Titled Land versus Rights of Possession Land

Buying Land in Panama: Fully Titled, or Possessory Rights?

By Ives Brant

Should you even consider buying land that is not titled? Spend time in Panama, and you'll hear stories about how people made a killing by buying up possessory rights (Derechos Posesorios) land, then getting it titled.

Titling the land, make no mistake, should increase its value.

But there are drawbacks and pitfalls. Let's start with a basic example. You find a terrific piece of land. It has everything except title; it doesn't show up in the Registro Publico. The "owner" has farmed it for generations; he just never got around to procuring title for it.

You are willing to buy this and go through the hassle of steering it through the bureaucracy to procure title. But how do you "buy" it? Do you make up a contract and have the seller sign, then give him a down payment (see related article on the necessity of Down Payments in Panama) ? What if he takes your down payment and spends it, and just keeps living there as if nothing was agreed? What exactly are you going to do about it?

If you sue him, he probably has no money. And he has no land you can take - legally he has no land you can take or seize, because the land you wanted does not legally exist under his ownership. It's not his property. It's the government's property, part of a vast soup of land the government owns and that farmers have certain rights to because they lived on it and worked it.

So you made a contract to buy from a person who owns nothing except certain rights to the land. You need a safety mechanism that is only available in some situations. It took me a couple of years to come up with that safeguard; and believe me, I've discussed this conundrum with quite a few Panamanian lawyers. I never heard a satisfactory answer until I worked one out with Attorney Gabriel Arrocha and my land scout and cattle partner, Daniel Polanco.

Sometimes ROP (or Rights of Possession land) is situated in desirable locations like the Caribbean coast, near expected future roads and traffic flow. The boundaries between properties in some areas may be extremely vague, especially if the land is not being used for cattle, which requires good fences. It's not uncommon for sellers to take surveyors and buyers walking around and with a wave of their arm, indicate that the property starts near that tree and ends by that beach. But the neighbor might wave his arm in the same direction and claim he owns some of that too. It's possible to get involved in a mess even if your seller is dead certain of his boundaries, because HIS NEIGHBORS might well disagree.

Why Foreigners Come to Panama

by Ives Brant

Ten percent of England's citizens live outside its borders, but Americans have been far more hesitant to venture abroad to live, with only about two percent living as expatriates. That's changing, and a lot of them are considering Panama. Here's why:

1. Baby Boomers. You've heard the statistic: 70 million Americans retiring in the next 15 years and seeking their place in the sun. If 1/10 of just one percent of them head for Panama, that's 70,000 folks with a Social Security and pension income.

2. Returning Military. Tens of thousands of US servicemen know Panama already, because they were stationed there. If they retire abroad, it's a likely destination for them. Already they are buying lots and building homes in Coronado, or snapping up condos in Panama City.

3. Cruise Ship Passengers Every year hundreds of thousands are treated to the sight on Panama City's skyline upon traversing the Canal. They tend to be near retirement age and their cruise leaves them with excellent impressions.

4. Panama is Inviting Them. With funding of documentaries and commercials on US and Canadian TV, the country is serious about promoting itself as a tourist and retiree destination.

5. The Internet. With a Vonage phone (so talking with friends and family back home is just a local call either way) and e-mail, it isn't so lonely or scary abroad. Chat groups like Yahoo's viviendo_en_panama help too.

6. Terrorism. The tragic events of 2001 triggered an outflow of Americans. Suddenly, the citadel of America did not feel as safe, and countries with warm climates, unlikely targets for terrorists, became attractive to many.

7. Panama's Housing. Suddenly, Panama City and the surrounding beach areas have extremely attractive housing options for any budget.
8. The Skyline. With hundred-story residential towers going up, Panama City conveys such dynamism that its attraction is felt immediately.

9. Retiree Benefits. For "pensionados" there is a long list of breaks on transportation, food, lodging, entertainment, and health care.
10. Stability and Infrastructure. Panama is now a solid country, and the United States will not let it be otherwise. Anything that could threaten the Canal guarantees immediate US intervention.

11. Red Frog and Vista Mar. Ambitious developments pave the way for more upscale developments and higher demand for land, just by showing how it's done.

12. High Costs at Home. For retirees, who need more personal services, including quality health care, but don't buy many imported goods, Costa Rica has been a fine haven. In Panama, they get all that plus extensive retiree benefits and it's a great place to buy almost anything.

13. Familes. Suddenly, suburbia has arrived around Panama City, with Balboa and Costa de l'Este, not to mention fine international schools. Employees of the US embassy, of multinationals with subsidiaries in Panama, and those who have found a way to make a living internationally are flocking into these areas.

(continued from previous column)

I've been witness to some remarkable scenes where a leading recognized-brand realty agency that was buying up ROP land took a surveyor out to the Caribbean side, and surveyed the wrong property because they started from the wrong river. The seller was sick, so he sent his son out to guide us, and this young fellow had been partying the night before. The potential for a future boundary conflict and legal mess was obvious. It was lucky that the owner of the wrong land happened by and asked, in essence, what are you people doing surveying my property? Everyone had a good laugh about the mistake - because it was caught by luck.

One safeguard, obviously, is to only buy ROP land that is between clearly demarcated titled land, and to talk to the neighbors and make sure they don't dispute the boundaries. The ROP land is always the weaker claim - because that land doesn't exist yet, as we mentioned.

I've heard quite a few tales of buying ROP and titling it, but so far, I am the only foreigner that I know of who has done it - meaning all the way to having a finca number in the Registro Publico, Panama's records registry. Certainly there are others, but I've only met people who "are almost done with the process." To make it happen, I had to devise a procedure that took out about 90% of the risk - not all the risk, but nearly all of it. My co-investors and I felt that remaining risk was worth the boost in value we'd get if we succeeded, and we did. Almost immediately, a Panamanian offered us 15% more than we'd paid.

The safeguard I came up with is one that I am reserving for the use of my investors/buyers and myself. It isn't always available; it depends on the specifics of the purchase and the land, but it's been clear all along that relying on the standard "legal" safeguards in an ROP buy is next to pointless because the contracts are not enforceable in PRACTICAL terms. Which means, you might be right, and the paper might be solid, but you won't get the titled land in the end if the Seller decides to be dishonest. Or to be more precise, you won't get it at the price you expected, because you'll lose time and money on the legal fight.

In many cases, the value boost of titling ROP is not substantial enough to warrant the risks. My advice: don't go looking for ROP. Look for titled land. If you look with me, we'll deal with each specific situation on its own merits, with the top priority being safety, and we'll apply a methodology to lower the risk.