Property Due Diligence

Before purchasing property in Panama it is wise to take the necessary steps to ensure problems are not going to arise in the future. Perform comprehensive due diligence on the property by completing a title search, review of cadastral maps, and verification of good standing with land taxes and utility bills. Make sure to check if there are any limitations on the property, liens or encumbrances that could negatively affect title.  It also could be beneficial to hire a professional surveyor to thoroughly inspect the property and affirm that the property’s blueprints, measurements, etc. match what is on file with the Public Registry.

Unfortunately, even if you perform thorough due diligence, fraudulent practices could still go unnoticed until it is too late. But it is not just fraud that can occur. Common complaints from property buyers are that the promoters, seller, developer, etc. do not comply with the closing date, and serious defects, like poor construction, faulty workmanship, water or humidity damage, become apparent after purchasing. Also, disadvantageous clauses in the contract that are not discussed during the transaction process can cause problems. 

One way to ensure you don’t fall victim to latent defects is to make sure the bill of sale includes a “latent defect clause” which gives the buyer the right to nullify the contract and claim damages. Title defects and property encumbrances can also be prevented with a thorough title search, but if one does arise, title insurance can protect against financial loss.

Real Estate Liability

Let’s assume that you did all you could to prevent any future property or home defects, and still one surfaces, what do you do? In Panama the real estate agency is not responsible for defects concealed by the seller.  Therefore, the seller assumes full liability, but the agent does have liability regarding reputation.  However, the agent is liable for damages suffered if they knowingly deceive the buyer when the seller has included defects in the contract, but the agent conceals the defects. 

It is not always clear who is liable for damages caused by incorrect or incomplete information – the real estate agent or the seller. If you are unsure, it is advisable to file a claim against both parties.

Real Estate Defects & Consumer Protection

Panama’s consumer protection agency, ACODECO (Autoridad de Proteccion al Consumidor y Defensa de la Competencia), is an autonomous entity operating within the Panamanian government. ACODECO is tasked with protecting and preserving the rights of the consumer, including rights provided to real estate buyers. 

If you purchase a piece of property, house or condo in Panama and feel you have been defrauded, are a victim of false advertising, or are in a breach of contract, you should file a claim with ACODECO. They will analyze your case and decide if it has merits to go to court or arbitration. However, ACODECO has limited resources for the amount of cases it receives in a year.

For example, in 2010, ACODECO received 506 complaints against 248 developers, of which the majority were for breaches of contract, demands for additional payments and failure to honor warranties. 

When filing a complaint with ACODECO there are some restrictions, and they can vary depending on your specific case. It is advisable to investigate what restrictions exist, such as financial claim limits and time limitations for making a claim. However, options do exist even after the limits have been exceeded. 

Your best course of action for attempting to recuperate losses or have damages repaired is via ACODECO. Filing a lawsuit or attempting to take legal actions through the Panamanian court system is not advised. It can take years, and if your complaint is against a large developer, it is definitely an uphill battle as most use corrupt means to influence court decisions.

If in doubt, do not purchase a questionable piece of property in Panama. There are many great opportunities to buy a piece of paradise from reputable, honest sellers, real estate agents and developers. Just do your research to find that right one.