There are virtually no restrictions for non-residents to purchase property in Panama because foreigners have the same rights as Panamanians, so capitalizing on the opportunities here is fairly easy.
Panama does not have the equivalent of “rights of survivorship”, so if a property is owned by two people and one of them passes on, half of the property goes into probate and if will be given to whomever is designated in the deceased’s will or in the absence of a will, in accordance with local law. The probate process is actually a court process and it may take one year or more and substantial legal costs may be incurred.
You will need to take some important steps in order to purchase property legally and safely in this country. Purchasing a property in Panama is very similar to the process in the U.S.A. or Europe – but there are some important differences.
Step 1: The first thing you need to do is confirm the legal owner of the property. After you’ve found the property you want to buy, ask the owner for two important documents – the public deed containing the title (escritura) and the Ownership and Encumbrances Certificate (Certificado de Registro Publico) from the Public Registry. You should then give these to your lawyer for an updated search. Even if these documents are not available, ask the seller for a property (finca) number. With this information, your lawyer will be able to search for the title. Make sure all the documents are originals and bear the signatures, as well as official stamps of the registration office.
Step 2: Enter into a Promise to Buy-Sell Agreement, whereby you give the seller a down payment and set a date for the transfer of title. Normally there is a penalty if either party backs out. During the period set out in the agreement, the seller pays the transfer tax and obtains the clearance certificates necessary to transfer the title; the buyer arranges for payment (by arranging financing, etc.). At the agreed upon time, both parties sign the final contract.
Step 3: Transfer of title. Once Step 2 is completed, your lawyer will draft the final purchase and sale contract. He or she will gather all documents and make an additional search to ensure that no liens or mortgages have been filed in the meantime. The lawyer will then put the contract into final form and draw it up as a public deed at which time all parties will go to a Notary Public to sign the deed. A Notary Public in Panama is not like the notaries you may have used in the U.S.A. Panama’s notaries are high-ranking officials and are granted far more responsibility than their American counterparts very similar to Europe. They represent neither the buyer nor the seller.
Step 4: Transfer of funds. The safest thing is to pay the balance of the purchase price through an irrevocable letter of payment from a local bank in Panama. Your lawyer should be able to assist you in obtaining such a document in which the bank irrevocably promises the seller to pay the balance of the sale price upon the transfer of the title to the buyer. The other, riskier way to pay the balance of the purchase price is to give the seller a bank draft on a bank in Panama upon the signing of the public deed at the Notary Public. The risk is making the payment before you obtain the registered deed; usually the next step in the process.
Step 5: Record your purchase at the public registry, as it is not final until you do so. This process normally takes a few weeks, but can be done in about 10 days by having your attorney file the documents directly at the main office of the public registry in Panama City. If you are in a hurry, the public registry charges an additional fee of $250 for the next day registrations (provided all the documents are in order). Once the registration process is complete, your lawyer will give you the registered deed and make sure that a copy is filed with the tax records department (catastro) at which time the property will be yours.