contact@aupanama aupanama by sébastien picart y manoj chatlani +507 610 947 16

[email protected] Sébastien Picart y Manoj Chatlani+507 610 947 16

PANAMA LAW FIRM

PANAMA REAL ESTATE LAWS

PANAMA LAW FIRM


PANAMA - REAL ESTATE LAWS •CONSTITUTION Article 44 of the National Constitution of the Republic of Panama: "It is granted the private property acquired according to the Law by natural or juridical persons". •CIVIL CODE •AGRARIAN CODE •FISCAL CODE (PROPERTY TAX) •HORIZONTAL PROPERTY LAW •MINISTRY OF HOUSING LAW •LEASE (PROPERTY RENTAL) LAW •ANATI (PROPERTY TITLE GOV.)

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PANAMA - REAL ESTATE LAWS Government Institutes:

1. NOTARY: Public Deed draft

2. PUBLIC REGISTRY: Properties Registration, assign a "Finca" number Registration System through the History:

Big Books (Tomos): Microfilm: Scanner: 2. Finca, Tomo, Folio 2. Finca, Rollo, Imagen 3. Finca,

documento

3. ANATI: Property Taxes Payment of Property Taxes: Calcullation: by year divided in 3 installments: by April 30th, August 31st, and December 31st

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PANAMA - REAL ESTATE LAWS LEGAL DOCUMENTS EXAMPLE: 1. Title Deed:

PANAMA - REAL ESTATE LAWS LEGAL DOCUMENTS EXAMPLE: 2. Survey:

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PANAMA - REAL ESTATE LAWS LEGAL DOCUMENTS EXAMPLE: 3. Property Tax Statement - MEF

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PANAMA - REAL ESTATE LAWS LEGAL DOCUMENTS EXAMPLE: 4. Property Tax Good Standing Certificate - MEF

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DESCRIPTION: TITLE PROPERTY: RIGHTS OF POSSESSION:

1. Ownership Private ownership Owner is the Government Only possession can be acquired

2. Government Public Registry Any Government Institute Registration can Certify: Anati, Mayor

(Alcalde), Chief of Police

3. Necessary Title Deed Physical occupation, ROP requirement (registration) Certification, good faith,...

PANAMA - REAL ESTATE LAWS TITLE PROPERTY -vs- RIGHTS OF POSSESSION:

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NEW or USED: 1. Home (House): Pre-Construction -vs- Used 2. Apartment: Pre-Construction -vs- Used 3. Land: Small Lot -vs- Hectares of Land

With Furniture -vs- Without Furniture

PANAMA - REAL ESTATE LAWS PROPERTIES OPTIONS:

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PANAMA - REAL ESTATE LAWS BEACH SET BACK AND OCEAN PROPERTIES TITLE EXPLANNATION: :

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Main Land

Titled

Main Land

beach (cannot be titled)

beach (cannot be titled)

22mts set back

22mts set back

high tide high tide Ocean Ocean

Titled area

---------------------------------------ROP area that can be titled200mts

set back from high tide

PANAMA - REAL ESTATE LAWS

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PROPERTY TAX COMBINED SCALE (for Land and Houses - not P.H.):

REGISTERED VALUE: PROPERTY TAX: AMOUNT: 1. $30,000 or less 0% $0.00 2. Over $30,000 to $50,000 1.75% $350.00 3. Over $50,000 to $75,000 1.95% $487.50 4. Over $75,000 2.1% $ _______


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PROPERTY TAX COMBINED SCALE (for Apartments in P.H.):

IF IMPROVEMENTS ARE EXONERATED: REGISTERED VALUE OF LAND: PROPERTY TAX: 1. Any amount 1%

AFTER IMPROVEMENTS EXONERATION: REGISTERED VALUE: PROPERTY TAX: AMOUNT: 1. $30,000 or less 0% $0.00 2. Over $30,000 to $100,000 ($70,000) 0.75% $525.00 3. Over $100,000 ($....) 1% $ ______


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IMPROVEMENTS EXEMPTED OF PROPERTY TAX

Improvement value

Land proportional value

Your Property Registered Value

Property Tax Exoneration can apply

Property Tax Exoneration does not apply


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IMPROVEMENTS EXEMPTED OF PROPERTY TAX

20 years Tax Exoneration on Improvements (NOT ON LAND):

If Construction Permit is issued by July 1st, 2009 and Registered at the Public Registry before December 31, 2011.

IF CONSTRUCTION PERMIT IS ISSUED AFTER SEPT.1, 2006:

RESIDENTIAL PROPERTIES: REGISTERED VALUE: IMPROVEMENTS EXONERATION: 1. Up to $100,000 15 years 2. Over $100,000.00 to $250,000 10 years 3. Over $250,000.00 5 years

COMMERCIAL PROPERTIES: REGISTERED VALUE: IMPROVEMENTS EXONERATION: Any amount 10 years


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Improvements "Not" Registered

Title Land Registered

EXAMPLE OF POSSIBLE CONSEQUENCES FOR NOT REGISTERING THE

IMPROVEMENTS:

BEFORE SALE: Improvements Reg. Value: $0

+ Land Reg. Value: $100,000.00 ------------------ Total Property Reg. Value: $100,000.00

SALE TRANSACTION: Improvements Reg. Value: $0

+ Land Reg. Value: $600,000.00 ------------------ Total Property Reg. Value: $600,000.00

FUTURE PROBLEM: Improvements Reg. Value: $500,000.00 + Land Reg. Value: $600,000.00 ------------------ Total Property Reg. Value: $1,100,000.00


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PROPERTY OWNERSHIP OPTIONS:

-vs-

Ownership in Personal Name

Corporate Ownership

PANAMA CORPORATION or PRIVATE INTEREST FOUNDATION


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WHY IS RECOMMENDED TO HOLD A PROPERTY IN A CORPORATION OR A PRIVATE INTEREST FOUNDATION:


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CORPORATE STRUCTURE RECOMMENDED FOR: ESTATE PLANNING

PRIVATE INTEREST FOUNDATION (PIF)

Corporation A Corporation B Corporation C Corporation D

Bank Accounts Family Home Business Car


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SALES OPTIONS & SALES TAXES:

PANAMA CORPORATION

Shares Transfer Transaction Must pay: 5% Shares Transfer Tax

Title Transfer Transaction Must pay: 2% Title Transfer Tax, plus 3% "Advance" Capital Gains Tax

BUYER


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3% "ADVANCE" Capital Gains Tax -VS- 10% Capital Gains Tax: EXAMPLE No.1 OF A SALE TRANSACTION: Sale Value: $100,000.00

- Reg. Value: $20,000.00 ------------------ Capital Gains: $80,000.00

EXAMPLE No.2 OF A SALE TRANSACTION: Sale Value: $100,000.00

- Reg. Value: $98,000.00 ------------------ Capital Gains: $2,000.00

-VS-

CALCULLATION IN EXAMPLE No.1: 2% Title Transfer Tax: $2,000.00

+ 3% "Advance" C.G.T.: $3,000.00 ------------------ Total: $5,000.00 10% C.G.T.: $8,000.00

CALCULLATION IN EXAMPLE No.2: 2% Title Transfer Tax: $2,000.00

+ 3% "Advance" C.G.T.: $3,000.00 ------------------ Total: $5,000.00 10% C.G.T.: $200.00


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REAL ESTATE TRANSACTION PHASES:

1. Negotiation - Seller, Broker & Buyer 2. Due Diligence

3. Promise to Purchase Contract

4. Closing


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1. Negotiation - Seller, Broker & Buyer:

1. Property Listing: 1. Property inspection, Title & Survey verification, Seller's Id and

documents, Representation Agreement signature, pictures, etc. 2. Title Search: Public Registry, M.E.F., etc. 3. Contact with Buyer and Buyer's inspection on Property 4. Negotiation of all Terms and Conditions of Transaction: sales price, down

payment amount, balance at closing, conditions or limitations, mortgage cancellation, mortgage constitution, etc.

5. Letter of Intent signature or Reservation Agreement (down payment either refundable or not refundable)


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2. Due Diligence:

1. Title Search at the Public Registry. Verify registered information:

ownership, mortgage, size, value, improvements if any, liens, etc.

2. Title Search at Anati (before Catastro). Verify registered information:

ownership, size, boundaries, property tax, improvements if any, etc.

3. Property measurement with Surveyor

4. If Mortgage on property, update balance letter request

5. Etc.


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Due Diligence: Title boundaries verification

affected area

extra area

Title line (registered)

Fence line


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REAL ESTATE TRANSACTION PHASES: EXAMPLE OF PROPERTY WITH BOUNDARIES PROBLEMS:


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3. Promise to Purchase Contract:Most important document in the Transaction - regulates all the rights and obligations of both parties

CLAUSES: 1. Parties description 8. Closing date 2. Property description 9. Seller's Penalty for breach 3. Interest to Sell and Buy 10. Buyer's Penalty for breach4. Price 11. Laws applicable 5. Payment Terms 12. Date of signature 6. Seller's Obligations 13. Signature 7. Buyer's Obligations

"FORMALITY": PUBLIC DEED & REGISTRATION IN THE PUBLIC REGISTRY


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4. Closing:

1. Issuance of Bank Promise to Pay Letter

2. Mortgage cancellation (if any)

3. Payment of Sales Taxes (by Seller)

4. Closing Contract signature

5. Registration

6. Payments - liquidation of Bank Promise to Pay Letter

7. Update of new property ownership in ANATI and ANIP


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REAL ESTATE TRANSACTION PHASES: CHECKLIST OF DOCUMENTS: 1. Seller's Id 2. Seller's Entity copy (if Entity ownership) 3. Seller's Entity good standing certificate (if Entity ownership) 4. Minutes of Entity to authorize sale or Power to Sale 5. Property Title deed copy 6. Property good standing certificate 7. Property survey with registration stamps 8. Improvements registration deed (if Improvements) 9. Improvements construction plans (electrical, plumbing, design, etc.) 10. Improvements construction permit 11. Improvements occupation permit

12. Pictures 13. Water (IDAAN) good standing certificate 14. Administration good standing certificate (if Building or PH) 15. Mortgage balance letter updated (if mortgage) 16. Mortgage cancellation minutes (at Closing) 17. Buyer's Id 18. Buyer's Entity copy (if buying through Entity) 19. Buyer's Entity good standing certificate 20. Minutes of Entity to authorize purchase or Power to Buy


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REAL ESTATE TRANSACTION PHASES: BANK PROMISE TO PAY LETTER EXPLANNATION:

Public Registry of Panama

BUYERSELLER

3. Step: Seller receives Promise to Pay Letter

4. Step: Seller transfers Title to Buyer's name

5. Step: Seller proves to Bank the Transfer of Title and gets paid

2. Step: Bank issues Promise to Pay Letter with the condition of Title Transfer

1. Step: Buyer deposits at Bank balance amount

Local Bank in PanamaBank Promise to Pay Letter


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REAL ESTATE TRANSACTION PHASES: BANK PROMISE TO PAY LETTER EXPLANNATION:

REGISTERED OWNER: 1.SELLER

2. SELLER

3. SELLER

4. BUYER

PANAMA TITLE TRANSFER REGISTRATION SYSTEM:

1. M.E.F.: SELLER pays Sales Taxes

2. NOTARY: SELLER signs Public Deed where transfers Property Title to BUYER

3. PUBLIC REGISTRY: Public Deed of Transfer of Title is "presented"

4. PUBLIC REGISTRY: Public Deed of Transfer of Title is "registered"


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"PH" (HORIZONTAL PROPERTY):

Important Points in Pre-Construction:

1. Construction completion delay

2. Building not ready and Occupation Permit

issuance

3. Increase of Construction Costs

4. Rent or Monthly Fee if payment by Promise to Pay

Letter or payment delay

5. Land proportional value "not Exonerated" of

Property Tax


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"PH" (HORIZONTAL PROPERTY) - CLOSING:

Occupation Permit

Promise to Pay Letter delivery

Closing Legal docs completion: Minutes of Sale, etc.

Sales Contract signature

Notary and Public Registry registration

Bank payment of balance

Property Inspection

Property fixings

Property 2nd Inspection / Keys collection "Acta de Entrega"

Utilities connection Furniture


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LEASE CONTRACT - CLAUSES:

1. PARTIES 2. PROPERTY DESCRIPTION AND OWNERSHIP 3. INTEREST TO LEASE - OBJECT OF THE CONTRACT 4. RENTAL PRICE. MUST INCLUDE 7% ITBMS 5. 7% ITBMS PAYMENT TO M.E.F. 6. DEPOSIT 7. CONTRACT TERM 8. INVENTORY (FURNISHER) 9. OBLIGATIONS OF THE LESSOR

10. OBLIGATIONS OF THE LESSEE 11. PROPERTY INSPECTION - KEYS RECIPT STATUS AND KEYS RETURN STATUS 12. EARLY TERMINATION BY LESSOR -VS- EARLY TERMINATION BY LESSEE 13. PROPERTY VACATION RIGHT AT JUDICIAL COURT: - 2 MONTHS OF NON PAYMENT - TERMINATION OF CONTRACT 14. PICTURES


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BROKERAGE COMMISSION - CONTRACT:

1. Exclusivity -vs- Representation (Commission) Agreement

2. Formality

3. Mistakes by Brokers (not calcullation of sales taxes and

sales commission)

Standard Sales Commission 5% (Also 3% - 10%)

4. Percentage -vs- Fix amount

5. "Sobreprecio"

6. Several Brokers

SELLER BUYER

SELLER'S BROKER 1

SELLER'S BROKER 2

SELLER'S BROKER 3

BUYER'S BROKER 1

BUYER'S BROKER 2

BUYER'S BROKER 3


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PICTURES (BEST EVIDENCE):

Benefits:

1. Avoid squatters rights

2. Keeps evidence of status of things during time

3. Etc.After rent Before rent


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CONTACT DIRECTORY:

1. Seller e-mail phone

2. Seller's Broker e-mail phone

3. Seller's Attorney e-mail phone

4. Seller's Bank Officer (mortgage cancellation) e-mail phone

5. Buyer e-mail phone

6. Buyer's Broker e-mail phone

7. Buyer's Attorney e-mail phone

8. Buyer's Bank Officer (mortgage constitution) e-mail phone


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BROKERS - ESCROW PAYMENTS:

Responsibility of Seller:

Clean Title & Property

Responsibility of Buyer: Payment


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Thank You

contact@aupanama aupanama by sébastien picart y manoj chatlani +507 610 947 16

Documents

republic of panama

private property

furniture vs

properties registration

government public registry

preconstruction vs

rights of possession

small lot vs