There are several transactions subject to inscription in the Public Registry in regards with Real Estates: mortgages, donation, improvement statements, co-owners acts, anyway, all sort of deeds requested for the due inscription of real estates in Panama. In this particular article we will focus on the Purchase-Sale deed.
My first advice would be that before you get engage in acquiring a property: 1)Verify its situation in the Public Registry, given that you could find servitudes or legal seizures attached to it. 2) Consult the General Direction of Cadastre, where you can acquire the plans of the polygon to buy and its regional location. 3) Make sure in the Ministry of Economic and Financial affairs (Ministerio de Economía y Finanzas - MEF) how much the property has to pay in taxes annually and finally, if you are still interested in doing the proper improvements. 4) Ask in the Ministry of Housing (Ministerio de Vivienda – MIVI) for the construction and zoning regulations.
Promissory Purchase-sale Contract.
Usually, the first step to buy a property (after performing the proper due diligence) is the execution of the Promissory Purchase-Sale Contract (Contrato de Compraventa). This instrument is a previous contract to the final closure Bill of Sale contract. In it basically is stated that you swear to sign a final closure Purchase-Sale contract once the price of the sale is paid in favour of the seller, among other common clauses. Generally, the payment is performed in several down payments or deposits. It is always advisable to read the delay penalties in regards to the deposits, before signing the contract. Many people have lost great amounts of money when being applied this sort of clauses.
This is the final closure contract to acquire a Real Estate property. It can either be the second step of a promissory contract or simply a direct action to acquire a property if you pay the total price to the seller at once. You should also verify the wording of this contract, in order to guarantee the acquisition of the property peacefully; trying to look for any legal instruments that could negatively affect your rights on the property, such as: rights of usufruct on favour of the seller, redemption clauses, hidden vices or the obligation to pay for taxes and expenses in general.
Taxes and Good Standing Documents.
Once the contracting part is finished, you should start calculating the amounts for the related taxes. In a Purchase-Sale situation, the following taxes are involved: Property tax, Real Estate Alienation Tax (10% on the obtained gains on the sale) and the Real Estate Transferring Tax (2% on the price of the sell itself). As a key tip, the "seller" is the one responsible for payment of these taxes, except the opposite is agreed.
With the recent modifications to the taxation system in Panama, the Public Registry requires for the original tax payment forms for these taxes to be attached to the main deed in order to validate the inscription. Once these tax payments are up-to-date you should request the Good Standing documents for the Ministry of Economic and Financial affairs (MEF) and for water utilities (IDAAN) so they can be attached to the Purchase-Sale deed as well.
Notary and Public Registry Expenses.
Once you gather all the previous documentation, you should transform them into a Public Deed and notarized all documentation against a Public Notary. The Notary retains the original contracts, giving you back the document to be recorded in the Public Registry, which is commonly known as "Notary Closure" (Cierre Notarial).
You should consider the closure expenses, where you’ll be charge for witnesses, seals, notary pages and notary rights. Once you have the closure document in your hands, you should go to the Public Registry and request the Deed inscription calculated value; an average of $ 5.00 for the first $ 1,000.00 plus $ 2.50 for each additional $ 1,000.00 of the sale’s price. For example, if you buy a property for $ 100,000.00 you would have to pay to the Public Registry $ 5.00 (for the fist $1,000.00) plus $ 247.50 (for the additional $ 99,000.00) plus $ 10.00 for qualification, which will give you a total of $ 262.50 on Public Registry rights.
Finally, you should know that for some goods there are other documents that most be added to the ones already mentioned, such as: letter from the administration of the building showing good standing in regards to the maintenance quotes or Shareholder’s meeting acts authorizing the sale, when the property to be acquired is under the name of a corporation or legal entity.
If you fulfil all the previous steps, then feel confident and certain that you will obtain your "property title" in a safe way.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.