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March 3, 2008

Property Investment in Panama

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by Brian Turner


Investing in the Property Market of Panama

Panama is a property market that is on the rise, and currently it is a market dominated by retirees and investors. Many major developments are being constructed (including a Trump project expected to reach the $400 million mark). The interest has sparked a boom in the prices – not only in properties, but in construction materials and even labor as well.

Although the increase in values has started to slow a bit, the future projects still are expected to reach just below 10%. The government is working hard to keep up with the property boom with airport expansions, road improvements and many more infrastructure developments.

Although the property market is booming at present, and the tourism industry is helping to drive both the property and the economy, many of the local residents still live below the poverty line. Unemployment looms, mainly because the labor that is needed to match the economic improvements is not currently available in many of the Panamanian workers.

Many experts recommend you establish a Panamanian Corporation to hold property in the country. It will protect you from any legal proceedings in your home country AND it will also offer you some protection from government seizure in Panama.

Buying a Titled Property

Enter into a “Promise to Purchase Agreement.” This will give you time to do all the research necessary and to acquire any financing that is needed. The agreement must be recorded in the Public Registry.

Perform a due diligence of the property – this includes a title search, map reviews, research of tax status (to be sure the property is in good standing) and utilities. The purpose is to ensure that the property you are purchasing does not have any limitations or encumbrances on it.

Once everything is found to be in good standing you can proceed with a “Purchase and Sale Agreement.”

Purchasing Possession Rights Properties

Be sure that the land you are acquiring is being issued by the correct authorities. Some properties are managed by the national governments and some are managed by the local municipal governments.

Make sure the award (the document showing the purchase agreement) includes a complete description of the property – including any limitations, all boundaries, and encumbrances that are included, and all other details of the land. There should also be complete blueprints which have been approved.

Confirm ahead of time that any activity you will be taking on the property is allowed by the government that owns and manages the property.

Weigh the cost of the property with the time restrictions for possession to be sure that you will be able to create a profit from the transaction.

There is no uniformity in the way that “possession rights” are granted. Review each transaction before entering into any agreements.

“Possession rights” transfers can take up to six months to complete.

Terms to know:

Registro Public – Public Registry Office that keeps records of all titled properties in all the nine provinces of Panama.

Derecho Possessorio – Properties that are owned by the governments (national or local) who grant “possession rights” for these properties for a limited period of time.

Additional Tips:

• It can take up to 44 days to close a property transaction in Panama.
• Be sure to talk with the owner of the property. Agents in this region have been known to request a higher price than the owner is asking and then pocketing the additional monies (plus the agent fees as well).
• Properties that are bought with “possession rights” can not be mortgaged.
• Buyers only pay the lawyer/notary fee which is 2% of the purchase price.
• Foreigners can buy most properties in Panama. The few exceptions include islands and properties located close to the frontiers.

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