Buying a house, apartment, land, or commercial property requires more than evaluating its price, location, and physical condition. Every property has a registration, cadastral, tax, and financial history that can reveal debts, restrictions, or conflicts.
Before handing over a deposit or signing a purchase agreement, the buyer should verify:
- Who the owner is and whether they have the legal capacity to sell.
- Whether there are mortgages, liens, seizures, lawsuits, or third-party rights.
- Whether the surface area, boundaries, and improvements match reality.
- Whether the land use permits the property to be used for the intended activity.
- Whether the land and improvement values match those recorded in the Public Registry, ANATI, and the DGI.
- Whether there are any outstanding tax debts, specific appraisals, or pending procedures.
- Whether the tax exemptions will continue to apply after the change of ownership.
- If the property belongs to a condominium, what is its financial, administrative, and legal status?
- Does the purchase agreement protect the deposit while the investigation is completed?
These verifications constitute real estate due diligence: a preliminary investigation to find out what is being purchased, how much it will actually cost, and what problems the new owner might face.
The registry, cadastral, and tax dimensions
In light of this new regulatory push, it is worth noting that the process of regulating Law 526 could be an opportune moment to review, in parallel, certain outdated aspects of the Panamanian Companies Law—such as the minimum requirement of three directors and three officers—so that the modernization of the Panamanian regulatory framework advances comprehensively and not only in terms of economic substance.
The review begins with the information held by the Public Registry, the National Land Administration Authority (ANATI), and the General Directorate of Revenue (DGI).
The land and improvement values listed in the Public Registry must match those registered with ANATI. In turn, the DGI uses the values maintained by ANATI to calculate property tax, so it must also be verified that its platform accurately reflects this information.
Simply put, there must be consistency between:
Public Registry → ANATI → DGI
The sale price does not always reflect the property’s true tax value.To determine this, you must review the registered values, the property’s tax account, appraisals, and applicable exemptions.
The cadastral value is not the sale price.
If the values don’t match, the cause must be determined before purchasing.It could be due to an outdated upgrade, a pending procedure, or an error in uploading the information.
Its determination and tax implications are primarily regulated by Articles 766, 766-A, 767, and 768 of the Tax Code.
The cadastral value should not be confused with the sale price or the market value. A property can be sold for B/.200,000 and have a different registered cadastral value. Therefore, the agreed-upon price alone does not determine the annual tax that the new owner must pay.
If the values are outdated, the property may appear to have a lower tax burden than it actually does. Correcting the information could result in outstanding taxes, interest, or surcharges, depending on the origin of the discrepancy and the date from which the correct value should be applied.
Tax Clearance Certificate, Appraisals, and Pending Procedures
The tax clearance certificate confirms that, according to the DGI’s records, the property has no outstanding debt at the time of issuance. However, it does not guarantee that the values used to calculate the tax are correct.
A property may be tax-free and still have discrepancies between the Public Registry, ANATI, and the DGI. Therefore, this document should be reviewed along with:
- The complete account statement.
- The values of the land and improvements.
- Payments made.
- Exemptions applied.
- Existing appraisals.
- Pending update procedures.
It should also be investigated whether a specific appraisal exists. This procedure allows for determining or updating the property value due to specific circumstances, such as:
- The construction or declaration of new improvements.
- A segregation or division.
- The demolition of a structure.
- The increase or decrease in value.
- The loss or deterioration of the property.
Its existence can completely change the purchase analysis. A property could be sold for B/.200,000, but have a specific appraisal of B/.700,000. In that scenario, its annual tax burden could be much higher than the buyer expected based on the sale price.
The appraisal date, the values assigned to the land and improvements, their registration with ANATI, their reflection in the DGI, and any resulting balance must be verified.
Exemptions and Change of Ownership
An exemption should not be assumed to be permanent, nor should it be understood that it will automatically transfer to the buyer.
The cadastral value is the value recognized by the Administration to determine the taxable base for property tax.It comprises the value of the land and, where there are buildings, the value of any improvements.
These benefits depend on the owner’s identity, the property’s use, and compliance with certain requirements. Therefore, even if the seller has benefited from a preferential rate, the buyer should not assume that it will continue to apply after the transfer.
The same caution should be exercised when acquiring land or improvements located in special economic zones, such as the Colón Free Zone. In these cases, the following should be confirmed:
- The legal basis for the exemption.
- Whether it applies to the land, the improvements, or both.
- Its period of validity.
- Whether it depends on the owner’s activity or status.
- Whether the buyer meets the requirements to retain it.
- Whether it must be reapplied for after the transfer.
- Whether it appears correctly applied to the property’s account.
The property’s location within a special economic zone does not, in itself, demonstrate that the new owner will be entitled to the benefit.
Ownership, capacity, and encumbrances
The legal review must confirm that the seller is the owner of the property and has the capacity to transfer it.
When the property owner changes, the new owner must verify whether they meet the eligibility requirements for the benefit and, if applicable, submit a new application to the DGI (General Directorate of Taxation).This is especially important for personal benefits, such as the Family Tax Assets or the Primary Residence, regulated by Articles 764, 766, and 766-A of the Tax Code.
The investigation should verify:
- The identity of the registered owner.
- The description and location of the property.
- Its area, boundaries, and location code.
- The correspondence between the property offered and the one actually visited.
- The legal capacity of the owner to sell.
- The powers of the representative who will sign the transaction.
When the owner is a company, its legal standing, the identity of its representatives, and the existence of the necessary corporate authorizations must be verified.
If the transaction will be carried out through the purchase of shares in the owning company, the investigation must extend to the entire company. In this scenario, not only is control of the property acquired, but also its legal, tax, and financial history, including its liabilities and contingencies.
If the owner has died, it must be determined whether there is an inheritance process, who the recognized heirs are, and whether the property can be validly transferred. An informal agreement between family members does not replace the corresponding adjudication or authorization.
It must also be verified whether the property is encumbered by:
- Mortgages.
- Antichresis.
- Liens or attachments.
- Registered claims.
- Easements.
- Usufructs.
- Restrictions on ownership.
- Prohibitions on disposal.
- Leases or occupants.
The existence of a mortgage does not necessarily prevent the purchase, but it requires establishing how it will be paid off, who will assume the expenses, and when the encumbrance will be released.
The physical reality and permitted use
It must be verified that the registered description matches the physical reality. The following situations may arise:
- Undeclared constructions.
- Additions made without permits.
- Discrepancies in surface area.
- Fences built outside the property lines.
- Parking spaces or storage areas that do not belong to the unit.
- Access points that depend on neighboring properties.
- Occupation of public or common areas.
These differences can complicate financing, transfer, future construction, or a subsequent sale.
These differences can complicate financing, transfer, future construction, or a subsequent sale.
Buying a property does not guarantee that it can be used as a restaurant, warehouse, clinic, office, business, or residential project. There may also be municipal, environmental, traffic, or special economic restrictions.
The feasibility of the intended use must be verified before closing the transaction, not after the purchase.
Condominiums: review more than just the unit
In land, offices and commercial premises, it must be verified that the land use allows the activity that the buyer intends to develop.
This regime is regulated by Law 284 of 2022.
Before purchasing, the Condominium Regulations and the Rules of Use should be reviewed. These documents may contain restrictions on:
- Short-term rentals.
- Short-term rentals.
- Short-term rentals.
- Remodeling.
- Noise and schedules.
- Noise and schedules.
- Remodeling.
- Moving services.
- Use of common areas.
- Exterior modifications.
A unit may be physically suitable for the buyer’s purpose and still be subject to regulations that prohibit that use.
The unit’s tax clearance certificate is required for the transfer, pursuant to Article 114 of Law 284 of 2022. However, it does not, by itself, reveal the financial status of the entire building.
It is advisable to review:
- The financial statements.
- The current budget.
- The overall level of delinquency.
- The contingency fund.
- Regular dues.
- Approved or anticipated special assessments.
- Accounts payable.
- Maintenance, security, and management contracts.
A condominium with high delinquency rates, insufficient reserves, or accumulated debt may end up passing these costs on to the owners who are up-to-date with their payments.
Recent meeting minutes provide information on matters that are not always clearly reflected in the financial statements, such as:
- Elevator repairs.
- Leaks or structural damage.
- Problems with water pumps.
- Façade maintenance.
- Deficiencies in fire protection systems.
- Disputes with the developer.
- Legal proceedings.
- Administrative penalties.
- Future special assessments.
The appearance of common areas does not always reflect the true financial and operational condition of the building.
The Promise of Sale and the Protection of the Deposit
The purchase agreement must protect the buyer while the due diligence process is completed.
Remitting a deposit without clear conditions can make it difficult to recover if a debt, lien, or discrepancy later appears.
The contract must stipulate:
- What documents the seller must provide.
- The deadline for completing due diligence.
- That the purchase is conditional upon satisfactory results.
- Who will correct any registration or tax inconsistencies.
- Who will pay any debts incurred before the transfer.
- How any mortgages will be paid off.
- What will happen if the property cannot be used for its intended purpose.
- When the deposit must be returned.
- Who will bear the taxes and expenses of the transfer.
- Under what conditions possession will be handed over.
The payment method must also be confirmed, and, if bank financing is available, the necessary conditions for disbursement.
Conclusion
The advertised price is only part of the cost of acquiring a property. A tax debt, a high cadastral value, an undeclared improvement, a restriction on use, or an extraordinary fee can completely change the advisability of the transaction.
Due diligence is not intended to complicate the purchase. Its purpose is to allow the buyer to make an informed decision, negotiate suitable conditions, and prevent the seller’s, property’s, or condominium’s problems from becoming their own.
Official Sources Consulted
- General Directorate of Revenue, information on property tax. ↗
- Law 284 of February 14, 2022, on the horizontal property regime. ↗
This article is for informational and general legal analysis purposes; it does not constitute legal advice for a specific case.
