PURCHASING REAL ESTATE THROUGH A REALTOR

In Panama, Law Decree 6 of July 8, 1999 and its regulations govern real estate transactions where a broker is involved.  Real Estate brokers in Panama have to renew a bond every year for the sum of US$10,000.00 to respond before the government in case of malpractice.  It is illegal to practice as a Real Estate Broker if you are not licensed.

The Real Estate Law states that the one who hires the real estate broker is who pays his/her commission, but in the practice the seller pays the broker’s commission.

Ownership of property is documented by PROPERTY TITLES written by a lawyer and presented before a notary for authentication purposes.  These PROPERTY TITLES are registered at the PUBLIC REGISTRY.

 

The following are the steps to transfer ownership of real estate

After agreeing in the price and conditions, buyer and seller can sign a Promise to Sell Agreement or can sign immediately a SALE CONTRACT before a Notary who will authenticate the signatures of both parties.
In Panama, it is customary that the buyer pays the Notary fees, the registration rights and any other legal fees involved in the transaction.  Once the SALE CONTRACT has been signed before the Notary the seller must provide a certification from the water company stating that the property does not owe any money in water concept, a certification from the Ministry of Economy and Finances stating that the property does not owe any sums in concept of property taxes.  A form from the Internal Revenue Office (Dirección General de Ingresos) should be filled for payment of the correspondent taxes, which is 2% of the registered value for the property or the sale price whichever is higher. As the law mandates, the seller should pay this tax. If the property been sold is a condo or apartment (propiedad horizontal) the seller should in addition provide a certification from the condominium board of directors or the administration of the condominium showing the seller is current with the condo dues.

Once all these steps are completed, the CERTIFICATE OF TITLE created by the notary are deposited at the PUBLIC REGISTRY where the buyer will pay the registration rights.  If all the paper work is in order the sale is recorded and the TITLE should be ready on the name of the new buyer within 5-6 working days.

DUE DILIGENCE

Before purchasing property it is recommended that the buyer retains a real estate attorney to do the due diligence.  The buyer can do it on his own, but it is always better to have an specialist taking care of these matters, specially if you don’t speak the language.

For your attorney to start the due diligence the seller should provide you with a copy of the CERTIFICATE OF TITLE (ESCRITURA PÚBLICA DEL TÍTULO DE PROPIEDAD) and a copy of his/her identification.  If the property is on the name of a corporation then a copy of the articles of incorporation should be provided.

If you are buying a furnished property, an inventory of furniture, etc should be provided and signed when signing the contract.

The attorney should ensure that no squatters’ rights of any kind exist.  If there are tenants living in the property at the time of purchase you should be aware that Panamanian laws are very protective of a tenant’s rights and trying to evict a recalcitrant tenant is expensive and time consuming.

EMPLOYEES RIGHTS

If you are buying a beach house, usually people have live in employees there.  You have to make sure that the seller pays any employees working on the property their legal severance up to the time of the closing, otherwise the buyer may find that is liable for the payment later, especially if you decide to keep the employee to work with you.

Sometimes, the real estate agent and the seller pressure the buyer into a hurried closing despite the advice of his legal counsel. Working with us you won’t have this problem since we provide you with real estate legal advice and we perform the due diligence on your behalf if you don’t want to hire a lawyer on your own.

Property transfers and legal expenses

Taxes on the conveyance of real property are of 2% over the registered value of the property or the final sale price whichever is higher.  The transfer tax must be paid before filing the TITLE at the Public Registry.
If the property is on the name of a corporation then and endorsement of the shares can be negotiated and the transfer tax wont be paid since the figure changes from the sale of a property to the sale of a corporation and its shares.