Buying a property is a decision that involves, starting a search, finding the property, choosing it, reaching an agreement with the seller, closing the transaction and planning the move. In this article we review the recommended due diligence according to the type of properties to guarantee a safe sale and purchase of real estate.
To begin with, we must keep in mind that a sale and purchase is an agreement whereby an individual (natural or legal person) undertakes to transfer real estate, owned by him/her, in exchange for the payment of an agreed amount of money. As such, the buyer and seller must agree on the sale price, conditions of the transaction including the term of payment and the process of delivery of the property.
In order to achieve a safe sale and purchase of real estate, we must point out that there are different types of property in Panama. Of which we can highlight two, titled ones and those without title or possessory rights. A titled property can be new, used, have improvements, have sea front among many other variants which must be considered in this investigation of the estate. An untitled property may be vacant, have flora or structures, or it may adjoin bodies of water.
What is the Objective of Due Diligence?
The objective of due diligence is to guarantee a safe sale and purchase of real estate by verifying that the owner has the property legitimately in his or her name or is the person authorised to make the sale, in the case of a legal entity.
It also ensures that the transaction complies with the laws in force and that the property is free of encumbrances. Carrying out this process properly is important to prevent future problems and to carry out a safe sale and purchase of real estate in Panama.
What Should Due Diligence Include?
Due diligence can be divided into two broad groups: titled properties and properties without title or possessory rights. Titled properties can be projects under construction, such as barriadas, flats, duplexes or similar. Possessory rights are properties that do not appear in the Public Registry of Panama and have been transferred from one family member to another or from owner to owner by means of legal agreements. For a safe sale and purchase of real estate, it is fundamental to conduct all the necessary verifications in each case.
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Titled Property
Search for the property in the Public Registry, see all the history that appears there, if there are any marginals such as mortgages, usufructs, pending entries, and any other details that are shown in the registry.
This process facilitates the safe sale and purchase of real estate, as the Public Registry will also show the owners, the size of the surface area, the last acquisition value of the property or the value of the last declared improvements.
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Project Under Construction
As with the titled property, the property must be searched in the Public Registry, all the history that appears in this, if there are any marginal entries, if there are any pending entries and all other details that can be found in the registry.
However, when a project is under development, it is very likely that the segregation has not been completed and therefore the fincas do not have individual folios. To ensure a safe sale and purchase of real estate, you must check the history of the project and the necessary permits, and so on.
A project under construction has a stipulated delivery date, but can be extended for common reasons or force majeure. Likewise, before this real estate can be transferred, it must have the required permits, among which must be the Occupancy Permit issued by the Emeritus Fire Department, which is one of the main permits to occupy a property.
Another point to consider for the safe sale and purchase of real estate under construction is the verification of the surface area, this can be done by a qualified surveyor or topographer in case there is any doubt about the dimensions of your property.
Due Diligence of a Possessory Right
In a safe sale and purchase of real estate, due diligence of a possessory right should involve a review of the documents submitted by the owner. These should include:
- Notarised Public Deed of Assignment Contract (if acquired by purchase) or the Judicial Resolution of Inheritance (if inherited).
- Plans drawn up by a qualified surveyor.
- Affidavits of the owners of the adjoining properties or neighbours of the area.
- Topographical images of the area.
- Land reform documents.
- Utility contracts and invoices.
- Building and occupancy permits.
- Certification from Casa de Paz, corregiduría or mayor’s office.
- Any other document that may facilitate the verification process for the sale.
These documents will be verified beforehand to guarantee the safe sale and purchase of the real estate.
Promise of Purchase and Sale
The Promise of Purchase and Sale Contract is fundamental to protect your investment. It guarantees a prudent time frame for the delivery of the documents required for the closing. It also includes indemnification clauses in case of hidden defects and penalties for non-compliance, defines the time frame for the entire process, confirms the documents that must be delivered for the effective transfer and safe sale and purchase of the real estate.
Once the due diligence is completed, you can proceed with the signing of the contract of promise of purchase and sale of the property and the payment of the deposit. Thus, once all the stages have been completed, the transaction will be perfected by means of the Final Purchase Deed, which is signed before a Notary Public with all the solemnity of the Law. Finally, it is registered with the Public Registry and updated with the National Land Administration Authority.
Completing a safe purchase and sale of real estate is something that is not left to chance, as it is an important investment. The Kraemer & Kraemer team has over 15 years of experience in assisting in the transaction of property. Contact us today.
