Country Article / Postcards

Panama Real Estate: Important Information

Date: 10/28/2005

Dear International Living Reader,

It's too late to be first on the scene for real estate opportunities within the walled city of Dubrovnik (though you can still find deals)...but I'm in Croatia this week scouting to find the next early-in opportunity along this country's coast.

I'll have details soon, but meantime I wanted to share with you an article written by our Panamanian attorney, Rainelda Mata-Kelly (and originally published in Panama Insider). If you ever plan to buy real estate in Panama, this is a must-read.

Lief Simon
Real Estate Editor, International Living

Organizing Paradise

International Living has always advised readers to steer clear of "rights of possession" property. And, for as long as my friends at IL have been writing about Panama (almost 10 years), they've specifically warned buyers against the rights of possession property that is found on some of the country's coasts and on its islands--including Bocas del Toro. As International Living's legal resource in Panama, I have been the source behind much of this advice.

How did rights of possession come about? Originally it was part of the Panamanian government's good-faith Agrarian Reform efforts, initiated many years ago to allow poor farmers to use government land to live, farm, or raise cattle. The system was basic at best and was not based on the well-structured fee-simple title system that applies to non-government property in Panama (where a centralized Deed Registry gives faith of ownership of land).

The rights of possession principle, however, did contain provisions for the farmers to convert their rights of possession to titled property. But, importantly, Panama's legal framework (from the Constitution down) clearly established that rights of possession on government land on islands and coastal areas could not be titled and that the Agrarian Reform could not issue rights of possession in these areas.

In the interim, speculation frenzy in places like Bocas del Toro resulted in the selling of rights of possession property, mostly to foreigners who listened to the siren song of unscrupulous brokers and speculators. They neglected to explain the downside of buying this type of property, and many court battles are being waged today because of the ensuing mess.

What's happening now? The government has introduced legislation intended to bring about some much-needed order--within Constitutional principles--and to provide clear rules to obtain concessions and proper titles for former rights of possession property on islands and coastal areas.

The law is currently being discussed at the National Assembly and there will no doubt be much discussion and many revisions before anything is finalized. (In Panama, our debate system allows any citizen to ask permission to speak before the Assembly during the initial debate of a projected law and to suggest changes before that law is finally approved.)

How will this all turn out? It's still too early to say. Some people may see their rights of possession affected to their detriment. Then again, things may work beneficially. Currently, the owner of the property is a tenant of the rights of possession system. Critically, though, that tenant is not guaranteed for any specific number of "years of use." Under the new law, as currently proposed, a buyer can obtain concessions for up to 90 years or outright title if he buys the land from the government. I suspect those who bought rights of possession land--even unknowingly--will incur additional costs to regularize their property under the new law.

In truth, this proposed legislation is a good-faith effort on the part of Panama's government to indicate its ongoing commitment to tourism and foreign property ownership--providing the rules are followed. It's a way to ensure that all the cards are on the table and that no one gets taken advantage of in the future.

Rainelda Mata-Kelly
For International Living
E-mail: rmk@mata-kelly.com.

Editor's note: To keep updated on this important issue, we recommend you read Panama Insider, the best way we know to keep informed about the world's top retirement haven.