Not all Panama real estate is titled. A buyer needs to know if he is purchasing “Titled” (actual ownership with a deed) property or “Rights of Possession” (ROP), and the process for buying the two types of Panama properties differs. Continue reading, and learn how to buy real estate in Panama.
Titled Panama Real Estate
The safest way is to own and buy Panama real estate is by having a deed recorded with the Panama government’s Public Registry in your name or in the name of an entity owned by you such as a Panama corporation or a Panama Private Interest Foundation. A recorded deed allows lenders to feel secure with loaning money to purchase titled property with a mortgage secured by recording a lien on the property.
Titled Real Estate Purchasing Process
a) Negotiate: Real estate agents are available to negotiate the price and terms on behalf of foreigners in Panama. If you negotiate directly with a property owner be sure to agree upon all important terms. Then hire a competent Panama lawyer to prepare a written purchase contract using those terms.
b) Promise to Purchase Contract: The buyer promises to purchase the property in a formal written contract. A small down payment is generally required when this contract is signed by the parties. Now the property is held open to give the buyer time to research the property’s condition and verify the seller is really the owner. Register this contract with the government Public Registry to give notice to other potential buyers that the property is unavailable.
c) Search the Title: A reliable attorney can be hired to go through Public Registry records confirming the seller is the true owner along with any liens on the property. The lawyer can also research encumbrances or other problems related with the property. Hire a licensed surveyor to confirm boundaries on raw land. The attorney can also research the government utility agencies to make sure all bills are paid for water and sewer services.
d) Buy-Sell Agreement: This is a second contract after the title and utilities are researched and the buyer is ready to close on the purchase. This contract usually is the deed. An escrow agency can be hired to hold the funds and make final payment and file the title transfer deed at the Public Registry.
e) Transfer of Title: In the U.S. this is known as the “Closing” when title transfers to the buyer where the Buy-Sell Contract is recorded with the Public Registry.
Rights of Possession (ROP)
Panama’s government owns a lot of land allowing persons to “possess” the land to make improvements. Known as “Rights of Possession” (ROP), this right passes onto to the next generation and this right can be sold to third parties (which includes foreigners).
A ROP is a simple document which certifies possession rights to particular government property. ROP certifications can be issued by municipal mayors, sheriffs, or governmental agencies. Property taxes are exempt for ROP because they are owned by the government. However, erecting structures can be subject to property taxes once the improvements are registered.
ROP properties can’t be mortgaged because they are owned by the government.
The Public Registry does not record ROP’s, only property title deeds. There is no central data base for Rights of possession properties. This creates confusion and conflicts between different people claiming to have ROP on the same property.
Two Types of Rights of Possession Property in Panama
1. Most islands, beaches, and marine floors are owned by the national government maintaining its rights up to 200 meters from the high tide mark. These properties are administered by the Ministry of Economy and Finance.
2. Land used for agriculture is administered by the Ministry of Agriculture which can grant title for agricultural uses.
Researching Rights of Possession
Since there is no central place for recording ROP’s, one must research local municipalities, the government property registration offices (Catastro) in each region, sheriffs or justices of the peace (Corregidors), and the government’s Agrarian Reform Department to locate ROP documents.
ROP’s are available to Foreigners A foreigner can purchase ROP’s from Panamanians or other foreigners.
ROP’s can be Titled There is a process for petitioning the government to convert a ROP into titled property. Basically, the government sells the land to the possessor who obtains a deed and records it at the Public Registry.
Process for Purchasing Rights of Possession
1. Promise to Purchase Agreement: The Promise to Buy Rights of Possession Property Agreement usually requires a small deposit when signed by the parties. Make sure there is sufficient time to do due diligence and obtain the funds to close the purchase. This contract can’t be filed with the Public Registry. Use a Notary Public to authenticate all signatures.
2. Due Diligence: Since the Public Registry does not file ROP’s; the due diligence is more complicated than for properties with title. The following are the necessary steps for ROP due diligence:
a) Certification of ROP Verification: Find the government or municipal agency which issued the ROP to confirm that the possessor has the right along with verifying the property description, size, area, location, and boundaries.
b) Survey Verification: Find the original survey and verify that it is signed and stamped by a licensed surveyor. The survey should have the name of the possessor, property location, and other information found in the Certificate of Possession Rights.
c) Inspect: Do a physical inspection confirming the actual occupation and there are no opposing third parties. Talk to any neighbors to ensure there are no border disputes. See if the land is fenced and borders marked.
d) Permit Verification: If the buyer wants to develop the land make sure there are no municipal or national rules prohibiting the type of development.
3. Buy-Sell Agreement: When verifications are complete a Buy-Sell Contract is prepared. An escrow agent can be used to make the final payment upon the Possession Rights Certification being transferred to the buyer’s name. Since the contract can’t be recorded at the Public registry make sure a Notary Public authenticates all signatures.
4. Conveying the Possession Rights Certification: When the buy-Sell Contract is signed by all parties the ROP ownership transfers to the buyer in the Certification of Possession Rights. If the ROP is in a corporation’s name and the seller wishes to sell the shares of the corporation, hen only the corporate shares are being sold as the ROP remains in the corporation’s name. This is a faster and easier option than re-issuing the ROP certifications to the new buyer’s name.
Panama Concession Property
National protected properties such as parks, islands, and coastal areas are usually not titled. However, the government can grant Panama “Concessions” so the land can be used for commercial purposes. Usually, Panama Concessions are granted for hotels and marinas or other specific uses.
A typical Panama Concession is for 20 years and is renewable. Sometimes, a concession can be granted for 40 years and is renewable for specially designated tourist areas.