Welcome to episode #12 of RealtyCast Global – a global connection to all things real estate, hosted by Hugh Gilliam, president of Global Property Pros.
Unlock the secrets of Panamanian real estate with our distinguished guest, Arnulfo Arias of Navarro Guardia, who comes from a prominent political background and offers a wealth of knowledge from his post-dictatorship governmental role. Imagine navigating the burgeoning market of a country where the monumental Panama Canal shapes its global standing, and where legal and investment climates intertwine to create a unique landscape for property ownership. With Arnulfo's guidance, we explore the nuances of buying and owning property in Panama, from the security of the public registry system to the importance of working with licensed professionals. This episode isn't just a conversation; it's an educational journey tailored for potential investors and anyone fascinated by the allure of this strategic nation's real estate opportunities.
Embark on a masterclass of the Panamanian property transaction process, where we dissect each step with precision, illuminating the path from earnest money agreements to the sacred public deed of sale. If the thought of losing deposits or doubling down on earnest money sends shivers down your spine, fear not; Arnulfo's expertise highlights the safeguards and legal considerations that protect all parties involved. We then follow the journey of a property purchase through to the recording of the deed, underscoring the gravity of legal ownership and the financial wisdom of securing transactions. This is not just a podcast episode – it's a roadmap to confidently claiming your stake in Panama's vibrant real estate scene.
Visit blog.realtyhive.com for more details on this episode.
About the guest - Arnulfo Arias:
Mr. Arias’s legal practice focuses mainly on commercial and civil matters, plus taxation and government administrative issues. Corporate practice includes advising corporation structure, corporate governance issues, living wills, estate planning structures, and civil and commercial contracts in general.
Arnulfo is an activist in social and humanitarian programs, a writer and weekly columnist, and is heavily involved in politics by family tradition. His grandfather, Arnulfo Arias Madrid, was president of Panama on th
About the host - Hugh Gilliam:
Hugh Gilliam co-owned a national transportation company, created a land development business, and worked as a general contractor in residential and commercial construction for over two decades. Hugh also co-founded an international distribution company and successfully negotiated and contracted with 135 sales representatives in the United States, Canada, France, Brazil, Japan, and the Netherlands.
Today, Mr. Gilliam is affiliated with RealtyHive, LLC where he serves as Director of International Real Estate and President of Global Property Pros. His duties include involvement in commercial and residential transactions, plus promoting marketing systems and lead generation platforms.
For real estate professionals looking to take their business to the next level, check out Global Property Pros!
He is also co-founder of the luxury digital magazine, DOORWAYS INTERNATIONAL, powered by RealtyHive, which serves as a platform for Brokers and Buyers throughout 70 countries.
Hugh's Designations Include:
- Certified Luxury Home Marketing Specialist
- Certified Distressed Property Export
- Certified International Property Specialist
- Certified International Investment & Immigration Specialist
- Transnation
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Hugh Gilliam (00:01):
Welcome to RealtyCast Global, where we
bring insights and advice fromtop professionals in the global
market.
Join us for a journey ofculture and real estate from
countries across the globe.
Arnulfo Arias (00:15):
I'd like to introduce my guest today,
arnolfo Arias, a partner withNavarro Guardia in Panama, and
he's quite the celebrity.
I contacted him a few monthsago.
A friend said if you need anyquestions ever answered about
Panama and about transactions,give him a call.
(00:36):
And I did, and he was rightthere on the phone answering my
questions, very polite, verynice to me, and then, as I
learned more about him and hisfamily, I feel like we're
dealing with royalty from Panamanow, and you'll know why in
just a few minutes.
Welcome and please introduceyourself as far as your
(00:57):
background, and let's talk alittle bit about your political
background too.
Speaker 3 (01:03):
Well, thank you very much, Hugh.
It's a real honor to be here.
This compliment about being acelebrity is, of course,
exaggerated.
I'm a Panamanian, I'm anattorney.
My name, as you have mentioned,is Arnulfo Arias.
Yes, I do have a long politicalline of members in the family
(01:29):
that have been actively almostsince the beginning of the
republic here in Panama.
So my grandfather had the samename as I bear it's Arnulfo
Arias and he was president threetimes here in Panama and he was
president three times here inPanama.
So by name I'm widely knownmore for what he did for this
(01:49):
country than for what I'vehumbly done throughout my career
, which is an attorney.
I've been practicing law in thecommercial side and as an
advisor to industry and anadvisor to foreign investment
(02:13):
coming into Panama, and I cantell you a little bit about how
I got interested in this side oraspects of the practice.
Or aspects of the practice.
And it's because in 1994, wehad a change of government here
in Panama after a longdictatorship had been in place
(02:34):
in Panama for more than 20 years, and as a young man I was
called to preside a new officein the government which was for
direct investment promotion inPanama.
So I got involved from thattime and really felt honored
(02:59):
that anyone really consideringinvesting in Panama was really
excited to do so, if you can doa bit of explaining about what
benefits Panama has to give out.
So ever since then I've been inthe field of the practice of
law but generally especiallyinterested in promoting
(03:20):
investment in Panama, not onlythrough my office, through
anyone really interested indoing so.
Arnulfo Arias (03:28):
Another thing about you is the fact that
you've written a book.
It's called From the Epicenter.
You do a weekly column in thenewspaper, the Panama America
newspaper, American newspaper.
Besides the long history offamily politics, you're also a
cattle rancher and you have anagricultural green thumb also.
Speaker 3 (03:58):
So it seems like when do you have time to practice
law actually?
Well, I consider that thepractice of law is something
very near to the person that isdoing it.
You see, I feel that I practicelaw 24-7 in my life and it's
really involved in every singlething I'm involved in.
(04:21):
A lot of social programs reallyinvolves legal work.
You know, profound legal work,and sometimes in that aspect you
cannot really value.
What you're doing is generatingwhat we really need for the
country, the country.
(04:49):
But what I'm hinting at is thatlaw is everywhere.
In anything that I do and ithas been like that for a long,
long time Even in cattleranching it is involved, because
I've helped out to create newpossibilities of regulations for
cattle owners here in Panamaand help out existing
associations of cattlemen too.
Arnulfo Arias (05:09):
Can you tell us a little bit about the history of
Panama?
I mean, I know that most peopleunderstand the history, but
could you go a little bit deeperinto it and tell the audience
about the history of Panama andsome of the aspects of it that
we really need to know before weplunge into how to do a
(05:32):
successful transaction, a realestate transaction, in Panama?
Speaker 3 (05:37):
Okay, that's a very important aspect.
I feel really proud to be bornin a country like this one,
because Panama has really beengiven a very important task of
serving the world, and it is atask that that comes into being
(06:00):
even before men exists.
Here, panama, we have a coat ofarms that had been enacted
since 1904, and it bears thestatement promundi beneficio.
And promundi beneficio meansfor the benefit of the world.
So our forefathers knew sincethen, when the Republic was born
(06:26):
, that we really engaged in agreat task of serving the world.
And this task really comesabout in a geological form, even
three million years ago, whenthe Isthmus of Panama rose from
the sea, because from that timethe geographical task of Panama
(06:46):
was dividing the two oceans, theGulf Stream started changing
its patterns and actually theglobe started warming up because
of the existence of Panama, andthere's quite a lot of studies
done on this matter.
So there's even theories thathint to the role that Panama
(07:10):
played throughout this procedureof warming the planet and
making men really go from theAfrican continent upwards,
because the planet had warmed atthat time.
So even you can consider thatto be an excessive pride, but
for us here that know this, wecall it a task that is embedded
(07:33):
in us from the very beginning ofthe existence of Panama.
So, in that same turn of events, men has also taken advantage
of this position of Panama and,as you know, the Americans
decided to take on the huge,enormous task of creating a
(07:53):
canal here in Panama and unitedthose two oceans that had been
actually separated through thiscanal that is actually in place,
through this canal that isactually in place, and 5% of the
total amount of commerce in theworld goes through this canal
right now.
So we feel really, really proudto be a part of this and to
(08:15):
share in this huge task ofserving the world.
Arnulfo Arias (08:21):
Yeah, excuse me, I was fortunate enough to be
there in Panama in 2016.
The International Real EstateFederation had meetings there
and see the town, see some ofthe villages out away from
(08:48):
Panama City, and even I meaneven down to romanticizing, like
the fruit stands and thingslike that on the highways.
I mean those were beautiful,beautiful fruits and vegetables
that were grown right there inPanama and it was just a lovely
place to be.
I know that in in it was inAugust, august 1st through the
(09:10):
5th of this year the US PanamaBusiness Council had, you know,
a time to come there and and itwas promoting your properties.
I miss that, but it wasn't onlypromoting commercial and
residential properties, but youhad symposiums about how to do
business there and things likethat.
(09:33):
I'd like to know if you had agreat attendance I hope you did
and a few of the things that youcovered, because I'm sure that
you participated in thatsymposium during that week.
Speaker 3 (09:46):
Yes, I had the honor to participate as a guest, as a
speaker, and basically provideda few hints and tips in issues
pertaining to the questions thatI've been hearing for over 27
years of anyone that isinterested in investing in
(10:07):
Panama.
So I already had those gatheredtogether and was able to at
least provide them with ageneral idea of what I recommend
that someone should do if thatperson is interested in
investing here in Panama in realestate.
So I concentrated on that andthat was what I gave to that
(10:31):
symposium when it took place.
Arnulfo Arias (10:35):
You know we need to look at.
First of all.
Let's do this so that ourviewers can know more about the
transaction itself, and that'sthe reason I was calling you.
I have several people on themarketing platform we have at
Global Property Pros.
We operate a global orinternational platform of
(11:00):
marketing, and one of ourmembers of GPP and you can see
it right here had a questionabout the whole transfer and it
sort of got complicated, becausein the us we refer to one thing
(11:22):
, in panama you refer to itanother way, and I mean even
down to earnest money.
I mean, you know we have a wayof collecting on this money and
and the attorney actually has afund, a trust fund, that he
keeps the money safe and soundin, but you don't do that.
From what I understand, inPanama, the bank actually is the
(11:45):
holder of the what do you callit?
The trust fund or the deposit?
I guess the deposit.
It's not really referred to asearnest money per se.
But so that was the beginningof my conversations with you,
and so I think one of the firstplaces we should start would be
(12:06):
about ownership rights.
I mean, just say that we're,you know, I'm a buyer, I'm in
Panama and I find the property.
I find the property that reallysuits my needs and want it.
So, number one, how can I beassured that I could have full
ownership of the property once Ichoose it?
(12:27):
And then, how do I get frompoint A?
Speaker 3 (12:33):
to point B and to a closing.
Okay, I'm going to try and makeit as simple as possible, okay.
Okay, I'm going to try and makeit as simple as possible.
Okay, so we can start byaddressing the first question
that I usually get, and it'sthat tendency to have some
inquiries about the right ofownership by foreigners.
Okay, regarding real estate,here in Panama, we have a
(12:56):
special situation regardingownership, because ownership of
real estate has not only beenlegalized by a bill.
It is part of our constitutionhere in Panama.
So, taken to that level, theright to own property is
constitutional, and by that Imean that our Congress cannot
(13:19):
change any of those rights byimposing any bill so that there
gives you immediately a sense ofeasiness that the property you
have will not even be changedunder law.
You would have to change theconstitution to change the right
to the property here in Panama.
(13:40):
So that is the first thing thatI usually tell somebody that
has this inquiry, and it's a bitfearful, if you will, of our
Latin American system.
So here in Panama, no, you havea constitutional right to own
property.
And the second, which is evenmore important, regarding the
fact that a foreigner would comeinto Panama, is that foreigners
(14:05):
and nationals are equal underthe constitution as well.
So that means that the right toown property is the same for me
as a national that it would befor a foreigner coming in and
buying a property in Panama, andthat gives a sense of assurance
that the investment you makewill be protected, just as if it
(14:27):
were a Panamanian buying aproperty.
Okay, and no bill issued byCongress here in Panama could
change that reality.
Now that does have a specificlimit, and I'm going to share
that with you right now, butit's also a limitation that is
only created by the Constitution, and it's the fact that
(14:49):
foreigners cannot own propertywithin 10 kilometers of each
border of Panama, meaning fromthe border of Colombia and from
the border of Costa Rica.
But that has beeninstitutionalized by
constitution, so it's not animposition.
(15:11):
It's really part of the balancethat is there, set in since
1904 for this situation ofproperty.
So, with that in mind, I can go, then, a bit further into how
to start knowing aboutproperties here in Panama.
Arnulfo Arias (15:31):
Okay, yeah, let me ask one quick question what
about property use?
Is there any type ofrestriction on the usage of the
property?
Speaker 3 (15:42):
No, absolutely, so long as you respect the third
party rights and I'm going to beheading on to give you a bit
more information how you canfind out if there are any
restrictions or limitations,because any restrictions or
limitations here in Panama forproperties must be publicly
known.
So before you get into buying aproperty, you will know what
(16:04):
restrictions you have beforehand.
Okay, so in that way, nolimitation at all, unless it's a
registered limitation, whichwe're going to be talking about
when we address the way to do atitle search here in Panama Okay
.
I consider the first step intogetting into a property
(16:26):
knowledge.
You have to really search orconduct a search here in Panama,
and a search here in Panama isdifferent than a search in the
US.
Here we have a public registrythat is centralized, and by
centralized I mean that each andevery property has a specific
(16:47):
number so you can track it allthe way down to its existence,
its history, its obligations andeven its restrictions, which is
what we had talked about.
So this system is a publicsystem which anybody can access.
But when it's a foreignercoming in to do a title search,
(17:10):
usually I advise that he hiresomebody that has the knowledge
of this title search, because,even though it's meant as a
do-it-yourself tool, you can gothrough the internet from
anywhere in the world and checkout a property.
There could be something youmiss and that would not be a
good experience to have.
(17:31):
Okay, so I immediately say wehave this wonderful public
registry system.
It's updated on a daily basis.
There's no information that canbe compromising if it's not
there, but you do need somebodyadvising at the moment of doing
this title search, because it'snot mandatory, of course, but
(17:55):
it's mostly recommended, andhighly recommended, by somebody
like me who has had to treatpeople and I say treat because
they've gone through horribleexperiences because of this lack
of information that we're nowtrying to provide.
Okay, so, if you have anyquestions about that public
(18:16):
registry, of course I will bewilling to answer them, but it's
a very, very simple andaccessible system.
Arnulfo Arias (18:24):
I think it's very interesting that I mean you're
talking about the entire countryof Panama having this registry
system that anyone can access.
That's correct.
Speaker 3 (18:37):
that is correct and I wanted to just let you know
that it has been so effectivethat it has been running since
1916, you know withoutinterruption.
Of course it used to be manualregistration.
You know of the properties doneby hand, but now it's.
Everything has changed,everything is computerized and
(19:00):
scanned and it has beenconsidered so important for the
legal security of Panama thatpart of this procedure and
structure of the public registryyou will find in our civil code
.
So that level of importance isactually given to the public
(19:20):
registry.
Arnulfo Arias (19:21):
I see has there been any developments of
blockchain within that system.
Has anybody tested that, orhave you heard any rumblings
about bringing that into Panama?
Speaker 3 (19:37):
Well, it's so effective that it's actually I
cannot say that there's no waysof trying to how can I say,
pierce it, but those are on theillegal sides and we really
don't need to deal with thatbecause it would be illegal.
There's no way of tampering,because I will go into that in
(19:59):
the next questions that I hopeto answer for you.
Regarding how to start buyingproperty, okay, it's a very,
very safe procedure if you do itright, just like anything, if
you don't do it right you haveproblems.
Arnulfo Arias (20:13):
Yeah, and I think that's the.
You know.
It sounds like you have beeninvolved with people that come
in and do it the wrong way andyou have to try to clean it up.
But if you start the right way,you're going to be able to make
sure that every I is dotted,every t is crossed by the time
(20:33):
you get to the closing and havefull ownership of the property.
So no title insurance, is thatright?
Speaker 3 (20:42):
Yeah, that is correct .
What I feel is this is a veryupdated system, accessible
system, no way to tamper with it.
Once you see a public deed ofsale posted in the system, it
cannot be changed anymore, yousee.
(21:03):
So the information you get fromthere is actually very valid,
and you immediately ask for itto be certified in official
documents.
So there's no way really tohave this risk of buying some
property that does not belong tothe person that owns it,
because you will be able to seeup to the last minute who owns
(21:27):
it.
Okay, so that procedure ofpurchasing will ensure that your
advisor will always be trackinghow your documents are going,
and there's really no way tocontest something of this nature
if it's done correctly.
Arnulfo Arias (21:45):
That makes perfect sense and it's really a
simple approach, I mean, sinceyou have everything documented
and back.
I think even with titleinsurance here in the United
States maybe it runs back only50 years, maybe as far as
guaranteeing the title.
You're talking about muchfurther than that with your
(22:08):
documentation.
Speaker 3 (22:11):
That is correct and it's important that we talk
about this.
I know we're short on time, butwhen you buy a property that
has been registered, let's sayland, the initial number of this
land that was issued back sincethe existence of the republic
would not change if nobody hadsold it, so it would be exactly
(22:33):
the same, and in that way youcan track a property all the way
down to the first initialenactment of the property.
So that's very important.
Arnulfo Arias (22:46):
Well, if we go step by step, let's do that.
I think there's about fivesteps that you've mentioned that
we need to follow when you'repurchasing in Panama, and if we
could just start step by stepand go through those five steps,
I think it would be veryimportant to let our listeners
hear and understand thatparticular process and
(23:08):
understand that particularprocess.
Speaker 3 (23:10):
Okay, it may not be needed, it may be.
You know, you probably heardthis so much, but again, when
you're buying property in Panama, it's important to get in touch
with a licensed broker.
Okay, very, very important.
Here in Panama, real estateagents are licensed under law.
(23:31):
Okay, so you must make surethat they have the accreditation
to act as such, so that thatstep is very important as well.
I know that people can do thingson their own and it's fine, but
it's a high risk, and I thinkthat's why some people commit
(23:52):
this type of mistakes from thebeginning, because they don't go
to the right individuals.
So the first tip I would liketo call it that would be to
contact a licensed real estateagent, and licensed real estate
agents here are usually membersof associations, okay, and those
(24:15):
associations are, of course,enacted and legalized on their
law, and that gives you a senseof security as well.
So you go to a licensed realestate agent and they will have
a multiple listing, which isvery important, because that
multiple listing means thatthose properties have already
(24:36):
been screened.
Okay.
So once that property is placedin a multiple listing, there's
a lot of things that justshorten the amount of time that
you need to actually make yourdecision.
Okay, that would be the firsttip.
Shorten the amount of time thatyou need to actually make your
decision Okay, that would be thefirst tip.
The second one would be to makesure that this title search is
(24:56):
actually conducted through thepublic registry, which we had
talked about, and again, it's asimple search, but it has to be
done by somebody that has thekeen eye to spot any single
situation that could rise withthat property, not only past but
future, even after you you buyit.
(25:17):
So when I advise in a in apurchase, I always make sure
that we go as back as further aspossible with the property and
we actually tell you whatlimitations you could have in
the future.
And that is very important,because if you're buying for a
home, it's different than ifyou're buying for building, you
(25:39):
know, a condominium.
So all of that must be studiedand given as advice before you
get in.
So it's very important thatthis title search be done
properly and that you feelabsolutely satisfied after you
receive this title search,because you will probably have
(26:01):
absolutely no doubts about yourdecision.
Okay, once you have conductedthis title search, then, and
only then, would I say you'reready to make an offer.
Okay, and here comes the catch.
A lot of people think that justby making that offer, the other
person that accepts is alreadybinded to it.
(26:25):
It doesn't work like that underour civil system here in Panama
to it.
It doesn't work like that underour civil system here in Panama
.
What I usually recommend isthat, after you make that offer,
that offer is then taken to afurther commitment that we call
a pre-sales agreement.
It's a promise to purchase andsell agreement.
And this agreement is withinthis regular strand of purchase
(26:49):
of property, because with thispre-sales agreement you will
immediately be able to committhe seller to the existing
(27:14):
surface.
For example, if you're buyingwith some items within the
property, you're making sure inthat pre-sale agreement that is
already stated there.
You will know the condominiumfees and how much they are
beforehand.
So doing this pre-sale agreementis, in my view, very important
(27:35):
because you're going to get toget a feel for the property even
before you buy that propertyand later on, after you purchase
, you will not be able to changeyour mind anymore.
So it really makes sense and Ialways advise to start off with
this pre-sales agreement.
And I'm going to tell you whata pre-sales agreement would
(27:58):
imply.
The person that is selling,what you want to do is make sure
that they get the piece ofproperty out of the commercial
market.
If you're really sure you wantthat property, then you want
that property out of thecommercial market.
If you're really sure you wantthat property, then you want
that property out of the market.
No further offers from thatmoment on.
In order to achieve that, youneed to have that set down in
(28:19):
writing through a pre-salesagreement as the one that I
mentioned.
So you mentioned this earnestmoney, the earnest money which
is something that always happensbecause it's within the regular
practice here in Panama.
In the US, you probably arevery familiar with the escrow
(28:50):
when buying property, but herein Panama, escrow is not
legislated.
Okay, so this is something thatmust be addressed in the
pre-sale agreement, and thereare two types of earnest here in
Panama.
One earnest is calledconfirmatory earnest, meaning
that the money you give usupfront, you cannot turn back on
it and the seller will not beable to legally turn back either
(29:12):
.
So what you're saying is anadvance.
This is an advance of the salethat we're both committing to.
Nobody can turn back.
Okay, that type of earnest willimply that if somebody defaults
, then we take it to court andenforce the sale, because both
parties were already inacknowledgement of that.
(29:34):
Now, that is one of the optionsyou have.
The other option is what wecall a penalty upfront, which is
almost the same, but what youdo is you are willing to lose
part of that money that you'reputting upfront, and a lot of
(29:57):
people don't know that they putthis earnest in the transaction
and they didn't really know thatthey were about to lose it, if
somebody you know, if theybacked up.
So let's say you're a buyer andyou say I'm putting this, you
take the property out of themarket and you did not know you
had this penalty.
(30:17):
And then you say, well, I'mbacking off, I like another unit
, give me back my money.
That's not possible anymore.
Okay, so you must be crystalclear when you do this earnest.
Okay, so you must be crystalclear when you do this earnest,
because what happens is, whenearnest implies that it's a
penalty, the buyer has to bewilling to lose it if he backs
(30:42):
up and the seller has to returnthat amount of earnest doubled
if he backs up.
Okay, that means that they'reboth in a in a balanced
situation.
Okay, and it's very important toclear that up beforehand.
And I've seen a lot of lack ofknowledgement in this, because
it's something that must bestudied and known.
(31:04):
We don't expect for anyonebuying to know these things.
We, we have expertise to tellthem how to do it.
Okay, so once you have thispre-sale, then that pre-sale,
you still don't have theproperty.
Okay, that pre-sale is just thecommitment of how you're going
to be going to the closing, thetimeframes, the amount of the
(31:31):
price sale, all the details youwant to get in there.
We get into that pre-sale.
But then, after you are ready toclose, then we must transform
your will, both the wills of theseller and the buyer, into what
we call a public instrument ofsale.
Okay, this public instrument ofsale is a deed of sale.
(31:52):
In order to carry out a deed ofsale, you must do it in a
notary public here in Panama,and it will require the presence
of buyer and seller beforewitnesses.
Okay, so there you set down thewill in a very short minute
that is written under theobligation of a law, by an
(32:16):
attorney.
They cannot just go in thereand do it themselves.
An attorney must be responsiblefor the drafting of this public
deed of sale.
Okay, so when the buyer and theseller go in together, they
usually go with both attorneysthat represent them, and then we
take this minutes of sale,already countersigned by us as
(32:40):
attorneys, and that document isthe framework that is used for
the deed.
That is used for the deed.
Everything is very simple as faras the terms that it must
include, because you alreadyknow what you're buying, you see
(33:00):
.
So what we lay down.
There is the acceptance of thepurchase of this specific
property, with the informationthat is included in the public
registry.
So you don't have to go aheadand make an encyclopedia of this
agreement.
It's very short, simple, onepage, but it must be done before
(33:20):
you can own that property.
Okay, this public deed of sale,we do it in one single day.
And then comes the final phase,which is taking that public
deed of sale and recording itfor public knowledge.
That recording for publicknowledge usually takes about a
week, and after that you arecompletely on legal ground and
(33:46):
proud owner of a property inPanama.
Okay, it may sound a bitoverwhelming, but it is not.
It's just simple sort ofcooking recipe steps that must
be taken and cannot be avoided.
Okay, so that would be the tips, hugh, that I would give
everybody.
Arnulfo Arias (34:07):
Let me ask you this about the earnest money.
So you don't have a trustaccount in your firm where you
hold the money.
Actually, that's held by a bankthat does that would be
designated to hold trust money.
Is that true?
Speaker 3 (34:28):
No, Okay.
So let me tell you what happenswhen you ask for an earnest.
You're asking for an upfrontthat in the market should not be
more than 10% Usually.
Okay, you want to take thatproperty out of the market.
The buyer should be willing toput upfront at least 10%.
(34:49):
But you don't put it in a trustaccount or anywhere of that
nature.
Usually the agreement is togive it to the seller.
Arnulfo Arias (34:57):
That's right Okay .
Speaker 3 (34:59):
Immediately to the seller.
But there's a balance there.
You're just giving the upfrontof 10%.
I usually don't recommend yougive more than that.
Okay, you give that 10, 10,everything in writing,
everything laid down in apre-sales agreement.
You don't give it out of thatagreement framework never, okay.
So you first sign the pre-saleagreement and then you can
(35:22):
entrust that 10.
Now the balance is where Iusually ask that it not be paid
without using a bank or withoutusing some type of engagement of
security.
And this is why, as I'veexplained to you, our
(35:44):
registration system is verysimple, but anything you
register there is immediatelyenacted and presumed to be legal
.
So let's say you pay the money,including the balance, and your
deed has not been recordedthere.
You could be in trouble, okay,and then you've already paid
(36:06):
that entire balance of the salesprice.
The way to avoid that is to usebanks here in Panama, because a
bank will issue a promissoryletter of payment to that seller
telling him that once he showsthe bank that you are already a
(36:28):
title owner, then the bankreleases the money over to them.
It's sort of an escrow.
Okay, sure, that is a simple,very secure manner to ensure
that that balance doesn't goprior to the registration of
that deed.
Okay, so, because I want toexplain to you the other side,
that could happen.
You go ahead and register thatdeed.
(36:49):
Okay, so, because I want toexplain to you the other side,
that could happen.
You go ahead and register thatdeed, but the seller has not
received your funds.
So what happens then?
For the purpose of the publicregistry, you're already the
owner, but you've not canceledthe sales price.
So there you could haveinquiries on both sides.
(37:10):
They're both very hesitant.
So we have to look for ways tomake this a secure transaction,
and the banks is only one way.
But we can work out other ways,like placing that, that
certified check, for example,with the attorneys that have
been appointed, and then he onlyreleases it once the title is
(37:32):
secured.
Arnulfo Arias (37:36):
So I mean you've certainly amplified the fact
that a foreigner doesn't need tocome to Panama and think he can
handle the entire transactionstart to finish without having
professional help to assistalong the way.
I mean it seems like it's alittle bit more complicated than
(38:42):
had to get in the middle of itand work it out so that they
could both come out winners onthe other side.
Speaker 3 (38:55):
Yes.
Arnulfo Arias (39:01):
I'll try not to bring out horror stories, but we
need to know.
I mean, we need to know becausewe don't want someone walking
into Panama and ending up inyour office because they didn't
do it right to begin with.
I think that's my thoughtprocess here.
To give one example of when itwent wrong.
Speaker 3 (39:15):
Okay, and I sincerely appreciate that because it will
give me at least the hopes thatanybody coming into Panama
really seek advice from thebeginning.
Well, I can tell you whathappens, not just once, it
happens quite a lot.
So I'm not just going to giveyou one story, I'm going to give
(39:36):
you a story that just happensagain and again.
Some people think that by justsigning a pre-sales agreement
they become the owner of thatproperty.
So I've had clients walk intomy office with a pre-sales
agreement saying that they don'tknow why they're still not
(39:56):
owners of the property, and I'vehad to walk them to the tips I
just gave you and explain tothem why they are not the legal
owners and why another person isstill the owner of that
property.
So what happens is I think thatthere should be responsibility
on a transaction of this natureby both the seller and the buyer
(40:21):
.
The seller should always beopen and commit himself to
making sure that the transactionis wrapped up all the way until
the end.
He cannot just receive thatmoney and let the other person
solve the issue, because this Idon't want to call it ignorance,
(40:43):
but it's rather a lack ofknowledge.
It's not a potential issue onjust the buyer or just
foreigners.
It happens to nationals thatthink that once they have issued
this type of commitment in apre-sale private agreement,
everything is done Well, that'snot the fact.
That's not the fact, and ithappens between friends.
(41:04):
It happens between people thathave some level of trust, that
think that they have alreadysolved issues, paid monies, and
you have to take it all the wayuntil the end, and that's the
simple manner of doing thesethings.
Now I can assure you that evenin the worst case scenarios, we
can solve it so long as there iswriting in the way, so long as
(41:28):
there are documents, becauseit's very hard to solve a
situation where you don't haveany documents, and that also I
have seen.
Okay, where there's not reallyreceipts of money, seen, where
there's not really receives ofmoney, where there's nothing,
then it makes it even hard forus to make miracles, which we're
not bound to do.
We're just there to commitourselves to practice law in the
(41:51):
most responsible manner andmake sure that even if you have
a problem, we can take it withlegal actions for a solution.
But I always ask the client tobear some level of
responsibility before breaking acase, because that's part of
life, you know, and we cannotpromise something that we cannot
(42:12):
do.
So when it's a really difficultcase.
I just must turn it downbecause I don't have ways of
helping out.
But that has happened just afew, very few times in my life.
Arnulfo Arias (42:27):
Listen.
We really appreciate your timetoday because I think you hit it
right on target about all theelements involved, start to
finish, in purchasing propertyin Panama.
I really appreciate you.
I appreciate your time herewith us today and I know that
it's great information for thelisteners and I look forward to
(42:49):
the next opportunity to sit downwith you.
Thank you.
Speaker 3 (42:53):
Thank you very much, Uri.
I've been delighted to be here.
Hugh Gilliam (42:56):
I've been delighted to be here.
Thanks for joining in ontoday's episode of RealtyCast
Global.
Make sure to subscribe to thepodcast to be notified when new
episodes air.
Welcome to RealtyCast Global, where we
bring insights and advice fromtop professionals in the global
market.
Join us for a journey ofculture and real estate from
countries across the globe.
Arnulfo Arias (00:15):
I'd like to introduce my guest today,
arnolfo Arias, a partner withNavarro Guardia in Panama, and
he's quite the celebrity.
I contacted him a few monthsago.
A friend said if you need anyquestions ever answered about
Panama and about transactions,give him a call.
(00:36):
And I did, and he was rightthere on the phone answering my
questions, very polite, verynice to me, and then, as I
learned more about him and hisfamily, I feel like we're
dealing with royalty from Panamanow, and you'll know why in
just a few minutes.
Welcome and please introduceyourself as far as your
(00:57):
background, and let's talk alittle bit about your political
background too.
Speaker 3 (01:03):
Well, thank you very much, Hugh.
It's a real honor to be here.
This compliment about being acelebrity is, of course,
exaggerated.
I'm a Panamanian, I'm anattorney.
My name, as you have mentioned,is Arnulfo Arias.
Yes, I do have a long politicalline of members in the family
(01:29):
that have been actively almostsince the beginning of the
republic here in Panama.
So my grandfather had the samename as I bear it's Arnulfo
Arias and he was president threetimes here in Panama and he was
president three times here inPanama.
So by name I'm widely knownmore for what he did for this
(01:49):
country than for what I'vehumbly done throughout my career
, which is an attorney.
I've been practicing law in thecommercial side and as an
advisor to industry and anadvisor to foreign investment
(02:13):
coming into Panama, and I cantell you a little bit about how
I got interested in this side oraspects of the practice.
Or aspects of the practice.
And it's because in 1994, wehad a change of government here
in Panama after a longdictatorship had been in place
(02:34):
in Panama for more than 20 years, and as a young man I was
called to preside a new officein the government which was for
direct investment promotion inPanama.
So I got involved from thattime and really felt honored
(02:59):
that anyone really consideringinvesting in Panama was really
excited to do so, if you can doa bit of explaining about what
benefits Panama has to give out.
So ever since then I've been inthe field of the practice of
law but generally especiallyinterested in promoting
(03:20):
investment in Panama, not onlythrough my office, through
anyone really interested indoing so.
Arnulfo Arias (03:28):
Another thing about you is the fact that
you've written a book.
It's called From the Epicenter.
You do a weekly column in thenewspaper, the Panama America
newspaper, American newspaper.
Besides the long history offamily politics, you're also a
cattle rancher and you have anagricultural green thumb also.
Speaker 3 (03:58):
So it seems like when do you have time to practice
law actually?
Well, I consider that thepractice of law is something
very near to the person that isdoing it.
You see, I feel that I practicelaw 24-7 in my life and it's
really involved in every singlething I'm involved in.
(04:21):
A lot of social programs reallyinvolves legal work.
You know, profound legal work,and sometimes in that aspect you
cannot really value.
What you're doing is generatingwhat we really need for the
country, the country.
(04:49):
But what I'm hinting at is thatlaw is everywhere.
In anything that I do and ithas been like that for a long,
long time Even in cattleranching it is involved, because
I've helped out to create newpossibilities of regulations for
cattle owners here in Panamaand help out existing
associations of cattlemen too.
Arnulfo Arias (05:09):
Can you tell us a little bit about the history of
Panama?
I mean, I know that most peopleunderstand the history, but
could you go a little bit deeperinto it and tell the audience
about the history of Panama andsome of the aspects of it that
we really need to know before weplunge into how to do a
(05:32):
successful transaction, a realestate transaction, in Panama?
Speaker 3 (05:37):
Okay, that's a very important aspect.
I feel really proud to be bornin a country like this one,
because Panama has really beengiven a very important task of
serving the world, and it is atask that that comes into being
(06:00):
even before men exists.
Here, panama, we have a coat ofarms that had been enacted
since 1904, and it bears thestatement promundi beneficio.
And promundi beneficio meansfor the benefit of the world.
So our forefathers knew sincethen, when the Republic was born
(06:26):
, that we really engaged in agreat task of serving the world.
And this task really comesabout in a geological form, even
three million years ago, whenthe Isthmus of Panama rose from
the sea, because from that timethe geographical task of Panama
(06:46):
was dividing the two oceans, theGulf Stream started changing
its patterns and actually theglobe started warming up because
of the existence of Panama, andthere's quite a lot of studies
done on this matter.
So there's even theories thathint to the role that Panama
(07:10):
played throughout this procedureof warming the planet and
making men really go from theAfrican continent upwards,
because the planet had warmed atthat time.
So even you can consider thatto be an excessive pride, but
for us here that know this, wecall it a task that is embedded
(07:33):
in us from the very beginning ofthe existence of Panama.
So, in that same turn of events, men has also taken advantage
of this position of Panama and,as you know, the Americans
decided to take on the huge,enormous task of creating a
(07:53):
canal here in Panama and unitedthose two oceans that had been
actually separated through thiscanal that is actually in place,
through this canal that isactually in place, and 5% of the
total amount of commerce in theworld goes through this canal
right now.
So we feel really, really proudto be a part of this and to
(08:15):
share in this huge task ofserving the world.
Arnulfo Arias (08:21):
Yeah, excuse me, I was fortunate enough to be
there in Panama in 2016.
The International Real EstateFederation had meetings there
and see the town, see some ofthe villages out away from
(08:48):
Panama City, and even I meaneven down to romanticizing, like
the fruit stands and thingslike that on the highways.
I mean those were beautiful,beautiful fruits and vegetables
that were grown right there inPanama and it was just a lovely
place to be.
I know that in in it was inAugust, august 1st through the
(09:10):
5th of this year the US PanamaBusiness Council had, you know,
a time to come there and and itwas promoting your properties.
I miss that, but it wasn't onlypromoting commercial and
residential properties, but youhad symposiums about how to do
business there and things likethat.
(09:33):
I'd like to know if you had agreat attendance I hope you did
and a few of the things that youcovered, because I'm sure that
you participated in thatsymposium during that week.
Speaker 3 (09:46):
Yes, I had the honor to participate as a guest, as a
speaker, and basically provideda few hints and tips in issues
pertaining to the questions thatI've been hearing for over 27
years of anyone that isinterested in investing in
(10:07):
Panama.
So I already had those gatheredtogether and was able to at
least provide them with ageneral idea of what I recommend
that someone should do if thatperson is interested in
investing here in Panama in realestate.
So I concentrated on that andthat was what I gave to that
(10:31):
symposium when it took place.
Arnulfo Arias (10:35):
You know we need to look at.
First of all.
Let's do this so that ourviewers can know more about the
transaction itself, and that'sthe reason I was calling you.
I have several people on themarketing platform we have at
Global Property Pros.
We operate a global orinternational platform of
(11:00):
marketing, and one of ourmembers of GPP and you can see
it right here had a questionabout the whole transfer and it
sort of got complicated, becausein the us we refer to one thing
(11:22):
, in panama you refer to itanother way, and I mean even
down to earnest money.
I mean, you know we have a wayof collecting on this money and
and the attorney actually has afund, a trust fund, that he
keeps the money safe and soundin, but you don't do that.
From what I understand, inPanama, the bank actually is the
(11:45):
holder of the what do you callit?
The trust fund or the deposit?
I guess the deposit.
It's not really referred to asearnest money per se.
But so that was the beginningof my conversations with you,
and so I think one of the firstplaces we should start would be
(12:06):
about ownership rights.
I mean, just say that we're,you know, I'm a buyer, I'm in
Panama and I find the property.
I find the property that reallysuits my needs and want it.
So, number one, how can I beassured that I could have full
ownership of the property once Ichoose it?
(12:27):
And then, how do I get frompoint A?
Speaker 3 (12:33):
to point B and to a closing.
Okay, I'm going to try and makeit as simple as possible, okay.
Okay, I'm going to try and makeit as simple as possible.
Okay, so we can start byaddressing the first question
that I usually get, and it'sthat tendency to have some
inquiries about the right ofownership by foreigners.
Okay, regarding real estate,here in Panama, we have a
(12:56):
special situation regardingownership, because ownership of
real estate has not only beenlegalized by a bill.
It is part of our constitutionhere in Panama.
So, taken to that level, theright to own property is
constitutional, and by that Imean that our Congress cannot
(13:19):
change any of those rights byimposing any bill so that there
gives you immediately a sense ofeasiness that the property you
have will not even be changedunder law.
You would have to change theconstitution to change the right
to the property here in Panama.
(13:40):
So that is the first thing thatI usually tell somebody that
has this inquiry, and it's a bitfearful, if you will, of our
Latin American system.
So here in Panama, no, you havea constitutional right to own
property.
And the second, which is evenmore important, regarding the
fact that a foreigner would comeinto Panama, is that foreigners
(14:05):
and nationals are equal underthe constitution as well.
So that means that the right toown property is the same for me
as a national that it would befor a foreigner coming in and
buying a property in Panama, andthat gives a sense of assurance
that the investment you makewill be protected, just as if it
(14:27):
were a Panamanian buying aproperty.
Okay, and no bill issued byCongress here in Panama could
change that reality.
Now that does have a specificlimit, and I'm going to share
that with you right now, butit's also a limitation that is
only created by the Constitution, and it's the fact that
(14:49):
foreigners cannot own propertywithin 10 kilometers of each
border of Panama, meaning fromthe border of Colombia and from
the border of Costa Rica.
But that has beeninstitutionalized by
constitution, so it's not animposition.
(15:11):
It's really part of the balancethat is there, set in since
1904 for this situation ofproperty.
So, with that in mind, I can go, then, a bit further into how
to start knowing aboutproperties here in Panama.
Arnulfo Arias (15:31):
Okay, yeah, let me ask one quick question what
about property use?
Is there any type ofrestriction on the usage of the
property?
Speaker 3 (15:42):
No, absolutely, so long as you respect the third
party rights and I'm going to beheading on to give you a bit
more information how you canfind out if there are any
restrictions or limitations,because any restrictions or
limitations here in Panama forproperties must be publicly
known.
So before you get into buying aproperty, you will know what
(16:04):
restrictions you have beforehand.
Okay, so in that way, nolimitation at all, unless it's a
registered limitation, whichwe're going to be talking about
when we address the way to do atitle search here in Panama Okay
.
I consider the first step intogetting into a property
(16:26):
knowledge.
You have to really search orconduct a search here in Panama,
and a search here in Panama isdifferent than a search in the
US.
Here we have a public registrythat is centralized, and by
centralized I mean that each andevery property has a specific
(16:47):
number so you can track it allthe way down to its existence,
its history, its obligations andeven its restrictions, which is
what we had talked about.
So this system is a publicsystem which anybody can access.
But when it's a foreignercoming in to do a title search,
(17:10):
usually I advise that he hiresomebody that has the knowledge
of this title search, because,even though it's meant as a
do-it-yourself tool, you can gothrough the internet from
anywhere in the world and checkout a property.
There could be something youmiss and that would not be a
good experience to have.
(17:31):
Okay, so I immediately say wehave this wonderful public
registry system.
It's updated on a daily basis.
There's no information that canbe compromising if it's not
there, but you do need somebodyadvising at the moment of doing
this title search, because it'snot mandatory, of course, but
(17:55):
it's mostly recommended, andhighly recommended, by somebody
like me who has had to treatpeople and I say treat because
they've gone through horribleexperiences because of this lack
of information that we're nowtrying to provide.
Okay, so, if you have anyquestions about that public
(18:16):
registry, of course I will bewilling to answer them, but it's
a very, very simple andaccessible system.
Arnulfo Arias (18:24):
I think it's very interesting that I mean you're
talking about the entire countryof Panama having this registry
system that anyone can access.
That's correct.
Speaker 3 (18:37):
that is correct and I wanted to just let you know
that it has been so effectivethat it has been running since
1916, you know withoutinterruption.
Of course it used to be manualregistration.
You know of the properties doneby hand, but now it's.
Everything has changed,everything is computerized and
(19:00):
scanned and it has beenconsidered so important for the
legal security of Panama thatpart of this procedure and
structure of the public registryyou will find in our civil code
.
So that level of importance isactually given to the public
(19:20):
registry.
Arnulfo Arias (19:21):
I see has there been any developments of
blockchain within that system.
Has anybody tested that, orhave you heard any rumblings
about bringing that into Panama?
Speaker 3 (19:37):
Well, it's so effective that it's actually I
cannot say that there's no waysof trying to how can I say,
pierce it, but those are on theillegal sides and we really
don't need to deal with thatbecause it would be illegal.
There's no way of tampering,because I will go into that in
(19:59):
the next questions that I hopeto answer for you.
Regarding how to start buyingproperty, okay, it's a very,
very safe procedure if you do itright, just like anything, if
you don't do it right you haveproblems.
Arnulfo Arias (20:13):
Yeah, and I think that's the.
You know.
It sounds like you have beeninvolved with people that come
in and do it the wrong way andyou have to try to clean it up.
But if you start the right way,you're going to be able to make
sure that every I is dotted,every t is crossed by the time
(20:33):
you get to the closing and havefull ownership of the property.
So no title insurance, is thatright?
Speaker 3 (20:42):
Yeah, that is correct .
What I feel is this is a veryupdated system, accessible
system, no way to tamper with it.
Once you see a public deed ofsale posted in the system, it
cannot be changed anymore, yousee.
(21:03):
So the information you get fromthere is actually very valid,
and you immediately ask for itto be certified in official
documents.
So there's no way really tohave this risk of buying some
property that does not belong tothe person that owns it,
because you will be able to seeup to the last minute who owns
(21:27):
it.
Okay, so that procedure ofpurchasing will ensure that your
advisor will always be trackinghow your documents are going,
and there's really no way tocontest something of this nature
if it's done correctly.
Arnulfo Arias (21:45):
That makes perfect sense and it's really a
simple approach, I mean, sinceyou have everything documented
and back.
I think even with titleinsurance here in the United
States maybe it runs back only50 years, maybe as far as
guaranteeing the title.
You're talking about muchfurther than that with your
(22:08):
documentation.
Speaker 3 (22:11):
That is correct and it's important that we talk
about this.
I know we're short on time, butwhen you buy a property that
has been registered, let's sayland, the initial number of this
land that was issued back sincethe existence of the republic
would not change if nobody hadsold it, so it would be exactly
(22:33):
the same, and in that way youcan track a property all the way
down to the first initialenactment of the property.
So that's very important.
Arnulfo Arias (22:46):
Well, if we go step by step, let's do that.
I think there's about fivesteps that you've mentioned that
we need to follow when you'repurchasing in Panama, and if we
could just start step by stepand go through those five steps,
I think it would be veryimportant to let our listeners
hear and understand thatparticular process and
(23:08):
understand that particularprocess.
Speaker 3 (23:10):
Okay, it may not be needed, it may be.
You know, you probably heardthis so much, but again, when
you're buying property in Panama, it's important to get in touch
with a licensed broker.
Okay, very, very important.
Here in Panama, real estateagents are licensed under law.
(23:31):
Okay, so you must make surethat they have the accreditation
to act as such, so that thatstep is very important as well.
I know that people can do thingson their own and it's fine, but
it's a high risk, and I thinkthat's why some people commit
(23:52):
this type of mistakes from thebeginning, because they don't go
to the right individuals.
So the first tip I would liketo call it that would be to
contact a licensed real estateagent, and licensed real estate
agents here are usually membersof associations, okay, and those
(24:15):
associations are, of course,enacted and legalized on their
law, and that gives you a senseof security as well.
So you go to a licensed realestate agent and they will have
a multiple listing, which isvery important, because that
multiple listing means thatthose properties have already
(24:36):
been screened.
Okay.
So once that property is placedin a multiple listing, there's
a lot of things that justshorten the amount of time that
you need to actually make yourdecision.
Okay, that would be the firsttip.
Shorten the amount of time thatyou need to actually make your
decision Okay, that would be thefirst tip.
The second one would be to makesure that this title search is
(24:56):
actually conducted through thepublic registry, which we had
talked about, and again, it's asimple search, but it has to be
done by somebody that has thekeen eye to spot any single
situation that could rise withthat property, not only past but
future, even after you you buyit.
(25:17):
So when I advise in a in apurchase, I always make sure
that we go as back as further aspossible with the property and
we actually tell you whatlimitations you could have in
the future.
And that is very important,because if you're buying for a
home, it's different than ifyou're buying for building, you
(25:39):
know, a condominium.
So all of that must be studiedand given as advice before you
get in.
So it's very important thatthis title search be done
properly and that you feelabsolutely satisfied after you
receive this title search,because you will probably have
(26:01):
absolutely no doubts about yourdecision.
Okay, once you have conductedthis title search, then, and
only then, would I say you'reready to make an offer.
Okay, and here comes the catch.
A lot of people think that justby making that offer, the other
person that accepts is alreadybinded to it.
(26:25):
It doesn't work like that underour civil system here in Panama
to it.
It doesn't work like that underour civil system here in Panama
.
What I usually recommend isthat, after you make that offer,
that offer is then taken to afurther commitment that we call
a pre-sales agreement.
It's a promise to purchase andsell agreement.
And this agreement is withinthis regular strand of purchase
(26:49):
of property, because with thispre-sales agreement you will
immediately be able to committhe seller to the existing
(27:14):
surface.
For example, if you're buyingwith some items within the
property, you're making sure inthat pre-sale agreement that is
already stated there.
You will know the condominiumfees and how much they are
beforehand.
So doing this pre-sale agreementis, in my view, very important
(27:35):
because you're going to get toget a feel for the property even
before you buy that propertyand later on, after you purchase
, you will not be able to changeyour mind anymore.
So it really makes sense and Ialways advise to start off with
this pre-sales agreement.
And I'm going to tell you whata pre-sales agreement would
(27:58):
imply.
The person that is selling,what you want to do is make sure
that they get the piece ofproperty out of the commercial
market.
If you're really sure you wantthat property, then you want
that property out of thecommercial market.
If you're really sure you wantthat property, then you want
that property out of the market.
No further offers from thatmoment on.
In order to achieve that, youneed to have that set down in
(28:19):
writing through a pre-salesagreement as the one that I
mentioned.
So you mentioned this earnestmoney, the earnest money which
is something that always happensbecause it's within the regular
practice here in Panama.
In the US, you probably arevery familiar with the escrow
(28:50):
when buying property, but herein Panama, escrow is not
legislated.
Okay, so this is something thatmust be addressed in the
pre-sale agreement, and thereare two types of earnest here in
Panama.
One earnest is calledconfirmatory earnest, meaning
that the money you give usupfront, you cannot turn back on
it and the seller will not beable to legally turn back either
(29:12):
.
So what you're saying is anadvance.
This is an advance of the salethat we're both committing to.
Nobody can turn back.
Okay, that type of earnest willimply that if somebody defaults
, then we take it to court andenforce the sale, because both
parties were already inacknowledgement of that.
(29:34):
Now, that is one of the optionsyou have.
The other option is what wecall a penalty upfront, which is
almost the same, but what youdo is you are willing to lose
part of that money that you'reputting upfront, and a lot of
(29:57):
people don't know that they putthis earnest in the transaction
and they didn't really know thatthey were about to lose it, if
somebody you know, if theybacked up.
So let's say you're a buyer andyou say I'm putting this, you
take the property out of themarket and you did not know you
had this penalty.
(30:17):
And then you say, well, I'mbacking off, I like another unit
, give me back my money.
That's not possible anymore.
Okay, so you must be crystalclear when you do this earnest.
Okay, so you must be crystalclear when you do this earnest,
because what happens is, whenearnest implies that it's a
penalty, the buyer has to bewilling to lose it if he backs
(30:42):
up and the seller has to returnthat amount of earnest doubled
if he backs up.
Okay, that means that they'reboth in a in a balanced
situation.
Okay, and it's very important toclear that up beforehand.
And I've seen a lot of lack ofknowledgement in this, because
it's something that must bestudied and known.
(31:04):
We don't expect for anyonebuying to know these things.
We, we have expertise to tellthem how to do it.
Okay, so once you have thispre-sale, then that pre-sale,
you still don't have theproperty.
Okay, that pre-sale is just thecommitment of how you're going
to be going to the closing, thetimeframes, the amount of the
(31:31):
price sale, all the details youwant to get in there.
We get into that pre-sale.
But then, after you are ready toclose, then we must transform
your will, both the wills of theseller and the buyer, into what
we call a public instrument ofsale.
Okay, this public instrument ofsale is a deed of sale.
(31:52):
In order to carry out a deed ofsale, you must do it in a
notary public here in Panama,and it will require the presence
of buyer and seller beforewitnesses.
Okay, so there you set down thewill in a very short minute
that is written under theobligation of a law, by an
(32:16):
attorney.
They cannot just go in thereand do it themselves.
An attorney must be responsiblefor the drafting of this public
deed of sale.
Okay, so when the buyer and theseller go in together, they
usually go with both attorneysthat represent them, and then we
take this minutes of sale,already countersigned by us as
(32:40):
attorneys, and that document isthe framework that is used for
the deed.
That is used for the deed.
Everything is very simple as faras the terms that it must
include, because you alreadyknow what you're buying, you see
(33:00):
.
So what we lay down.
There is the acceptance of thepurchase of this specific
property, with the informationthat is included in the public
registry.
So you don't have to go aheadand make an encyclopedia of this
agreement.
It's very short, simple, onepage, but it must be done before
(33:20):
you can own that property.
Okay, this public deed of sale,we do it in one single day.
And then comes the final phase,which is taking that public
deed of sale and recording itfor public knowledge.
That recording for publicknowledge usually takes about a
week, and after that you arecompletely on legal ground and
(33:46):
proud owner of a property inPanama.
Okay, it may sound a bitoverwhelming, but it is not.
It's just simple sort ofcooking recipe steps that must
be taken and cannot be avoided.
Okay, so that would be the tips, hugh, that I would give
everybody.
Arnulfo Arias (34:07):
Let me ask you this about the earnest money.
So you don't have a trustaccount in your firm where you
hold the money.
Actually, that's held by a bankthat does that would be
designated to hold trust money.
Is that true?
Speaker 3 (34:28):
No, Okay.
So let me tell you what happenswhen you ask for an earnest.
You're asking for an upfrontthat in the market should not be
more than 10% Usually.
Okay, you want to take thatproperty out of the market.
The buyer should be willing toput upfront at least 10%.
(34:49):
But you don't put it in a trustaccount or anywhere of that
nature.
Usually the agreement is togive it to the seller.
Arnulfo Arias (34:57):
That's right Okay .
Speaker 3 (34:59):
Immediately to the seller.
But there's a balance there.
You're just giving the upfrontof 10%.
I usually don't recommend yougive more than that.
Okay, you give that 10, 10,everything in writing,
everything laid down in apre-sales agreement.
You don't give it out of thatagreement framework never, okay.
So you first sign the pre-saleagreement and then you can
(35:22):
entrust that 10.
Now the balance is where Iusually ask that it not be paid
without using a bank or withoutusing some type of engagement of
security.
And this is why, as I'veexplained to you, our
(35:44):
registration system is verysimple, but anything you
register there is immediatelyenacted and presumed to be legal
.
So let's say you pay the money,including the balance, and your
deed has not been recordedthere.
You could be in trouble, okay,and then you've already paid
(36:06):
that entire balance of the salesprice.
The way to avoid that is to usebanks here in Panama, because a
bank will issue a promissoryletter of payment to that seller
telling him that once he showsthe bank that you are already a
(36:28):
title owner, then the bankreleases the money over to them.
It's sort of an escrow.
Okay, sure, that is a simple,very secure manner to ensure
that that balance doesn't goprior to the registration of
that deed.
Okay, so, because I want toexplain to you the other side,
that could happen.
You go ahead and register thatdeed.
(36:49):
Okay, so, because I want toexplain to you the other side,
that could happen.
You go ahead and register thatdeed, but the seller has not
received your funds.
So what happens then?
For the purpose of the publicregistry, you're already the
owner, but you've not canceledthe sales price.
So there you could haveinquiries on both sides.
(37:10):
They're both very hesitant.
So we have to look for ways tomake this a secure transaction,
and the banks is only one way.
But we can work out other ways,like placing that, that
certified check, for example,with the attorneys that have
been appointed, and then he onlyreleases it once the title is
(37:32):
secured.
Arnulfo Arias (37:36):
So I mean you've certainly amplified the fact
that a foreigner doesn't need tocome to Panama and think he can
handle the entire transactionstart to finish without having
professional help to assistalong the way.
I mean it seems like it's alittle bit more complicated than
(38:42):
had to get in the middle of itand work it out so that they
could both come out winners onthe other side.
Speaker 3 (38:55):
Yes.
Arnulfo Arias (39:01):
I'll try not to bring out horror stories, but we
need to know.
I mean, we need to know becausewe don't want someone walking
into Panama and ending up inyour office because they didn't
do it right to begin with.
I think that's my thoughtprocess here.
To give one example of when itwent wrong.
Speaker 3 (39:15):
Okay, and I sincerely appreciate that because it will
give me at least the hopes thatanybody coming into Panama
really seek advice from thebeginning.
Well, I can tell you whathappens, not just once, it
happens quite a lot.
So I'm not just going to giveyou one story, I'm going to give
(39:36):
you a story that just happensagain and again.
Some people think that by justsigning a pre-sales agreement
they become the owner of thatproperty.
So I've had clients walk intomy office with a pre-sales
agreement saying that they don'tknow why they're still not
(39:56):
owners of the property, and I'vehad to walk them to the tips I
just gave you and explain tothem why they are not the legal
owners and why another person isstill the owner of that
property.
So what happens is I think thatthere should be responsibility
on a transaction of this natureby both the seller and the buyer
(40:21):
.
The seller should always beopen and commit himself to
making sure that the transactionis wrapped up all the way until
the end.
He cannot just receive thatmoney and let the other person
solve the issue, because this Idon't want to call it ignorance,
(40:43):
but it's rather a lack ofknowledge.
It's not a potential issue onjust the buyer or just
foreigners.
It happens to nationals thatthink that once they have issued
this type of commitment in apre-sale private agreement,
everything is done Well, that'snot the fact.
That's not the fact, and ithappens between friends.
(41:04):
It happens between people thathave some level of trust, that
think that they have alreadysolved issues, paid monies, and
you have to take it all the wayuntil the end, and that's the
simple manner of doing thesethings.
Now I can assure you that evenin the worst case scenarios, we
can solve it so long as there iswriting in the way, so long as
(41:28):
there are documents, becauseit's very hard to solve a
situation where you don't haveany documents, and that also I
have seen.
Okay, where there's not reallyreceipts of money, seen, where
there's not really receives ofmoney, where there's nothing,
then it makes it even hard forus to make miracles, which we're
not bound to do.
We're just there to commitourselves to practice law in the
(41:51):
most responsible manner andmake sure that even if you have
a problem, we can take it withlegal actions for a solution.
But I always ask the client tobear some level of
responsibility before breaking acase, because that's part of
life, you know, and we cannotpromise something that we cannot
(42:12):
do.
So when it's a really difficultcase.
I just must turn it downbecause I don't have ways of
helping out.
But that has happened just afew, very few times in my life.
Arnulfo Arias (42:27):
Listen.
We really appreciate your timetoday because I think you hit it
right on target about all theelements involved, start to
finish, in purchasing propertyin Panama.
I really appreciate you.
I appreciate your time herewith us today and I know that
it's great information for thelisteners and I look forward to
(42:49):
the next opportunity to sit downwith you.
Thank you.
Speaker 3 (42:53):
Thank you very much, Uri.
I've been delighted to be here.
Hugh Gilliam (42:56):
I've been delighted to be here.
Thanks for joining in ontoday's episode of RealtyCast
Global.
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