfer of Title:
The property will be officially transferred to the buyer once the title is transferred to the buyer's name, which will be done immediately after the purchase-sale contract is signed by each of the parties and registered with the office of the Public Registry of Panama. In some cases, if the title is in the name of a Corporation, and the seller agrees to the sale of the shares of the corporation, only one transfer of the shares will be made.
Possession of Property Rights
Possession of property rights is similar to occupancy rights, as was common in North America many years ago and are governed by a different set of laws in Panama than that of land titles. Property rights are issued by the Government of Panama over property owned by the State, which is occupied or used by a person or organization over time. Possession rights are issued to holders through simple certification documents issued either by the municipal mayor, or another government organization, such as the National Land Administration Authority (ANATI).
The rights of possession are not applicable to the collection of property taxes, however, the registered improvements made to the property, if they could be subject to the application of the collection of municipal or national taxes.
Please note that most properties with possession rights could become titled through a land purchase procedure from the Government, however, the law prohibits the titling of properties with possession rights in some areas such as coastal areas and national parks. In these cases, and as an alternative, the holder may apply for an administrative concession on the land to ensure the specific use of the land.
To acquire property ownership rights, it is important to follow these steps:
Purchase Promise Agreement:
In general, a small payment will be made at the time of signing the promise of payment contract and its purpose is to secure ownership and provide sufficient time for due diligence as well as coordinate payment mechanisms for closing. Contracts related to the purchase of possession rights cannot be registered in the Public Registry, therefore, they should simply be authenticated by a Notary Public.
Unlike land titles, which are much easier to verify in the Public Registry, the due diligence procedure on possession rights is much more complex, since there is no centralized database where all property ownership rights are obtained. Therefore, buyers of possession rights should exercise additional caution during the due diligence process. Generally, the scope of research someone can conduct on the right of possession over a property is:
a) Verification of the Certification of the Right of Possession:
The issuance of the Certification of the Right of Possession must be validated with the competent governmental authority and should contain: name of the possessor, complete description of the property in terms of location, surface, boundaries, boundaries and neighbors (north, south, east and west)
b) Verification of the Plans:
The plans must be stamped and signed by a licensed engineer or surveying specialist, who must identify the name of the holder, location, as well as reflect the same information in accordance with the provisions of the Certificate of Right of Possession.
It is one of the main elements to verify the occupation of the property, without opposition from third parties and in good faith. The physical inspection must be carried out by your surveyor to identify and mark the points of the property, as well as confirm those points with the neighbors, in order to ensure that there are no future boundary conflicts with your neighbors. Additionally, real property in Panama must be maintained and fenced to clearly delimit the boundaries.
d) Allowing Verification:
In some cases, buyers intend to build a certain type of structures or project on the property subject to the Right of Possession, (for example, a marina, a port, a hotel, an airstrip, etc.), therefore, it is recommended to duly check if there is any municipal or national regulation that may prohibit such activities in the area.
The Final Balance will be paid at the time of signing the definitive purchase-sale contract, or in some cases, if the services of a funds custody company are contracted, once the Certificate of Right of Possession is transferred or changed in the name of the buyer. Contracts related to the purchase of Possession Rights cannot be registered in the Public Registry, therefore, they should simply be authenticated before a Notary Public.
Transfer of Certificates of Possession Rights:
The Right of Possession over the property will be officially transferred to the buyer once the Certificate of Right of Possession is transferred in his name, which will occur immediately after the purchase-sale contract is signed by each of the parties. In some cases, when the property rights are in the name of a Corporation, and the seller agrees to sell the shares of the Corporation, then in that case there will be no transfer of the Certificate of Right of Possession, but only a transfer of the shares of the Corporation.
The concession of the property is very similar to a land lease, as is very common in Mexico or Hawaii (for example). It is a government property, therefore, the State issues a concession to an individual or organization for a specific purpose, such as a real estate development, a hotel, a marina, or another project.
Concessions in Panama are generally issued for a term of 20 years (in renewable periods), however, some concessions are issued for a term of 40 years (renewable), in some specially designed areas, such as the Amador Causeway, where there are commercial projects and condominium developments that are currently being sold (Naos Harbor, for example).
Property concessions are generally located in coastal areas or other areas protected by the Government, where ownership is not permitted by law. In many cases, real estate developments on concession properties offer shared ownership investments or fractional ownership agreements, which is very common in Mexico and other coastal areas where resort-type resorts are developed around the world.
Unlike Property Ownership Rights, the concession on a property is guaranteed by the Government through a specific Contractual Agreement, which implies a very small risk for the investor and generally insurance companies offer policies to insure the titles or guarantees for the peace of mind of the investor.
Even though Panamanian laws are designed to protect foreign investments, you should always take precautionary measures to secure your investment. Title insurance is highly recommended for all real property transactions in Panama, and they are readily available through the largest international insurance companies with a presence in Panama. The costs of title policies are minimal and the peace of mind they provide pays for their cost.
Below is a table that summarizes some of these rights:
|Description||Title||Right of Possession|
|Property||Private property||*The owner is the State, only possession is acquired.|
|Concession||*Administrative Route||You can protect your investment|
|Registration||*Cadastre Inspection-Approval||*Any government authority in the area can certify the Possessory Rights (Cadastre, Agrarian Reform, Mayor / Mayor, Chief of Police / Corregidor).|
|State institution||Registration of the Title in the Public Registry||*Registration of the Transfer of the Title|
|Requirements||*Registration of the Transfer of the Title||*Registration of the Transfer of Possessory Rights, maintains possession, good faith|
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