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Republic of Panama

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Panama Real Estate

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Panama has three different types of property:

Titled Property
Titled property is very similar to the titles in the USA and other countries. Panama has Public Registry with cadastral department that oversees the registration of titled properties in all nine provinces of the country. Titled property is the most preferred type because it is easily verifiable in the Public Registry system, as well as it provides the best security to an investment standpoint. The private property is guaranteed by the constitution of the Republic of Panama. Generally, banks will issue mortgage loans under the titled properties, registering liens against the title as collateral on the loan. Titled properties also generally incur annual property taxes when the registered value is over US$30,000.

 Buying titled property requires the following procedures:

1. Promise to Purchase Contract: Generally a small down payment is made at the signing of the promise to purchase contract. Its purpose is to provide enough time to settle down sale preparation procedures and coordinate payment arrangements for the closing up the deal. This contract must be registered at the Public Registry to guarantee that the property cannot be sold to any third parties prior to the final closing up of the deal.

2. Title Search: you need a competent lawyer to do a title investigation consisting of:
(a) verification at the Public Registry that the title is in fact in the name of the seller, and it is free and clear of encumbrances, liens, or other issues that could affect the free disposition or transfer of the title;
(b) the cadastral survey map should be reviewed. In some cases it is recommended to have a professional surveyor physically verify the maps points on the property, to avoid future boundary conflicts;
(c) verification of utility debts (water and sewage, power, telephone, etc.).

3. Buy-Sell Contract: This contract is registered at the Public Registry and the final balance is paid to the seller. In some cases, if an escrow agent is used, payment is made once the title is transferred to the buyers' name.

4. Title Transfer: The property ownership is officially transferred to the buyer once the property title is transferred to buyers' name. It is done after the buy-sell contract is signed by each party and registered at the Public Registry. In some cases, if the title is in a corporations' name, and the seller agrees to sell the corporations' shares, then there is no transfer of title, only a transfer of shares of the corporation.

Possession Rights Property
Possession Rights Property is similar to (squatter rights)¯. It is government owned property that is occupied¯ or used¯ by a Panamanian individuals (or Panamanian organization) over time. Possession rights are generally granted to the possessors¯ through very simple certification documents issued by either municipal mayors, sheriffs, or other government organizations such as the Agricultural Reform Department (Reforma Agraria). Possession rights do not incur property taxes. But the registered improvements over possession rights property may incur taxes at a municipal and/or national level.
Most Possession Rights properties can become titled through the procedure of purchasing of the land from the government. However, the law prohibits titling of possession rights properties in some areas, such as certain coastal strips and national parks. In these cases, as an alternative, the possessor¯ of the property can apply for an administrative concession over the land to guarantee the specific use of it.

To acquire the possession rights include the follow the following procedures:

1. Promise to Purchase Contract: Generally a small down payment is made at the signing of the promise to purchase contract, and its' purpose is to secure the property and provide enough time for the due diligence, as well as to coordinate payment arrangements for the closing.
Contracts relating with the purchase of rights of possession are not registered at the public registry, but they should simply be authenticated by a public notary.

2. Due Diligence: Unlike titled property that is easily verifiable through the public registry, the due diligence procedures on possession rights property is more complex because there is no central database of information on possession rights properties.
Generally, the extent of the due diligence investigation that one can realize on possession right property is the following:

a. Verification of Certification of Rights of Possession: The certification of possession rights should be validly issued from a competent government authority, and should contain the possessors' name, correct description of the property in terms of location, size (area), limits, boundaries and neighbors (to the north, south, east, and west).

b. Verification of Survey: The survey should be stamped and signed by a professional licensed surveyor engineer, identifying the possessors' name, location and reflecting the same information in accordance with the certification of possession rights.

c. Inspection: The main elements to verify are physical occupation, no opposition by the third persons, and good faith. A physical inspection should be realized by surveyor to identify and mark the points of the property as well as confirm these points with the neighbors to ensure that there are no future boundary conflicts. In addition, the Panama real property should be maintained and fenced to clearly delineate the boundaries.

d. Permitting Verification: If the buyers' intention is to build a certain type of structure or project on the possession rights property (for example, a marina, port, hotel, airstrip, etc.), it is necessary to verify if there are any national or municipal regulations that may create obstacles to those activities.

3. Buy-Sell Contract: The final balance is paid at the signing of the final buy-sell contract. In some cases, if an escrow agent is used, once the possession right certification is actually transferred or changed to the buyers' name. Contracts relating with the purchase of rights of possession cannot be registered at the Public Registry, therefore, they should simply be authenticated by a public notary.

4. Possession Rights Certification Transfer: The possession right over the property is officially transferred to the buyer once the possession right certification is transferred to buyers' name. It is done immediately after the buy-sell contract is signed by each party. In some cases, if the possession rights are in a corporations' name, and the seller agrees to sell the corporations' shares, then there is no transfer of possession rights certification, only a transfer of shares of the corporation.

Concession Property
Concession property is similar to that of a land lease arrangement. It is government owned property, where the government has granted a concession to an individual or organization for a specific purpose, such as a real estate development, hotel, marina, or other purposes. Concessions in Panama are generally granted for a maximum of 20 year (renewable) periods. Some concessions are granted for up to 40 years (renewable) in specially designated areas
Concession Property is normally located in specific coastal or other government protected areas where titles are not permitted by law. In many cases, real estate developments over concession property offer investors time-share or fractional ownership arrangements, which are very common in resort-type coastal areas around the world. Unlike Possession Rights property, Concession property is guaranteed by the government through a specific contractual agreement. In this way there is very little risk to the investor. Title insurance companies will generally offer title policies or guarantees to investors.

Title Insurance
Even though the law of Panama protects foreign investors, it is better to take precautionary measures to secure your investment. Title insurance is recommended for all Panama real property transactions, and is readily available in Panama through major international title insurers. Title policy costs are minimal and is definitely worth the cost.


 


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