Although being a modern country, with an updated legislation based on a Civil Law system, there are
several topics and peculiarities within the process of acquiring a property in Panama that will certainly
make it stand apart from any other process of its kind in the region. Our positive law establishes flexible
enough guidelines to allow common practices to self-regulate the purchase process, referring mainly to
how title registration should take place and what elements must be included and detailed. Parties
complete names and identifiable particulars, as well as, all specific property related data should be
stated, the agreed selling price and the seller’s obligation to guarantee the transfer of the title and right
of possession, together with both parties expressed will or acceptance of the deal must be included in
order for a purchase process to be concluded successfully. However, these all refer to the actual closing
deed or final step of a sales purchase agreement in Panama, it all starts with more complex steps and
stages.
Once both parties have express their intentions of both, selling and buying a property, along with its
agreed selling price, it is customary to prepare an initial agreement, which will regulate all steps,
obligations and foreseeable scenarios for the next weeks or even months of the transaction; this
document is commonly known as the “Promise of Purchase and Sale Agreement”.
In this initial contract, parties are referred to as “the Promissory Seller and the Promissory Buyer”,
where the former promises to sell and the latter promises to buy. If a party is a legal or fictional person,
registry details, along with all general data of its legal representative or authorized attorney-in-fact
should be included, as well.
These types of contracts often start with a declaration of title of the Promissory Seller, describing all
legal/registry information of the property object of the transaction, as well as its location, size and
limitations, however, these last details are already part of the property registered data, making it easier
to simply refer all of these to the “described recorded information at the Public Registry”.
The mention of the selling price is usually expressed in letters and numbers, to avoid confusions, and it’s
often split into two or more down payments, starting with a lower one (10% – 20% is expected). This
common practice has more than one purpose, first it allows the Promissory Seller to take care of certain
obligations, such as paying all property transfer-related taxes (around 5% of the selling price) and bring
the property up to date with any existing debts, such as back property taxes or home owner association
late fees.
But beyond handling funds to the promissory seller, it also represents a token of commitment for both
parties to comply with each other’s obligations, since this deposit will become the penalty to bear in
mind when one of the parties defaults: on the one hand the Promissory Buyer will lose this initial
deposit if he/she can’t finalize the deal successfully for any reason, and on the other, if it is the
Promissory Seller the one that defaults, he/she will not only have to reimburse this initial down
payment, but add an identical amount as penalty. Even though this is not only a common legal practice
but is also stated in our Civil Code (art. 1224), parties may agree something else, such as committing to
lose only a percentage of this first down payment or even none at all.

A Promise of Purchase and Sales Agreement must also include the parties’ obligations, where the
promissory buyer will have to comply with the established payment schedule and bear with all closing
fees and costs, and the promissory seller should provide in due time all documents and information
required to draft and register the closing deed. Among these documents, the promissory seller should
be ready to provide before closing, the following ones:
1. A Bill of Sale, drafted in accordance with Panamanian regulations, and countersigned by an
Attorney.
2. Good standing certificates from both, local tax authorities and the water utility public offices.
3. If the property is subject to the horizontal property regime, a good standing certificate from the
building’s Home Owner Association fees should be included, as well.
4. Proof of payment of all real estate transfer related taxes involved in the transaction, along with
its respective application forms.
5. If the Promissory Seller is acting through a legal entity, a Shareholders’ Assembly Resolution
approving the transaction and authorizing its attorney-in-fact should be included, as well.
Once the promissory buyer gains access to all of the above, their attorney (or the bank’s attorney, if the
purchaser is financing the transaction) should start working on the closing deed, which will eventually be
registered to transfer ownership.
Our constant advice when it comes to these types of investments is to always hire legal representation
from day ONE, guaranteeing you an uncomplicated, straightforward transaction.
By: Emilio Cornejo Vernaza LL.M.
Founding Partner of PGS Attorneys and PGS Realty