PANAMA PROPERTY TITLES AND THE INHERANT DIFFERENCE THEY POSSES  

Foreigners can own property in Panama with few restrictions. Currently ownership can be conveyed in two ways:

1.   Title
2.   Rights of possession

Titled property is treated very similar to U.S. real estate law. Deeds are recorded in the public registry or "registro Público". Rights of possession are handled by the agriculture department and also recorded. This system was originally set up in the land reform of 1971 to encourage homesteading of unclaimed, untitled land. Most of the land traded in the islands is by right of possession with the exception of town, proper.

The most important difference in the two forms of ownership is that rights cannot be mortgaged.

Constitutionally the government cannot take possession of private property without following a condemnation process similar to the U.S.; the owner must be compensated for land and improvements at fair market value.

Regarding waterfront property, by law all beaches are public, hence all beach front properties most provided a right of way starting from the highest tide to the property line. (The distance may vary).

The technical aspects of titling a property in Panama are best discussed with a qualified Panamanian lawyer.

First, you should seek a qualified attorney in Panama to handle the due diligence and title search on the property, putting your Panamanian attorney in contact with the seller (or real estate broker) to gather copies of the property title documents and survey (if available).
 
Second, have your attorney prepare a written Contract to Buy/Sell and lock in the property sale along with the secured the terms agreed upon (a deposit of 10% is usually required by the seller upon signing the promise to buy/sell contract), plus this gives you time to do the due diligence and get your funds into the escrow account.
 
Third, once the attorney has confirmed the property title is clean, then the final closing is scheduled, where the buyer/seller sign the final Buy/Sell Contract.
 
Fourth, payment is made to the seller, broker, and attorney from escrow (in some cases, buyers/sellers agree that payment is made after the public deed of the property is transferred and registered into the buyers name). Sixth, the Buy/Sell Contract is registered at the Public Registry where they transfer the property title ownership from the previous owner to the new owner.

Q: Who normally pays for the property title transfer tax in Panama, the buyer or the seller?
A: It is standard practice in Panama for the seller to pay for the title transfer tax, however, in some cases, depending on the negotiation between the buyer and seller, the seller may insist that the buyer pay the title transfer taxes.

Q: Who normally pays for the closing costs on Panama real estate transactions, the buyer or the seller?
A: Generally, each party pays for their own closing costs. For example, the seller pays his/her attorney to review the buy/sell contract, and the buyer pays his/her attorney for drafting the buy/sell contract, doing the title search, title transfer, and escrow services. However, in some cases, buyers and sellers negotiate special terms whereby the buyer or the seller pays all closing costs, so it really depends on the particular negotiation between buyer and seller.

Q: What are the average closing costs for Panama property transactions?
A: The closing costs vary depending on the particular transaction. For example, if the property is held in the sellers personal name, and the buyer is transferring the property title to a Panamanian corporation (most recommended), then the closing costs would include; (1) the legal property transaction fee of US$1200 (includes; title search, buy/sell contract, closing, & property title transfer service), (2) public registry title transfer fees of approx. US$250 to US$350, (3) escrow fees from 0.5% to 1% of the transaction amount (vary depending on amount of transaction, see for details), and (4) incorporation fee of US$1000 + tax to setup the Panama corporation. However, if the property is already held by a Panama corporation already, and the buyer is purchasing the shares of the corporation, then the transaction is relatively simple because there is no registration of title transfer, meaning that there is no title transfer tax, and no public registry title transfer fees. In this case, the closing costs would include; (1) the legal property transaction fee (includes; title search, purchase of shares contract, and closing for US$1200), (2) change of directors / resident agent of the corporation (approx. $350), and (3) escrow fees from 0.5% to 1% of the transaction amount (vary depending on amount of transaction.

Q: How long does it normally take to register a property title transfer in the Public Registry of Panama?
A: In some cases, it can be done within 2 business days, if we pay extra for quick expediting. However, in normal circumstances, it takes from 1 to 3 weeks, depending on the volume of transactions at the Public Registry.

Q: Are escrow companies normally used in Panama for property transactions?
A: Escrow services are relatively new to Panama, so Panamanians are not very familiar with the term "escrow", although it is quickly becoming a standard for real estate transactions nationwide with more and more Panamanian realtors selling to foreigners who are accustomed to using escrow companies in property transactions.

Q: Do purchase contracts for Panama real estate transactions need to be in Spanish, in order for them to be legally enforceable in Panama?
A: No. The law does not require a buy/sell contract to be in Spanish to be legally enforceable, however, if there is ever a dispute over the transaction in a court of law in the Republic of Panama, then the court will require that the contract be translated to the Spanish language by an official (licensed) translator of that language.

Q: If I am a US citizen, can I use my IRA or 401K money to buy property in Panama?
A: Yes. There are several financial companies in the USA, who offer retirement account services that facilitate movement of your IRA or 401K funds into self-directed retirement accounts, through which you can then invest in property anywhere in the world. If you would like to receive an updated list of these financial companies (such as Pensco), please contact us for details.