Legal Landmarks For Real Estate Investment In Panama. By: Roberto I. Guardia R. Guardia & Co.

Transcription

1 Legal Landmarks For Real Estate Investment In Panama By: Roberto I. Guardia R. Guardia & Co.

2 PROTECTION AT A CONSTITUTIONAL LEVEL ARTICLE 47: Private property legally acquired by legal or natural persons is guaranteed.

3 REGISTRATION OF THE PROPERTY The Public Registry is a public institution aimed at establishing ownerships by virtue of its legal power and officially publicizing the legal status of real property, with the purpose of protecting a group of legal acts. At the Public Registry you acquire the domain and other true rights with enough assurance as to avoid any claims. The basic function of the Public Registry is not to announce acts or contracts, but to establish ownership unassailable by virtue of an act of its legal power.

4 PUBLIC REGISTRY OF PANAMA The Public Registry in Panama was created by Law 13 of January 27, 1913, as a branch of the Secretariat of Government and Justice, during the first administration of Doctor Belisario Porras. In 1999, by means of Law 3 of January, 1999 it is converted into an autonomous entity named Public Registry of Panama. It is a legal entity, that has its own patrimony and is internally autonomous in its management, operations, budget and financially.

5 IMPORTANCE OF A DETAILED INVESTIGATION OF THE PROPERTY AND ITS OWNER 1. Public Registry (ownership, encumbrances, restrictions, etc.) 2. Ministry of Economics and Finances (status of property taxes) 3. Judicial Body (ongoing legal processes) 4. Ministry of Labor (administrative processes) 5. Social Security (pending debt with the Country) If no minimal necessary investigations are done the transfer of the ownership title could be affected.

6 WHAT SHOULD YOU WORRY ABOUT A PROPERTY OWNERSHIP TITLE 1. When there are registered defects or encumbrances. 2. If the ownership title cannot be registered at the Public Registry. 3. If there are litigations on the right of way at the front, back, or any side of the property. 4. If the owner of the property can be thrown out of the property by a third party with more rights. 5. If the mortgage lender cannot sell at auction or register the auction because there is a third party with more rights. 6. The forgery of the title. 7. Contestation of the title due to the violation of an inheritance right. 8. If third parties are usurping the asset.

7 WHO MAY ACQUIRE A REAL ESTATE PROPERTY IN PANAMA? 1. Natural Panamanian persons or from any country with address in any place of the world. 2. Legal Panamanian persons or from other jurisdiction. The decision about how to become the owner or holder of a real estate property will vary from person to person, depending on their needs, circumstances or preferences.

8 PHASES THAT MUST BE FULFILLED TO ACQUIRE A REAL ESTATE PROPERTY Promissory Contract of Sale and Purchase: whereby the terms and conditions of the sale and purchase are set in writing, namely, an identification of the property, the purchase price, terms of payment, time allowed to register the final contract of sale and purchase, and other aspects of the sale and purchase. Public Deed: is issued for purposes of transferring the title of ownership of the property to the purchaser. This final contract is issued by means of a Public Deed that must be registered at the Public Registry.

9 PROCEDURE FOR THE PURCHASE AND SALE A REAL ESTATE 1. The seller s lawyer (generally, but not mandatory) issues a promissory contract of sale and purchase and sends it to the purchasing party. 2. The lawyer of the buyer (who previously should have investigated the property) reviews the clauses and conditions stated for the transaction and makes (if he deems it necessary) observations to the promissory contract of sale and purchase. 3. Once both parties had agreed on the amount and terms of payment, the obligations of each of the parties, penalties for non-compliance and any other condition related to the act, the parties meet and sign the promissory contract of sale and purchase, and deliver the first payment so that it be registered. 4. Generally, then starts the term for the seller to issue all necessary documents to sign the final Contract of Sale and Purchase.

10 5. The selling party issues the necessary documents to be able to issue the public deed. These documents are: Minutes Authorizing the sale. Form of payment of real estate transfer taxes (2% y 3%). Certificate of No Outstanding Obligations with the water utilities. Certificate of No Outstanding Obligations of Property Taxes. Certificate of Compliance with maintenance fees regulated by the horizontal property regulations). (if it is a property If the owner of the asset is a company or foundation (Minutes from the Board of Shareholders or the Foundation Council, authorizing the sale of the property). Copy of the personal identification or passport of the person that will sign the public deed.

11 6. Once the public deed is prepared, the parties must appear before a Panamanian public notary to sign the document, stamp fingerprints, and take a picture of the act of transfer. 7. Then it is registered at the Public Registry; this may last from one to three weeks (depending on each case). 8. Once the public deed transferring the real estate property to the purchaser is registered, the seller receives the pending balance to cancel the amount of the transaction. 9. Copy of the public deed must be presented to the National Authority of Lands, for the proper update of the information.

12 PURCHASE AND SALE OF SHARES This proceeds when the owner of a real estate property is a legal person. The legal owner will be the owner of said shares. The Contract of Sale and Purchase is written in similar conditions, but with different terms and the documents to submit by the vendor are the same, with the exception of the payment of property taxes, which will be of 5% of the amount of the transaction. This amount is usually extracted from the registered value of the property.

13 POSSESSORY RIGHT Material possession by a person or persons of a rural piece of land owned by the government. These possessory rights grant privileges for the use of the land to those persons that have been recognized by the government in view of their physical occupation, maintenance or use of the land for a determined length of time. It must be emphasized that the recognized possessory rights DO NOT GRANT OWNERSHIP TITLE to its bearer, but only the right to occupy the land; however, it allows the holder of said rights to start a process of entitlement with the purpose of registering the property at the Public Registry.

14 STRUCTURES TO DO INVESTING AND ALSO ACQUIRE REAL ESTATE Companies : Law 32 of 1927 Private Interest Foundations: Law 25 of 1995

15 COMPANIES SUBSCRIBERS OF THE PUBLIC DEED DIRECTORS SHAREHOLDERS

16 ADVANTAGES OF A PANAMANIAN COMPANY 1. Information about shareholders is not public. 100% private. 2. They are completely exempt of taxes, contributions or encumbrances in the Republic of Panama, except for the payment of an Annual Tax of US$ There is no limit in the maximum number of directors or shareholders. 4. Shareholders or members of the Board of Directors can hold meetings in any country and may be represented by proxy.

17 5. Capital stock does not need to be deposited as a requirement to incorporate the company. 6. They can carry out any transaction of any civil or commercial nature, anywhere in the world and in any currency.

18 FOUNDATION FOUNDER PROTECTOR FOUNDATION COUNCIL BENEFICIARY

19 Information about beneficiaries is not public (100% private). Operates as a company. Acts as a Trust.

20 ADVANTAGES OF A PRIVATE INTEREST FOUNDATION They are exempted from any tax, contribution or encumbrances in the Republic Panama (except for the payment of an Annual Tax of US$ ) Consequently, they do not pay income, patrimony, property or inheritance tax, nor transfer tax. There is no legal requirement to reveal the name of the beneficiaries. Payments to the Foundation Patrimony do not need to be deposited as a requirement to incorporate the Foundation and there is no maximum period to assign that patrimony.

21 They may carry out transactions of any civil or commercial nature (on a non regular basis) anywhere in the world and in any currency. The founders, members of the Foundation Council, beneficiaries, protectors or inspectors may be natural or legal persons, of any nationality and with any address. Members of the Foundation Council do not need to be founders. The founders, the protectors or inspectors, and the members of the Foundation Council can be beneficiaries of the foundation.

22 There is no limitation as to the maximum number of founders, counselors, beneficiaries or protectors allowed. The founders and the members of the Foundation Council may hold meetings in any country and may be represented by proxy. Accounting and foundation books may be kept in Panama or abroad. The foundations incorporated in other countries may reestablish domicile or continue to exist as Foundations of Private Interest of Panama or vice versa.