Trouble in Paradise

Wednesday, September 21, 2011

Dear Reader,

A couple of your fellow readers contacted me this week after reading some news articles about a land dispute in Bocas del Toro, Panama. They’d read stories about eviction notices. They’d seen photos of burned-out eco-cabins on the land. They were shocked. They couldn’t believe something like this could happen in Panama. Did this mean that buying property in Panama wasn’t safe, one reader asked.

The short answer is no. Buying titled property in Panama is generally safe. What this flags up is the problem of buying property in Bocas del Toro specifically. It also highlights the problem of buying untitled property in any country.

Bocas is a pretty Caribbean location…a real tourist hot spot. Unfortunately, t’s also a hot spot for property disputes. I’ve lost track of the number I’ve heard about or read about in the five years I’ve lived in Panama.

One couple who contacted me bought a piece of land in Bocas, paid $150,000, and started planning to build their dream house. But they “owned” their property for all of a week….before someone came along and laid claim to it. They lost the land, and ended up $150,000 out of pocket. They asked me to recommend an attorney. But sadly, there was little that the attorney could do for them.

The couple didn’t understand what they had bought. We always recommend buying titled property (similar to fee simple title in the U.S). Here in Panama, and in other Latin American countries, most property is titled. But you’ll also see property for sale that isn’t titled. It’s often called concession land, derecho posesorio or Rights of Possession (ROP) property.

Most of the properties in Bocas are ROP. The couple who paid $150,000 had purchased a ROP property. They assumed that ROP was the same as titled property. It isn’t.

In some cases, ROP is like squatter’s rights. In many countries, if you occupy property for a prolonged period of time you gain rights to carry on occupying it. Another form of ROP occurs when a government grants property parcels to locals to encourage them to farm unused land. Sometimes this farm land is held communally. In Mexico, you’ll see this communal farmland described as ejido land. In other Latin countries, it’s co-operativa.

You don’t get title when you buy ROP property. Instead, you get the right to live in it, use it…possess it…unless someone with a better claim comes along. You often can’t leave a ROP property empty, either. The normal condition for ROP government property is that you must use it.

Now, in some areas (including some parts of Panama) you can title ROP land. However, it’s a slow, complicated process. It’s often very costly. It’s not something I’d recommend trying yourself.

Bocas del Toro is in a league of its own when it comes to property problems. It’s a showcase of almost everything that can go wrong with ROP property. Technically, there should be one claim documented against each ROP property. But often there are multiple documented claims. That’s because there is no central registry of ROP property in Panama. There have been allegations of municipal corruption, bribery, and unscrupulous lawyers. Even buyers who believed they had titled property in Bocas have faced ownership disputes.

I’ve lived in Panama for almost five years. I scout across Latin America for property deals. I spend up to two weeks a month traveling in search of up-and-coming locations. Bocas del Toro is on my doorstep…and I still haven’t scouted there. There’s no point. I wouldn’t buy anything there myself (whether titled or ROP land). And I don’t recommend that anyone else buy in Bocas, either.

In fact, I don’t recommend that you buy ROP land, or ejido land, or co-operativa land in any country…full stop.

Buying ROP land is a gamble. If you have money to spare…and you don’t mind losing it…it may make sense. But $150,000 is a pretty big gamble…

So, my first recommendation is that you avoid buying ROP land. There’s plenty more property options out there that are far less risky.

My second more specific recommendation is to steer clear of Bocas del Toro. Treat it as a fun vacation spot and nothing more. Panama (and Latin America) offers many other destinations that are just as pretty…and a lot more secure when it comes to buying a property.

Margaret Summerfield

P.S. If you want to know more about what to look out for when buying a property overseas, download our free report here. One of my tips is to find a good local attorney. Here in Panama, I use attorney Rainelda Mata-Kelly. You can contact Rainelda at (JavaScript must be enabled to view this email address) if you’re thinking of buying a property in Panama.

 

 

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Posted Under:

panama, due diligence, foreign ownership restrictions

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