Buying A Panama Condo
Work with a real estate agent who speaks English and can show you a wide range of condominium buildings. Beware of real estate agents committed to only a few property developers or simply looking to make the biggest commissions. Then find a reliable English speaking real estate lawyer who can give you practical advice, do the title search, and draw up the necessary purchase contracts. The sales office at a specific condominium building will have the architect drawings, a model of the building along with typical floor plans. If the sales staff hands you a written contract you will find that it will usually be in Spanish. Do not sign anything until you have a licensed Panama real estate attorney review it and explain it to you.
There are two types of Panama condos for sale: Pre-construction and Existing buildings.
Panama Pre-Construction
Panama developers have a “Pre-Construction Contract” ready to be filled out by their sales staff or a real estate agent. Let us explain things a buyer should be looking out for in these types of contracts.
Many of them include clauses restricting purchaser’s rights such as the right to re-sell the condo unit before construction is completed without the developer’s consent. Such a clause requires the buyer to complete the purchase before selling to another party. The reason for such a clause is to prevent the original buyer from selling a unit for less than what the developer is trying to sell the other units for.
Panama developers also include what are known as “subjective” clauses like “possibility of a sales price increase up to 5% due to rising construction costs or materials”. Expect this clause to be enforced every time.
Panama developer’s contracts often limit their liability for construction damages to one year from the occupation permit being issued. Purchasers should be aware that Panama’s Civil Code Article 1343 holds construction companies liable for “structural” damages for the first 10 years. Thus, the one year limit can only apply to “non-structural” damages.
Panama courts have held some pre-construction contracts null and void for violating Panama’s Consumer Protection laws by having “abusive” clauses which restrict buyer’s consumer rights.
Another problematic clause requires full payment of the balance when the government issues the occupation permit which may occur when the foreign buyer is out of the country. To prevent such poor timing the buyer can acquire a bank’s “Promise to Pay” letter which guarantees payment upon issuance of the occupancy permit without requiring the purchaser to be present.
If the buyer wants the penthouse the pre-construction contract should be specific about the top floor instead of naming the 20th floor because the developer may add more floors leaving the 20th floor below the penthouse.
Another clause in which a competent real estate lawyer should include in any pre-construction contract is a “purchaser’s protection clause” in case the mortgage application is not approved by the bank. Without this clause the buyer will lose the 30% down payment.
Condominium Documents created by the Panama developer include:
Plans;
Drawings;
Articles of Incorporation;
Bylaws.
These documents are filed with the Ministry of Housing and copies can be purchased there. These documents will all be in Spanish.
Existing Panama Condominiums
The above-mentioned documents for existing condo buildings will also be on file with the Panama Ministry of Housing.
In addition, the Condo owners association will have their own rules and regulations which every owner is entitled to receive. Ask about how much funds are held in reserve and plans for future maintenance or repairs where every owner will have to contribute.
Purchasing an existing condo unit requires hiring professionals to inspect the unit’s electricity, plumbing, air conditioning, and structure.
Here are the following steps necessary to purchase a Panama condominium:
1. Promise to Purchase Contract: This will include important terms and conditions which a competent Panama real estate attorney will need to review before signing. The down payment will be paid when the parties sign this contract.
2. Title Search: The Promise to Purchase Contract should give the buyer sufficient time to verify the seller is the owner. Hire a real estate attorney to do a title search at the government Public Registry. Encumbrances, liens, existing mortgages, and other possible problems which may affect transferring ownership can be researched at the Public Registry. The lawyer can also research that all the utilities are paid up.
3. Buy-Sell Contract: After the title search is completed, a formal Buy-Sell Contract is prepared for all parties to sign.
4. Transfer of Title: Title officially transfers from seller to buyer when the Public Deed of Transfer is signed and recorded at the Public Registry. This is when final payment is made. In order to avoid paying the seller who doesn’t file the deed at the Public Registry use a reliable escrow agent who will pay the seller and personally file the deed.
If you wish to purchase a Panama condominium please don’t hesitate to contact our law offices for further details.