Real Estate Due Diligence in Panama: What to Review Before Buying

Real estate due diligence confirms that the property offered is the one that can legally be acquired, that its physical condition matches the records, and that its debts, restrictions and future costs are understood before a deposit is paid or a purchase agreement signed.

What should be reviewed before buying?

A useful review is not about collecting certificates. It must answer four questions: who can sell, what is being purchased, which obligations accompany the property and whether it can be used for the intended purpose.

Ownership, capacity and authority to sell

The starting point is a current registry certificate. It should confirm the registered owner, property description, area, boundaries, location code and any rights or encumbrances affecting it.

When the seller is a company, the review extends to its corporate standing, representation and corporate approvals. If an attorney-in-fact signs, the power of attorney must specifically authorise the transaction. If the owner has died, the succession proceedings and the capacity of those seeking to transfer the property must be verified.

Buying the property must also be distinguished from buying shares in the company that owns it. In a share acquisition, the buyer takes on the entity’s entire history, including tax, contractual and regulatory liabilities that may not appear on the property’s registry certificate.

Encumbrances and third-party rights

The certificate should be examined for mortgages, enforcement and precautionary attachments, lawsuits, easements, usufructs, ownership restrictions and other entries. A mortgage does not necessarily prevent a sale, but the agreement must specify how it will be discharged, who will bear the costs and when the release will be available.

The investigation does not end at the Public Registry. It is important to establish whether there are tenants, occupants, private agreements, rights of use or possession disputes. Legal transfer and physical delivery must both be possible on the agreed terms.

The Public Registry, ANATI and DGI must tell the same story

Registry, cadastral and tax information are connected, but each institution has a distinct role. The Public Registry evidences registered rights; the National Land Administration Authority (ANATI) maintains cadastral and valuation information; and the General Directorate of Revenue (DGI) administers the property’s tax account.

The review should compare:

• land and improvement values;
• area, location and identifying details;
• declared improvements;
• the property tax account and payments;
• specific appraisals and updating procedures;
• registered exemptions and their validity.

A tax clearance certificate confirms that the account shows no debt due at the time of issue. It does not, by itself, guarantee that the values used are correct or that no update is pending.

Cadastral value, appraisals and future tax costs

Cadastral value is not necessarily the sale price or market value. It is a reference for the property tax base and may affect other tax calculations. A significant difference between the price, registered value and physical reality deserves an explanation before closing.

For certain specific appraisals, ANATI requires a current ownership certificate and a report prepared by a registered appraiser. A pending appraisal or an improvement awaiting incorporation into the records may change the tax burden the buyer will assume.

The buyer should project the cost of holding the property using the correct values, not merely the balance shown before the transfer.

Exemptions and the primary residence

Exemptions must be checked for their legal basis and scope. Some depend on the property; others depend on the owner’s identity, use or an approved application. A benefit enjoyed by the seller should therefore not be assumed to continue automatically after transfer.

For the Panamanian classifications Patrimonio Familiar Tributario and Vivienda Principal, the DGI publishes specific requirements and rates. The buyer must confirm eligibility, the application required and the date from which the benefit would take effect.

Physical condition and permitted use

The technical inspection must be checked against plans, permits and records. Common discrepancies include undeclared construction, extensions without permits, fences beyond property boundaries, parking spaces or storage rooms that do not belong to the unit, and access dependent on neighbouring land.

For land, offices and commercial premises, zoning and permitted use must be verified. The fact that an activity currently operates there does not demonstrate that it has all necessary authorisations or can continue after the purchase.

Condominium property: review both the unit and the building

Law 284 of 2022 governs Panama’s horizontal property regime. For a unit subject to this regime, the following should be reviewed in addition to the registry certificate:

• the co-ownership regulations and amendments;
• recent owners’ assembly minutes;
• clearance for common charges;
• special assessments approved or under discussion;
• the budget, reserves and financial statements;
• litigation, claims and planned repairs;
• rules on rentals, pets, parking and common areas.

A unit may be free of encumbrances yet belong to a building with significant extraordinary obligations. The condominium’s financial and administrative position directly affects value and use.

The preliminary purchase agreement must protect the investigation

Due diligence loses its purpose if the buyer becomes bound before learning the results. The preliminary agreement should define the review’s scope, the time available to complete it and the consequences of a material adverse finding.

It should establish:

1. that the purchase is conditional on satisfactory results;
2. which documents the seller must provide;
3. who will correct registry, cadastral or tax discrepancies;
4. how encumbrances and debts will be discharged;
5. what happens if the intended use is not permitted;
6. when the deposit will be refunded;
7. how taxes and expenses will be allocated;
8. the conditions for delivery of possession.

An orderly route to closing

The investigation must translate into specific closing conditions. An organised file generally follows this sequence:

1. identify the property, seller and acquisition structure;
2. review registry and corporate records;
3. compare cadastral and tax information;
4. inspect the property, plans and land use;
5. review condominium matters where applicable;
6. negotiate corrections, holdbacks or guarantees;
7. prepare the deed and tax payments;
8. register the transfer and deliver possession.

Before paying a deposit or signing, explore our real estate legal services in Panama.

Conclusion

The purpose of due diligence is not to slow the purchase. It is to turn an important wealth decision into an informed transaction. When findings emerge early, they can be corrected, reflected in the price, covered by guarantees or justify the buyer’s decision not to proceed.

Official sources consulted

• Public Registry of Panama: registry information searches.
• ANATI: requirements for a specific appraisal.
• General Directorate of Revenue: property tax.
• Infojurídica: Law 284 of 2022 on horizontal property.
• MIVIOT: Horizontal Property Directorate.

This article provides general legal information and analysis; it does not constitute legal advice for a specific purchase. Documentation and permits must be checked against the property, transaction structure and legislation in force.