In part 1 and part 2 of this series we explored the attraction of Panama as a destination to make your investment in real estate and the process, from start to finish, of buying your property in Panama.
In this part we will explore the potential perils and pitfalls that should be avoided when buying your property in this country. Panama provides excellent real estate investment opportunities but, as with buying property in any country, there are risks, problems and challenges that can be a cause of stress, financial, legal or otherwise. This article will aim to give you some handy tips and guidance so you may prevent any unfortunate events and purchase your real estate safely. Below you can see some of the most important areas to consider.
Real estate agents/brokers
When building your property purchase team, as we discussed in our article “Buying Property in Panama: Part 2”, the selection of your real estate broker is crucial.
1. Check that your chosen real estate broker is licensed
By law, a real estate broker must have a valid, active license which is issued by the Real Estate Technical Board at the Ministry of Commerce and Industries (MICI). This is the first step that should be taken when selecting your real estate agent.
To get their license, the broker must take courses, pass an exam, have no criminal record and opt for a security bond of $10,000. A licensed broker is compliant with their legal obligations in Panama including supporting their clients fully and transparently and providing all information when assisting their clients in buying and selling their property in Panama.
There are significant risks to the buyer when working with an unlicensed broker as they can be found to carry out illegal practices and unethical actions. Breach of contract, unjustified fees, missing commercial information, failure to comply with warranties are just some of the potential issues that can impact the client from financial and legal perspectives.
2. Check the real estate brokers experience and portfolio.
A licensed broker should always provide good comprehensive information on items such as the market, area, prices and laws so their client is best informed. The more years of experience in the real estate sector that the agent has, the greater the likelihood that the agent will serve you well from several aspects, such as providing you with all of the skills and information mentioned above, be fully transparent, have a strong local network of contacts so that the range of properties on offer within their portfolio will be wider.
Ownership Issues
Complications with real estate ownership in Panama can present problems. Common ownership issues are as follows:
1. Is the person selling you the property the registered owner?
Ensure your appointed lawyer checks the public registry to confirm the identity of the registered owner as the seller you are dealing with. At the same time, they can check the property is titled which is the most secure form of ownership.
2. Inherited real estate.
Under Panamanian probate law, a spouse and any children of a deceased person inherit their property, if no formal will was drafted. This can result in complex issues arising if a sale is planned. It would be wise to have your lawyer and/or real estate agent ensure that the proclaimed owner has the documentation and authority to fully support the transaction.
3. Untitled land.
Real estate that is not titled can only ever be owned by a Panamanian citizen for a minimum of two years before it can be then sold on to a foreign person. However, some untitled land can never be titled so it is worth doing your background checks before attempting to purchase and obtain a title for untitled land. Much of Panama lies in territory which is ceded in perpetuity to indigenous peoples. It is not possible therefore, to obtain a title for land in these areas.
4. Restricted real estate.
Waterfront and island real estate can be complicated. All beachfront properties must provide a public right of passage between the high tide point and property borders. Building property over water or constructing a marina requires a permit and the process will take a long time to complete, involving a lot of red tape and expense.
It is worth noting that Panama borders Costa Rica and Colombia and under Article 286 of the constitution, foreign ownership of real estate within 6.2 miles of an international border is prohibited.
Other risks to avoid
Pressure to buy quickly.
Some real estate brokers, and even other representatives that may be involved in the transaction have been known to attempt to persuade the foreign buyer to act quickly and rush the process under the guise that there is no time to conduct the necessary background checks. This is a warning sign that all may not be what it seems and you should always stop the process until clarity is achieved as to why this is so.
Corrupt practices and overpaying
This issue is not just a Panama problem, as you will appreciate. As we mention, a buyer should always be cautious of a real estate broker who is applying pressure to carry out a purchase without a legitimate explanation. Remember to do your research, reach out to local expats and only use credible, trustworthy and experienced real estate agents.
The wrong place at the wrong time.
It is very important to research the history and future plans for the area where you are considering to buy your property. Panama is always growing and developing and if you are basing your purchase on a fantastic view or area surrounded by nature this may change quickly if a new construction project is approved that will be adjacent to your potential location or hinder the view. Of course, any new construction comes with added problems such as noise, pollution and disruption to traffic flow and utilities. It may even affect the value of your property, so try and avoid any future issues by gaining a good insight into the area. A competent real estate agent should be able to do the research and guide you accordingly.
Breach of contract.
Breaches of contract and misdealings do occur and some buyers have been forced to file lawsuits against real estate promotors for breach of contract, delays in delivery, repayment of advance fees, construction defects or breach of warranties. It is very important that you have your lawyers include provisions in the purchase contract to allow for any such breaches to protect your investment.
Summary
It is hoped that those potential perils and pitfalls highlighted have alerted you to the potential challenges that can be faced when making your real estate investment in Panama. Panama truly provides great opportunity for investment and if you, as the buyer or seller, take your time, do your research, build a network of trusted service providers so that you are fully informed and protected, your property transaction can be a lucrative and efficient process.
How we can help you with making your property purchase in Panama!
At Topaz Services, we can assist you with all of the services you need to buy or sell your property in Panama including due diligence reviews and the drafting, negotiating, implementing and enforcing of real estate contracts. Additionally, we can assist with the transfer of the purchase funds, attend to the registration of the purchase with the local authorities and take care of all property tax obligations on your behalf.
By being your “boots on the ground,” we can provide you with the confidence and peace of mind as we take care of the process. Our team of experts, with proficiency in Spanish and English, as well as our long-established local network of recommended service providers, can be of invaluable assistance.
Topaz Services has been providing quality advice and expertise for over forty years and our experience in Panama is accompanied by the reliability, understanding, personal approach and responsibility you could expect from a British-run professional company. To ensure impartiality we do not accept commissions from any third parties involved with a clients affairs.
Contact us today, and let our experience be your guide.