PANAMA REAL ESTATE LAWS contactaupanama com www aupanama

PANAMA REAL ESTATE LAWS contact@aupanama. com www. aupanama. com By Sébastien Picart y Manoj Chatlani +507 610 947 16 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. ) contact@aupanama. com www. aupanama. com By Sébastien Picart y Manoj Chatlani +507 610 947 16 PANAMA LAW FIRM

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): 1. Finca, Tomo, documento Microfilm: Scanner: Folio 2. Finca, Rollo, Imagen 3. Finca, 3. ANATI: Property Taxes Payment of Property Taxes: Calcullation: by year divided in 3 installments: by April 30 th, August 31 st, and December 31 st contact@aupanama. com www. aupanama. com By Sébastien Picart y Manoj Chatlani +507 610 947 16 PANAMA LAW FIRM

PANAMA - REAL ESTATE LAWS LEGAL DOCUMENTS EXAMPLE: 1. Title Deed: contact@aupanama. com www. aupanama. com By Sébastien Picart y Manoj Chatlani +507 610 947 16 PANAMA LAW FIRM

PANAMA - REAL ESTATE LAWS LEGAL DOCUMENTS EXAMPLE: 2. Survey: contact@aupanama. com www. aupanama. com By Sébastien Picart y Manoj Chatlani +507 610 947 16 PANAMA LAW FIRM

PANAMA - REAL ESTATE LAWS LEGAL DOCUMENTS EXAMPLE: 3. Property Tax Statement - MEF contact@aupanama. com www. aupanama. com By Sébastien Picart y Manoj Chatlani +507 610 947 16 PANAMA LAW FIRM

PANAMA - REAL ESTATE LAWS LEGAL DOCUMENTS EXAMPLE: 4. Property Tax Good Standing Certificate - MEF contact@aupanama. com www. aupanama. com By Sébastien Picart y Manoj Chatlani +507 610 947 16 PANAMA LAW FIRM

PANAMA - REAL ESTATE LAWS TITLE PROPERTY -vs- RIGHTS OF POSSESSION: DESCRIPTION: TITLE PROPERTY: RIGHTS OF POSSESSION: 1. Ownership Private ownership Owner is the Government Only possession can be acquired 2. Government Registration Public Registry Any Government Institute can Certify: Anati, Mayor (Alcalde), Chief of Police 3. Necessary requirement Title Deed (registration) Physical occupation, ROP Certification, good faith, . . . contact@aupanama. com www. aupanama. com By Sébastien Picart y Manoj Chatlani +507 610 947 16 PANAMA LAW FIRM

PANAMA - REAL ESTATE LAWS PROPERTIES OPTIONS: 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 contact@aupanama. com www. aupanama. com By Sébastien Picart y Manoj Chatlani +507 610 947 16 PANAMA LAW FIRM

PANAMA - REAL ESTATE LAWS BEACH SET BACK AND OCEAN PROPERTIES TITLE EXPLANNATION: : Main Land Titled area Titled beach (cannot be titled) Ocean 22 mts set back high tide 200 mts set back from high tide Main Land -------------------ROP area that can be titled beach (cannot be titled) Ocean 22 mts set back high tide contact@aupanama. com www. aupanama. com By Sébastien Picart y Manoj Chatlani +507 610 947 16 PANAMA LAW FIRM

PANAMA - REAL ESTATE LAWS PROPERTY TAX COMBINED SCALE (for Land Houses - not P. H. ): REGISTERED VALUE: 1. $30, 000 or less 2. Over $30, 000 to $50, 000 3. Over $50, 000 to $75, 000 4. Over $75, 000 PROPERTY TAX: 0% 1. 75% 1. 95% 2. 1% $ AMOUNT: $0. 00 $350. 00 $487. 50 _______ contact@aupanama. com www. aupanama. com By Sébastien Picart y Manoj Chatlani +507 610 947 16 PANAMA LAW FIRM

PANAMA - REAL ESTATE LAWS PROPERTY TAX COMBINED SCALE (for Apartments in P. H. ): IF IMPROVEMENTS ARE EXONERATED: REGISTERED VALUE OF LAND: 1. Any amount AFTER IMPROVEMENTS EXONERATION: REGISTERED VALUE: 1. $30, 000 or less 2. Over $30, 000 to $100, 000 ($70, 000) 3. Over $100, 000 ($. . ) PROPERTY TAX: 1% PROPERTY TAX: 0% 0. 75% 1% $ AMOUNT: $0. 00 $525. 00 ______ contact@aupanama. com www. aupanama. com By Sébastien Picart y Manoj Chatlani +507 610 947 16 PANAMA LAW FIRM

PANAMA - REAL ESTATE LAWS IMPROVEMENTS EXEMPTED OF PROPERTY TAX Improvement value Land proportional value Your Property Registered Value Property Tax Exoneration can apply Property Tax Exoneratio n does not apply contact@aupanama. com www. aupanama. com By Sébastien Picart y Manoj Chatlani +507 610 947 16 PANAMA LAW FIRM

PANAMA - REAL ESTATE LAWS IMPROVEMENTS EXEMPTED OF PROPERTY TAX 20 years Tax Exoneration on Improvements (NOT ON LAND): If Construction Permit is issued by July 1 st, 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 contact@aupanama. com www. aupanama. com By Sébastien Picart y Manoj Chatlani +507 610 947 16 PANAMA LAW FIRM

PANAMA - REAL ESTATE LAWS Improvements "Not" Registered Title Land Registered BEFORE SALE: Improvements Reg. Value: $0 + Land Reg. Value: $100, 000. 00 ---------Total Property Reg. Value: $100, 000. 00 EXAMPLE OF POSSIBLE CONSEQUENCES FOR NOT REGISTERING THE IMPROVEMENTS: 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 contact@aupanama. com www. aupanama. com By Sébastien Picart y Manoj Chatlani +507 610 947 16 PANAMA LAW FIRM

PANAMA - REAL ESTATE LAWS PROPERTY OWNERSHIP OPTIONS: Ownership in Personal Name Corporate Ownership -vs- PANAMA CORPORATION or PRIVATE INTEREST FOUNDATION contact@aupanama. com www. aupanama. com By Sébastien Picart y Manoj Chatlani +507 610 947 16 PANAMA LAW FIRM

PANAMA - REAL ESTATE LAWS WHY IS RECOMMENDED TO HOLD A PROPERTY IN A CORPORATION OR A PRIVATE INTEREST FOUNDATION: contact@aupanama. com www. aupanama. com By Sébastien Picart y Manoj Chatlani +507 610 947 16 PANAMA LAW FIRM

PANAMA - REAL ESTATE LAWS CORPORATE STRUCTURE RECOMMENDED FOR: ESTATE PLANNING PRIVATE INTEREST FOUNDATION (PIF) Corporation A Corporation B Bank Accounts Family Home Corporation C Business Corporation D Car contact@aupanama. com www. aupanama. com By Sébastien Picart y Manoj Chatlani +507 610 947 16 PANAMA LAW FIRM

PANAMA - REAL ESTATE LAWS SALES OPTIONS & SALES TAXES: Shares Transfer Transaction Must pay: 5% Shares Transfer Tax PANAMA CORPORATION BUYER Title Transfer Transaction Must pay: 2% Title Transfer Tax, plus 3% "Advance" Capital Gains Tax contact@aupanama. com www. aupanama. com By Sébastien Picart y Manoj Chatlani +507 610 947 16 PANAMA LAW FIRM

PANAMA - REAL ESTATE LAWS 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 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 -VS- EXAMPLE No. 2 OF A SALE TRANSACTION: Sale Value: $100, 000. 00 Reg. Value: $98, 000. 00 ---------Capital Gains: $2, 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 contact@aupanama. com www. aupanama. com By Sébastien Picart y Manoj Chatlani +507 610 947 16 PANAMA LAW FIRM

PANAMA - REAL ESTATE LAWS REAL ESTATE TRANSACTION PHASES: 1. Negotiation - Seller, Broker & Buyer 2. Due Diligence 3. Promise to Purchase Contract 4. Closing contact@aupanama. com www. aupanama. com By Sébastien Picart y Manoj Chatlani +507 610 947 16 PANAMA LAW FIRM

PANAMA - REAL ESTATE LAWS REAL ESTATE TRANSACTION PHASES: 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) contact@aupanama. com www. aupanama. com By Sébastien Picart y Manoj Chatlani +507 610 947 16 PANAMA LAW FIRM

PANAMA - REAL ESTATE LAWS REAL ESTATE TRANSACTION PHASES: 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. contact@aupanama. com www. aupanama. com By Sébastien Picart y Manoj Chatlani +507 610 947 16 PANAMA LAW FIRM

PANAMA - REAL ESTATE LAWS REAL ESTATE TRANSACTION PHASES: Due Diligence: Title boundaries verification extra area Title line (registered) Fence line affected area contact@aupanama. com www. aupanama. com By Sébastien Picart y Manoj Chatlani +507 610 947 16 PANAMA LAW FIRM

PANAMA - REAL ESTATE LAWS REAL ESTATE TRANSACTION PHASES: EXAMPLE OF PROPERTY WITH BOUNDARIES PROBLEMS: contact@aupanama. com www. aupanama. com By Sébastien Picart y Manoj Chatlani +507 610 947 16 PANAMA LAW FIRM

PANAMA - REAL ESTATE LAWS REAL ESTATE TRANSACTION PHASES: 3. Promise to Purchase Contract: Most important document in the Transaction - regulates all the rights and obligations of both parties CLAUSES: 1. Parties description 2. Property description 3. Interest to Sell and Buy 4. Price 5. Payment Terms 6. Seller's Obligations 7. Buyer's Obligations 8. Closing date 9. Seller's Penalty for breach 10. Buyer's Penalty for breach 11. Laws applicable 12. Date of signature 13. Signature "FORMALITY": PUBLIC DEED & REGISTRATION IN THE PUBLIC REGISTRY contact@aupanama. com www. aupanama. com By Sébastien Picart y Manoj Chatlani +507 610 947 16 PANAMA LAW FIRM

PANAMA - REAL ESTATE LAWS REAL ESTATE TRANSACTION PHASES: 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 contact@aupanama. com www. aupanama. com By Sébastien Picart y Manoj Chatlani +507 610 947 16 PANAMA LAW FIRM

PANAMA - REAL ESTATE LAWS CHECKLIST OF DOCUMENTS: REAL ESTATE TRANSACTION PHASES: 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 contact@aupanama. com www. aupanama. com By Sébastien Picart y Manoj Chatlani +507 610 947 16 PANAMA LAW FIRM

PANAMA - REAL ESTATE LAWS REAL ESTATE TRANSACTION PHASES: BANK PROMISE TO PAY LETTER EXPLANNATION: 3. Step: Seller receives Promise to Pay Letter SELLER 2. Step: Bank issues Promise to Pay Letter with the condition of Title Transfer Bank Promise to Pay Letter 1. Step: Buyer deposits at Bank balance amount Local Bank in Panama 5. Step: Seller proves to Bank the Transfer of Title and gets paid BUYER 4. Step: Seller transfers Title to Buyer's name Public Registry of Panama contact@aupanama. com www. aupanama. com By Sébastien Picart y Manoj Chatlani +507 610 947 16 PANAMA LAW FIRM

PANAMA - REAL ESTATE LAWS REAL ESTATE TRANSACTION PHASES: BANK PROMISE TO PAY LETTER EXPLANNATION: REGISTERED OWNER: PANAMA TITLE TRANSFER REGISTRATION SYSTEM: 1. SELLER 1. M. E. F. : SELLER pays Sales Taxes 2. SELLER 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" 3. SELLER 4. BUYER contact@aupanama. com www. aupanama. com By Sébastien Picart y Manoj Chatlani +507 610 947 16 PANAMA LAW FIRM

PANAMA - REAL ESTATE LAWS REAL ESTATE TRANSACTION PHASES: "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 contact@aupanama. com www. aupanama. com By Sébastien Picart y Manoj Chatlani +507 610 947 16 PANAMA LAW FIRM

PANAMA - REAL ESTATE LAWS REAL ESTATE TRANSACTION PHASES: "PH" (HORIZONTAL PROPERTY) - CLOSING: Closing Legal docs Promise to completion: Sales Pay Letter Minutes of Sale, Contract delivery signature etc. Occupation Permit Property Inspection Property fixings Notary and Bank Public payment of Registry registration balance Property 2 nd Inspection / Utilities Keys collection "Acta de Entrega" connection Furniture contact@aupanama. com www. aupanama. com By Sébastien Picart y Manoj Chatlani +507 610 947 16 PANAMA LAW FIRM

PANAMA - REAL ESTATE LAWS REAL ESTATE TRANSACTION PHASES: 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 -VSEARLY TERMINATION BY LESSEE 13. PROPERTY VACATION RIGHT AT JUDICIAL COURT: - 2 MONTHS OF NON PAYMENT - TERMINATION OF CONTRACT 14. PICTURES contact@aupanama. com www. aupanama. com By Sébastien Picart y Manoj Chatlani +507 610 947 16 PANAMA LAW FIRM

PANAMA - REAL ESTATE LAWS REAL ESTATE TRANSACTION PHASES: 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 SELLER BUYER 5. "Sobreprecio" 6. Several Brokers SELLER'S BROKER 1 SELLER'S BROKER 2 SELLER'S BROKER 3 BUYER'S BROKER 1 BUYER'S BROKER 2 BUYER'S BROKER 3 contact@aupanama. com www. aupanama. com By Sébastien Picart y Manoj Chatlani +507 610 947 16 PANAMA LAW FIRM

PANAMA - REAL ESTATE LAWS REAL ESTATE TRANSACTION PHASES: PICTURES (BEST EVIDENCE): Benefits: 1. Avoid squatters rights 2. Keeps evidence of status of things during time 3. Etc. After rent Before rent contact@aupanama. com www. aupanama. com By Sébastien Picart y Manoj Chatlani +507 610 947 16 PANAMA LAW FIRM

PANAMA - REAL ESTATE LAWS REAL ESTATE TRANSACTION PHASES: 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 contact@aupanama. com www. aupanama. com By Sébastien Picart y Manoj Chatlani +507 610 947 16 PANAMA LAW FIRM

PANAMA - REAL ESTATE LAWS REAL ESTATE TRANSACTION PHASES: BROKERS - ESCROW PAYMENTS: Responsibility of Seller: Clean Title & Property Responsibility of Buyer: Payment contact@aupanama. com www. aupanama. com By Sébastien Picart y Manoj Chatlani +507 610 947 16 PANAMA LAW FIRM

PANAMA - REAL ESTATE LAWS Thank You contact@aupanama. com www. aupanama. com By Sébastien Picart y Manoj Chatlani +507 610 947 16 PANAMA LAW FIRM