Actualizado: 26 de abr de 2020
Starting a sales process in Panama does not have to be complicated, as long as you follow the correct steps or let yourself be advised by a suitable professional.
When selling or buying a property, two contracts must usually be signed. The first is the promise of sale, which is a simple contract, usually two pages, in which the conditions under which the sale will be governed are established, such as the price, amount of the subscription, the way in which payments will be made, the amount of taxes, commissions and penalties. These are the most relevant elements that can be established in a promise of sale, but as many conditions and clauses can be established as the parties consider is required.
The second contract is the minute of sale, which is basically a summary of the promise of sale, this only establishes the generals of the parts, price, the tax receipts are transcribed, etc. This time I will only explain the basic elements of the promise of sale, about the minute of sale I will speak in detail in a future article. I want to mention that this article is dedicated to people without notions of what is a promise of sale or how it works, therefore, I will make the explanation as simple as possible, without going into technical legal issues. If you need a legal analysis of a promise to sell you can send me an email or go to the services section.
Now let's get into the matter, the basic elements are:
1. Sale price: At this point the parties will establish the price by mutual agreement, the currency to be used and in some cases where some type of exchange occurs, assign a value to said exchange.
2. Payment: The payment depends in most cases on the form of payment. If the buyer will use bank financing, the bank establishes the amount of credit that the buyer must deliver to the signing of the promise of sale, in most cases it is 10% on used properties within Panama City, 20 30% to 30% on beach or country properties, 30% on commercial properties and 5% on new or presale residential properties.
3. Deadlines: In general terms, the deadlines will be established for the buyer to deliver the irrevocable letter of payment issued by his bank for the remaining amount after the payment, the deadline to sign the minute of sale and the deadlines for the seller to deliver peace and safe from the payment of taxes etc.
4. Penalties: This point is extremely important for the parties to be clear about, because the application of this clause can cause serious financial problems for one of the parties or even generate litigation. This clause basically establishes that in case of default by the buyer, the buyer will lose the amounts given in payment and in the opposite case that the seller fails, the latter must return the amount received as payment plus an equal amount.
Legally, there cannot be a contract that only establishes a penalty for breach of one of the parties, this would violate the principle of bilaterality of the contracts, this means that when one party is obliged to give or do something, the other must have a reciprocal obligation.
5. Commissions and expenses: If there is a commission to pay to a real estate agent, in the promise of sale the amount and manner of paying said commission can be mentioned, additional expenses that correspond to each part will be established. In Panama, the law establishes that it is the seller's responsibility to pay all the expenses inherent to selling the property and the agent's commission, if any, and the buyer must pay the closing of the deed of sale in the notary and the expenses generated by the registration of the sale in the Public Registry.
6. Formalization of the promise of sale: This contract only requires the comparison of the signature of the parties before a notary public for its formalization, this does not entail greater expense of time and resources. It is possible to raise the promise of sale to a public deed and register it in the Public Registry so that the buyer insures the asset, but in practice this figure is only used in special or high-risk transactions.
I hope this very basic summary of the main parts and operation of a promise of sale will be useful for your next purchase or sale of a property in Panama. A promise of sale can be as complex as the transaction requires, each sale has its special characteristics in some cases due to the quality of the property or the quality of the parts, however, everything is possible as long as you have the right advice. For any question about how to sell or buy a property in Panama, complete the form:
Until next time!