Why Rights Of Possession Property Is A Risk In Panama

The Problem With Rights Of Possession Property In Panama

A friend of a friend is trying to resolve some title issues to do with property that the company he works for has purchased in Panama over the past several years. He got in touch this week to ask my thoughts. When we sat down to meet, and he began to present the details of the situation, I realized that he has a bigger problem than I anticipated.

The company has been buying relatively small parcels of land but dozens of them, and every piece is rights of possession. At this point they have not been able to obtain actual title for anything they “own.”

Rights of possession (ROP) properties in Panama are complicated. ROP can be registered and transferred, but, unlike with titled property in this country, there is no central registry. Also unlike with titled property, someone else can quickly establish rights on ROP land. With titled land in Panama, adverse possession rights don’t kick in until after 15 years.

So in addition to the titling process dilemma, the guys who’ve been buying up all these remote ROP pieces also have a “maintaining possession” dilemma. Bottom line, they’re trying to figure out how to keep invaders at bay.

With a single piece of property, the keeping-out-squatters thing is straightforward. You hire a caretaker to live on the property. You’ll want to put a formal contract in place indicating that the caretaker is an employee and therefore can’t “possess” the property on his own behalf.

However, in this case, we’re talking about dozens of properties, not all contiguous. My new acquaintance needs several caretakers. That’s step one.

The titling challenge is greater. It can be possible to convert ROP property to titled property, but it’s a process that requires the cooperation of the sellers. My new friend indicated that the majority of sellers in this case are cooperating, but that can change easily in a situation like this. These are farmers, campesinos. My new friend and the group he represents are never really going to understand them…and they aren’t ever really going to understand or (more important) trust my new friend. They could easily be spooked into changing their minds about wanting to sell…or, more likely, about the price for which they’re happy to sell. They could decide they want more money, and the way things stand, the erstwhile “owners” would have no choice but to ante up.

In addition, some of the sellers are getting on in years. My friend wants to finalize the titling process sooner rather than later. The longer this stretches on, the greater the risk that he’ll have to deal with heirs, probably children, maybe many children in each case, who may not be as inclined to cooperate as their parents or able to agree among themselves that they want to sell or at what price.

My typical advice to anyone considering buying ROP land is to have the seller go through the titling process first. Then, once the property has been titled, the buyer can follow through with his purchase. In such a case, the buyer has to front the seller money for the attorney work and to pay the associated government fee. Still, this is a far less risky approach than paying in full for the purchase and then counting on the seller to carry through on the title work.

This strategy won’t work in this case, because these properties have already been bought and paid for. The buyer has already paid out large sums. He’ll just have to keep working on getting each property titled.

My new acquaintance has worked all along with an attorney who says he’s making progress. However, with so many properties and so much paperwork to process, I think the best way to pull this off might be to hire an in-house attorney to focus on the project full-time.

Lief Simon

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