Beachfront Land in Panama - Right of Possession vs. Titled
Updated: Nov 10
How to Select The Best Investment in Panama's Undeveloped Rainforest Beaches on the Atlantic Coast
Written July 24, 2023 by Sarah Bajc, Owner of Camaroncito EcoResort & Beach, provider of real estate tour services (https://www.camaroncito.net/real-estate-tour) AND property improvement services (https://www.panamaparadise.net/en/about-us) in the off-grid area of Costa Abajo in Colon, in partnership with Premier Casa, a respected real estate firm (https://www.premiercasa.com/es/panama).
Is Right of Possession Property a Good Investment?
Absolutely yes, or probably no, is the answer to this common question, depending on who you are and your expectations in the short and long term.
An important note upfront: Everything in this article is written by someone who is personally experienced as a buyer and seller in the Panama real estate market, but who is NEITHER a licensed real estate professional nor a real estate attorney! Please consider this information as a guide to doing more of your own research!!!
So you have decided to purchase a bit of Beachfront Paradise in Panama? Perhaps you are attracted by the beauty of nature while enjoying privacy, seclusion, and tranquility. Or perhaps you just like that it is a beach property that you can actually AFFORD, and that you can enjoy now, and expect it to increase in value! Either way, you are in luck if you are looking on the Caribbean coast of Panama. This previously undeveloped area is now attracting attention as the next hot real estate investment area. In recent years the government has scaled up infrastructure investments on the Caribbean coast, and we expect that trend to continue. Now is the time to secure your place in paradise.
You can learn more about this amazing area and why it is such an attractive investment in this article: Pristine Caribbean Beachfront Paradise.
There is a 30 kilometer stretch of exquisite coconut palm fringed coastline stretching from Miguel de la Borda to Cocle del Norte. Let’s call this zone Panama Paradise Property. When looking at a map of Panama, the Panama Canal runs through the center of this isthmus of a country, from Panama City on the Southern/Pacific coast of Panama up to Colon, on the Northern/Atlantic coast of Panama. You can see it noted on the map below in the areas where there are pink and purple curved lines noting a coastal area.
Why is This Land Still Undeveloped?
Most of this Panama Paradise Property zone is owned by subsistence farmers and fisherman who still live here, under the "right of possession" land law in Panama, also known as "Derecho Posesorio" in Spanish. This law has its origins in Panama's historical development and legal framework that can be traced back to the Spanish colonial period, but it was formalized by the Civil Code of 1916, which established specific requirements for acquiring and maintaining possession rights, including the need for continuous, peaceful, and public possession of the property, and the ability to pass it to heirs or sell it.
In effect, the ROP framework was created by the government to allow the use of unowned land for farming and homes by people who had no capital to buy that land, and it has been an integral part of Panama's land law system ever since. It provides a legal mechanism for individuals who occupy and use land without formal title to acquire legal recognition and protection of their rights to continue to occupy and use that land. Once registered and secured at the municipal level, Right of Possession of a specific parcel of land can be transferred, inherited, or sold. ROP land can also be fully titled, but in this area it seldom has been as the owners do not have the financial resources or know how required to do so.
Benefits of Right of Possession Property Land in Panama
Although ROP property does not have a unique identification number registered, or titled, in the national property registration system, ROP property is registered in municipal systems, and it is completely legal to buy and sell ROP property. There are a range of benefits which may in fact be even more appealing to you than the benefits of titled property. One big benefit of ROP property is that there is no national property tax to pay. Nor must you pay a capital gains tax if you end up reselling the property. Depending on the region of the country in which your property is located, and to which municipal district it pertains, you may not be required to pay any tax at all on the resale of your property, though each municipality is different.
There are several other benefits of ROP properties besides the tax savings. ROP properties are usually much cheaper to purchase than titled properties. And, ROP properties can be subdivided practically without limit, which is not the case with titled property. Finally, nearly all ROP properties can be titled in order to achieve the protective legal benefits of titled property, if that is desired by the owner. Only ROP properties in protected national park zones may be prohibited from being titled, so you should be careful to check that point. Just understand that the title process can take years of time and persistence to complete, and it is expensive in the form of fees paid to the government, and to the appraisal and legal professionals needed to facilitate the process for you. Still, even with the hassle and expense of processing an ROP property through to full titled status, the financial upside can still be significant.
Downsides of ROP Property
There are negatives regarding ROP property of which you must also be aware. As previously mentioned, ROP property does not receive a unique identification number, meaning it is more complicated to verify the history, current status, and legitimate owner of the property. This also relates to you, once you become the owner, as it will not be possible to simply search the property ID # in the public registry and see that you are the rightful owner. This results in YOUR ownership of the property also being less visible to the public. In order to protect your ownership rights, you must actively occupy or at least maintain your property. You can not just purchase it and walk away for five years. First, you must clear the circumference of your property in order to facilitate the proper assessment and marking of the land borders, then you must put up a fence, and keep it maintained.
Most owners of ROP property for investment only purposes usually hire a local representative to do this for them. While this is not expensive to do, it does require some supervision to ensure it is being done properly. In this area of Panama, you should plan on about $2000 per linear 100 meters of fencing. This includes purchase and transport of materials, clearing of a 2 meter wide perimeter through rainforest, and installation of hardwood posts every 2.5 meters with 3 lines of barbed wire. Quarterly clearing and maintenance will run about $500 per year per 100 meters. You will pay that to an overseer who maintains telephone and email contact with you, and in turn takes responsibility to supervise local workers and provide proof of conditions. Remember, this is the rainforest and the rate of underbrush growth can be astounding. The overseer also ensures that nobody takes the opportunity of your absence to build a small shelter and “squat” on your property in your absence. We recommend occasionally validating the efforts of your overseer, either through in person visits or video exchange. This “proof of ownership” of the ROP property is still a fraction of what equivalent property taxes would be.
Also, as ROP land is registered only at the municipal level, you must be absolutely fanatic about keeping both physical and digital records of your purchase and ownership of the property, as these documents and scanned copies will be your hard proof should someone try to contest your ownership of the property in the future, or in case of a future dispute over boundary lines. While this isn’t a common occurrence, it can happen. Clearly, ROP property requires extra due diligence and research into the history of the property, its current legal state, relations with neighboring properties and their owners, as well as a look at the seller and his/her credibility as the rightful and honest owner. Still, ROP land can be purchased at a cost of ½ to ¼ less than titled property, so it can be well worth the need to take extra care. It is also worth noting that ROP property cannot be used as collateral for a loan, so you must be prepared to pay cash.
So What is the Cost and How Long Will it Take?
Processing a title should take eight to ten years if you are persistent and have a good attorney, and the total cost can be roughly estimated at: beachfront is about $10,000 per hectare, and interior land is $2000 per hectare. Those estimates include legal fees, assessments and surveying, and fees paid to the government at the completion of the title process to in effect purchase the title rights. Those fees are much higher for beach property than for interior property, as you might suspect. They can also be a bit higher in an undeveloped area such as Costa Abajo due to logistics and transport costs.
Still, as long as you are careful with your due diligence, there is a very limited risk of NOT being able to title the property, but it does take a lot of hoop jumping. Those costs seem to be going up now as the government is getting more aggressive on the conversion fees, but the process is also getting more streamlined and transparent, which is a good trade off. And, it is important to note that you must occupy/improve/maintain the land during that time. Panama Paradise Properties provides that service (www.panamaparadise.net).
Why is Now the Time to Buy?
Most of the original ROP owners have already passed their property to heirs who are less enthusiastic about a life of fishing and subsistence farming. Most current owners have been seeking to sell their land for many years, but just have not had the opportunity to access potential buyers. Also, the lack of infrastructure to access this area has been a barrier to buyers finding sellers. Recently, however, government investments in both transportation and communication infrastructure have begun to remove those barriers, and so the market is beginning to open.
Although this specific PPP zone is reachable only by boat, the ocean time ranges from only 10 to 70 minutes, so is certainly manageable. And while most properties give the sensation of being on a deserted island, you are in fact on the mainland with high fertile ground and fresh water sources just behind the beach zone. Despite the utter lack of development, these properties are only 3 hours of total travel time from a brand new international airport and world class medical and retail services in a politically and financially stable country.
Owner Development and Use of Panama Paradise Property
Buyers interested in purchasing property in this area in order to develop a vacation or permanent home are in luck! There is now an opportunity for prospective buyers to enjoy a few day (or longer) tour to this area, with all logistics and transportation fully arranged, and stay at the western caliber comfort of Camaroncito EcoResort & Beach, which is currently the ONLY development in this entire area. The owners, Ernesto and Sarah are deeply experienced with what works, and doesn’t, in regards the development of property and the design and construction of buildings that will be comfortable and sustainable for discerning owners. This approach allows you to enjoy your property now, as well as look forward to the benefits of its value appreciation over time.
You can benefit from their experiences as advisors on where to start on your own personal development and construction efforts, or to completely outsource the building of your personal paradise retreat. They will be delighted to guide you through the steps needed to obtain the needed permits and materials, equipment and trained workers. Prior to beginning construction of Camaroncito EcoResort & Beach, Ernesto built and remodeled homes, and designed and installed water systems for over a decade in Panama City.
One aspect of your time at Camaroncito will include a tour of the owner’s personal home, outbuildings and farm. You can see firsthand what it takes to install an aqueduct and water filtration system, solar power systems, sustainability built buildings that provide protection while also allowing you to feel connected to the incredible nature around you.
Long-Term Investment Returns
Investing in unspoiled exclusive property on a deserted Caribbean beach with rainforest can also be done purely as a long-term investment. The demand for exclusive eco-resorts and private getaways has been steadily increasing in recent years, and available undeveloped land is becoming more rare. As this area gains recognition among discerning travelers, its value is likely to appreciate significantly. The exclusivity and limited number of available beachfront properties ensure impressive returns on your investment over time.
Beyond personal gains, investing in this unspoiled exclusive property with an eye towards sustainable development, also contributes to the social, environmental, and economic development in the region. The careful development of your property not only creates job opportunities for local communities but also fosters cultural exchange between owners and locals. By employing local staff and supporting nearby businesses, you actively participate in the growth and prosperity of the region, helping to uplift the local economy. By promoting environmental stewardship, you play a role in preserving the pristine beauty of the rainforest and the Caribbean coastline for generations to come.
Investing in unspoiled exclusive property on a deserted Caribbean beach with rainforest in Panama is an opportunity that offers a multitude of benefits, regardless if the land is titled or right of possession. Assuming you hire quality professionals to help you, and have your eyes open wide as to the time and energy needed for investment in property in this part of the world, the long-term investment potential promises high returns. Furthermore, the property's sustainable practices and commitment to social, environmental, and economic development ensure a positive impact on the region.