Like any country, Panama has its own processes for buying or renting real estate. Knowing the procedures and steps to follow allows to speed up the processes and avoid traps particularly for foreigners who buy or rent for the first time in the country.
- Process of renting real estate
The process of renting in Panama is easy and uncomplicated. It is important to mention that a foreign person can perfectly rent a property in Panama without fulfilling special conditions of nationality or residence.
In order to rent first it is necessary to find the suitable good that fulfills its criteria and budget. In Panama numerous real estate agencies exist that will be able to guide them through the multitude of offers. There are also platforms on the web with properties directly offered by owners, such as Find24 and Buy or Rent which are the most visited.
Once the property has been selected, and if it was through an agency, it will ask for personal documents depending on what the owner of the property requires: personal identity card, bank reference letter, account statement to check resources, etc.
Then, the real estate agency or the owner of the property will provide you with a lease contract. This contract is usually private so the will of the parties prevails. However, it should contain at least the following:
Generals of the parties
Legal description of the property (registry identification)
Amount of lease fee and security deposit
Term of the lease and possibility of renewal
Termination of the contract
Utilities included in the rent
Damage and Repair Provisions
Right to inspect the property
Conflict resolution method
Right of subleasing
It should be noted that the equivalent of one month’s rent is usually advanced to the signing of the lease as a security deposit. It will only be returned at the end of the contract if there was no damage to the property, except for that caused by normal wear and tear.
It is important to mention that the landlord is obliged to formalize the lease contract with the Ministry of Housing and Land Management (Miviot) and also to consign the guarantee deposit as established by Law 93 of 1974. However, statistics reveal that in practice the amount of rentals registered with that institution is 20 times less than the rentals actually perfected in the plaza. Unregistered contracts are considered private contracts and any conflict must be resolved in the civil courts or through arbitration, as agreed by the parties to the contract.
2. Process of purchase of real estate
The process of buying real estate in Panama is open to any person, without conditions of nationality or residence. It is important to mention that Panama respects the right to private property, which is guaranteed by the National Constitution.
a. The steps to follow
Due to the formality of the proceedings, it is necessary to hire the services of a lawyer who will guide you through the process:
The lawyer can be the one chosen by the seller or the buyer, or each one can have his own, it all depends on the will of the parties.
The lawyer’s fees are usually a percentage of the value of the purchase and are assumed by the seller or the buyer or it is a shared expense, depending on the agreement between the parties.
Notary and Public Registry fees are the responsibility of the buyer. The seller must pay the taxes generated by the transfer of the property and everything related to the peace and quiet of the property being sold.
For more clarity, below you will find an outline of the whole process that must be followed by the lawyer or lawyers in charge. This process of buying and selling usually takes about 3 months.
Steps of the purchase process
b. Payment methods
In step 2, the buyer must pay the credit, generally corresponding to 10% of the value of the sale. The payment is usually made by certified check or cashier’s check directly to the seller if the buyer has a bank account in Panama. If the buyer has an offshore account the payment of the credit will be made by international transfer to the account of the seller.
In step 6, the buyer must proceed to pay the balance and can do it in different ways. The most usual and secure are the following:
Using the custody service of a Notary Public who will act as an intermediary, releasing the funds and delivering them to the seller once the property is registered in the name of the buyer in the Public Registry.
The buyer can send the funds to an escrow account, managed by a Fiduciary, an entity regulated by the Superintendency of Banks of Panama (SBP), which will release the funds to the seller.
In step 6, the buyer must proceed to pay the balance and can do so in different ways. The most usual and secure ways are the following:
- Using the custody service of a Notary Public who will act as an intermediary, releasing the funds and handing them over to the seller once the property is registered in the buyer’s name at the Public Registry.
- The buyer can send the funds to an escrow account, managed by a Fiduciary, an entity regulated by the Superintendence of Banks of Panama (SBP), which will release the funds and deliver them to the seller once the property is registered in the name of the buyer in the Public Registry.
- The buyer may have the funds in a bank account at a local bank and will request the bank to issue a letter of promise to pay which will be sent to the seller. The letter assures the seller that once the bank receives proof that the property is registered in the buyer’s name at the Public Registry, the funds will be delivered by the seller.
- If the buyer requires financing, it will be the same procedure as point 3: the bank granting the financing will issue a letter of promise in the name of the seller and will deliver the funds once the property is registered in the name of the buyer at the Public Registry.
Conclusion
As you can see, the process for renting and or buying in Panama is quite organized and safe. Additionally, Panama is a very attractive place to live and invest in housing. In fact, the country has been placed in the Top 10 most sought after countries worldwide to live in and to retire from due to its multiple advantages in terms of cost of housing, climate, security, health system and the ease of achieving permanent residence status in Panama.
Dorothée Kisvel Berthet
Head of Private Equity – Managing partner
To learn more, contact us at:
info@kb-familyoffice.com
Marzo, 2019
