Panama Property Law Overview

Since Panama’s separation from Colombia in 1903, Panamanian real estate has been attractive to foreign investors. This is due, in part, to Panama’s dollar-based economy, which offers low inflation and no foreign exchange risk, and also to a Civil Code that is applicable to both nationals and foreigners alike. The Panamanian government promotes real estate investment by foreigners. Foreigners can own property in Panama with few restrictions.

Panama’s Constitution under Article 44 guarantees and protects ownership of real property and/or private investment in it. Article 44 reads: “ ... Private Property is guaranteed as long as it is acquired in accordance with the law by natural person or legal entity.”

The following brief introduction highlights a few aspects of Panamanian real property law:

In Panama, ownership is determined two ways: title and rights of possession. All real estate property titles are registered at the Registro Público (Public Registry). It is here that an attorney extracts public deeds and all amendents to public deeds in order to ensure the legalities of the sale of a property.  When a property is not titled, and is referred to as Propiedad de Derecho Possessorio (rights to possess), attorneys obtain the information on the property from the Agricultural Reform Department.  This department regulates government land in rural areas where ownership rights are granted to citizens or entities which have proven use of the land.

The Propiedad de Derecho Possessorio system was initiated by land reforms in 1971 to encourage homesteading on unclaimed, untitled land.  Right of possession are constitutional protected and cannot be mortgaged.  Derecho Possessorio can be classified in two ways:

1. The occupant of government land can claim the occupied piece of land after a length of time and officially obtain the "right of use" for an indeterminate period.  Derecho Possessorio can pass from one generation to another and this right can be sold.

2. Idle private land can be claimed by the people who have worked the land.  That Land must be occupied and worked by third parties for an extended period of a minimum of 5 years. This legal process requires proof of use, probes and witnesses.

With the exception of town itself in the islands, most of the land traded is by right of possession. By law, all beaches are public; neither nationals nor foreigners may own beaches or the shores of rivers or lakes. Beach front properties must provide right of way beginning at the highest tide to the property line.  Builders and investors generally rent the land for 20-30 years, via the Ministry of Finance. Tourism incentives law expands this period for up to 40 years.

One exception only, which stems from national security concerns, limits foreigners investing in real property. Natural or legal entities, and/or nationals whose capital in whole or in part is derived from foreign sources, cannot own real property within 10 kilometres of national borders under Article 286 of the Constitution. This restriction can extend to some island property.