By Sébastien Picart y Manoj Chatlani

By Sébastien Picart y Manoj Chatlani PANAMA - REAL ESTATE LAWS CONSTITUTION Article 44 of the National Constitution of the Republic of Panama: "It is granted the private property acquired according to the Law by natural or juridical persons". CIVIL CODE AGRARIAN CODE FISCAL CODE (PROPERTY TAX) HORIZONTAL PROPERTY LAW MINISTRY OF HOUSING LAW LEASE (PROPERTY RENTAL) LAW ANATI (PROPERTY TITLE GOV.)

By Sébastien Picart y Manoj Chatlani PANAMA - REAL ESTATE LAWS Government Institutes: 1.NOTARY: Public Deed draft 2. PUBLIC REGISTRY: Properties Registration, assign a "Finca" number Registration System through the History: Big Books (Tomos): Microfilm: Scanner: 1.Finca, Tomo, Folio 2. Finca, Rollo, Imagen 3. Finca, documento 3. ANATI: Property Taxes Payment of Property Taxes: Calcullation: by year divided in 3 installments: by April 30th, August 31st, and December 31st

By Sébastien Picart y Manoj Chatlani PANAMA - REAL ESTATE LAWS LEGAL DOCUMENTS EXAMPLE: 1. Title Deed:

PANAMA - REAL ESTATE LAWS LEGAL DOCUMENTS EXAMPLE: 2. Survey: By Sébastien Picart y Manoj Chatlani

PANAMA - REAL ESTATE LAWS LEGAL DOCUMENTS EXAMPLE: 3. Property Tax Statement - MEF By Sébastien Picart y Manoj Chatlani

PANAMA - REAL ESTATE LAWS LEGAL DOCUMENTS EXAMPLE: 4. Property Tax Good Standing Certificate - MEF By Sébastien Picart y Manoj Chatlani

DESCRIPTION: TITLE PROPERTY: RIGHTS OF POSSESSION: 1. Ownership Private ownership Owner is the Government Only possession can be acquired 2. Government Public Registry Any Government Institute Registrationcan Certify: Anati, Mayor (Alcalde), Chief of Police 3. Necessary Title Deed Physical occupation, ROP requirement (registration) Certification, good faith,... PANAMA - REAL ESTATE LAWS TITLE PROPERTY -vs- RIGHTS OF POSSESSION: By Sébastien Picart y Manoj Chatlani

NEW or USED: 1. Home (House): Pre-Construction -vs- Used 2. Apartment: Pre-Construction -vs- Used 3. Land: Small Lot -vs- Hectares of Land With Furniture -vs- Without Furniture PANAMA - REAL ESTATE LAWS PROPERTIES OPTIONS: By Sébastien Picart y Manoj Chatlani

PANAMA - REAL ESTATE LAWS BEACH SET BACK AND OCEAN PROPERTIES TITLE EXPLANNATION: : By Sébastien Picart y Manoj Chatlani Main Land Titled Main Land beach (cannot be titled ) beach (cannot be titled ) 22mts set back 22mts set back high tide Ocean Titled area ROP area that can be titled 200mts set back from high tide

PANAMA - REAL ESTATE LAWS By Sébastien Picart y Manoj Chatlani PROPERTY TAX COMBINED SCALE (for Land and Houses - not P.H.): REGISTERED VALUE: PROPERTY TAX:AMOUNT: 1. $30,000 or less 0% $ Over $30,000 to $50, %$ Over $50,000 to $75, % $ Over $75, % $_______

PANAMA - REAL ESTATE LAWS By Sébastien Picart y Manoj Chatlani PROPERTY TAX COMBINED SCALE (for Apartments in P.H.): IF IMPROVEMENTS ARE EXONERATED: REGISTERED VALUE OF LAND: PROPERTY TAX: 1.Any amount 1% AFTER IMPROVEMENTS EXONERATION: REGISTERED VALUE: PROPERTY TAX: AMOUNT: 1. $30,000 or less 0% $ Over $30,000 to $100,000 ($70,000)0.75% $ Over $100,000 ($....) 1% $______

PANAMA - REAL ESTATE LAWS By Sébastien Picart y Manoj Chatlani IMPROVEMENTS EXEMPTED OF PROPERTY TAX Improvement value Land proportional value Your Property Registered Value Property Tax Exoneration can apply Property Tax Exoneratio n does not apply

PANAMA - REAL ESTATE LAWS By Sébastien Picart y Manoj Chatlani IMPROVEMENTS EXEMPTED OF PROPERTY TAX 20 years Tax Exoneration on Improvements (NOT ON LAND): If Construction Permit is issued by July 1st, 2009 and Registered at the Public Registry before December 31, IF CONSTRUCTION PERMIT IS ISSUED AFTER SEPT.1, 2006: RESIDENTIAL PROPERTIES: REGISTERED VALUE: IMPROVEMENTS EXONERATION: 1. Up to $100, years 2. Over $100, to $250, years 3. Over $250, years COMMERCIAL PROPERTIES: REGISTERED VALUE: IMPROVEMENTS EXONERATION: Any amount 10 years

PANAMA - REAL ESTATE LAWS By Sébastien Picart y Manoj Chatlani Improvements "Not" Registered Title Land Registered EXAMPLE OF POSSIBLE CONSEQUENCES FOR NOT REGISTERING THE IMPROVEMENTS: BEFORE SALE: Improvements Reg. Value: $0 + Land Reg. Value: $100, Total Property Reg. Value: $100, SALE TRANSACTION: Improvements Reg. Value: $0 + Land Reg. Value: $600, Total Property Reg. Value: $600, FUTURE PROBLEM: Improvements Reg. Value: $500, Land Reg. Value: $600, Total Property Reg. Value: $1,100,000.00

PANAMA - REAL ESTATE LAWS By Sébastien Picart y Manoj Chatlani PROPERTY OWNERSHIP OPTIONS: -vs- Ownership in Personal Name Corporate Ownership PANAMA CORPORATION or PRIVATE INTEREST FOUNDATION

PANAMA - REAL ESTATE LAWS By Sébastien Picart y Manoj Chatlani WHY IS RECOMMENDED TO HOLD A PROPERTY IN A CORPORATION OR A PRIVATE INTEREST FOUNDATION:

PANAMA - REAL ESTATE LAWS By Sébastien Picart y Manoj Chatlani CORPORATE STRUCTURE RECOMMENDED FOR: ESTATE PLANNING PRIVATE INTEREST FOUNDATION (PIF) Corporation ACorporation BCorporation CCorporation D Bank AccountsFamily HomeBusinessCar

PANAMA - REAL ESTATE LAWS By Sébastien Picart y Manoj Chatlani SALES OPTIONS & SALES TAXES: PANAMA CORPORATION Shares Transfer Transaction Must pay: 5% Shares Transfer Tax Title Transfer Transaction Must pay: 2% Title Transfer Tax, plus 3% "Advance" Capital Gains Tax BUYER

PANAMA - REAL ESTATE LAWS By Sébastien Picart y Manoj Chatlani % "ADVANCE" Capital Gains Tax -VS- 10% Capital Gains Tax: EXAMPLE No.1 OF A SALE TRANSACTION: Sale Value: $100, Reg. Value: $20, Capital Gains: $80, EXAMPLE No.2 OF A SALE TRANSACTION: Sale Value: $100, Reg. Value: $98, Capital Gains: $2, VS- CALCULLATION IN EXAMPLE No.1: 2% Title Transfer Tax: $2, % "Advance" C.G.T.: $3, Total: $5, % C.G.T.: $8, CALCULLATION IN EXAMPLE No.2: 2% Title Transfer Tax: $2, % "Advance" C.G.T.: $3, Total: $5, % C.G.T.: $200.00

PANAMA - REAL ESTATE LAWS By Sébastien Picart y Manoj Chatlani REAL ESTATE TRANSACTION PHASES: 1. Negotiation - Seller, Broker & Buyer 2. Due Diligence 3. Promise to Purchase Contract 4. Closing

PANAMA - REAL ESTATE LAWS By Sébastien Picart y Manoj Chatlani REAL ESTATE TRANSACTION PHASES: 1.Negotiation - Seller, Broker & Buyer: 1. Property Listing: 1. Property inspection, Title & Survey verification, Seller's Id and documents, Representation Agreement signature, pictures, etc. 2. Title Search: Public Registry, M.E.F., etc. 3. Contact with Buyer and Buyer's inspection on Property 4. Negotiation of all Terms and Conditions of Transaction: sales price, down payment amount, balance at closing, conditions or limitations, mortgage cancellation, mortgage constitution, etc. 5. Letter of Intent signature or Reservation Agreement (down payment either refundable or not refundable)

PANAMA - REAL ESTATE LAWS By Sébastien Picart y Manoj Chatlani REAL ESTATE TRANSACTION PHASES: 2. Due Diligence: 1. Title Search at the Public Registry. Verify registered information: ownership, mortgage, size, value, improvements if any, liens, etc. 2. Title Search at Anati (before Catastro). Verify registered information: ownership, size, boundaries, property tax, improvements if any, etc. 3. Property measurement with Surveyor 4. If Mortgage on property, update balance letter request 5. Etc.

PANAMA - REAL ESTATE LAWS By Sébastien Picart y Manoj Chatlani REAL ESTATE TRANSACTION PHASES: Due Diligence: Title boundaries verification affected area extra area Title line (registered) Fence line

PANAMA - REAL ESTATE LAWS By Sébastien Picart y Manoj Chatlani REAL ESTATE TRANSACTION PHASES: EXAMPLE OF PROPERTY WITH BOUNDARIES PROBLEMS:

PANAMA - REAL ESTATE LAWS By Sébastien Picart y Manoj Chatlani REAL ESTATE TRANSACTION PHASES: 3. Promise to Purchase Contract: Most important document in the Transaction - regulates all the rights and obligations of both parties CLAUSES: 1. Parties description8. Closing date 2. Property description 9. Seller's Penalty for breach 3. Interest to Sell and Buy 10. Buyer's Penalty for breach 4. Price 11. Laws applicable 5. Payment Terms12. Date of signature 6. Seller's Obligations 13. Signature 7. Buyer's Obligations "FORMALITY": PUBLIC DEED & REGISTRATION IN THE PUBLIC REGISTRY

PANAMA - REAL ESTATE LAWS By Sébastien Picart y Manoj Chatlani REAL ESTATE TRANSACTION PHASES: 4. Closing: 1. Issuance of Bank Promise to Pay Letter 2. Mortgage cancellation (if any) 3. Payment of Sales Taxes (by Seller) 4. Closing Contract signature 5. Registration 6. Payments - liquidation of Bank Promise to Pay Letter 7. Update of new property ownership in ANATI and ANIP

PANAMA - REAL ESTATE LAWS By Sébastien Picart y Manoj Chatlani REAL ESTATE TRANSACTION PHASES: CHECKLIST OF DOCUMENTS: 1. Seller's Id 2. Seller's Entity copy (if Entity ownership) 3. Seller's Entity good standing certificate (if Entity ownership) 4. Minutes of Entity to authorize sale or Power to Sale 5. Property Title deed copy 6. Property good standing certificate 7. Property survey with registration stamps 8. Improvements registration deed (if Improvements) 9. Improvements construction plans (electrical, plumbing, design, etc.) 10. Improvements construction permit 11. Improvements occupation permit 12. Pictures 13. Water (IDAAN) good standing certificate 14. Administration good standing certificate (if Building or PH) 15. Mortgage balance letter updated (if mortgage) 16. Mortgage cancellation minutes (at Closing) 17. Buyer's Id 18. Buyer's Entity copy (if buying through Entity) 19. Buyer's Entity good standing certificate 20. Minutes of Entity to authorize purchase or Power to Buy

PANAMA - REAL ESTATE LAWS By Sébastien Picart y Manoj Chatlani REAL ESTATE TRANSACTION PHASES: BANK PROMISE TO PAY LETTER EXPLANNATION: Public Registry of Panama BUYER SELLER 3. Step: Seller receives Promise to Pay Letter 4. Step: Seller transfers Title to Buyer's name 5. Step: Seller proves to Bank the Transfer of Title and gets paid 2. Step: Bank issues Promise to Pay Letter with the condition of Title Transfer 1. Step: Buyer deposits at Bank balance amount Local Bank in Panama Bank Promise to Pay Letter

PANAMA - REAL ESTATE LAWS By Sébastien Picart y Manoj Chatlani REAL ESTATE TRANSACTION PHASES: BANK PROMISE TO PAY LETTER EXPLANNATION: REGISTERED OWNER: 1.SELLER 2. SELLER 3. SELLER 4. BUYER PANAMA TITLE TRANSFER REGISTRATION SYSTEM: 1. M.E.F.: SELLER pays Sales Taxes 2. NOTARY: SELLER signs Public Deed where transfers Property Title to BUYER 3. PUBLIC REGISTRY: Public Deed of Transfer of Title is "presented" 4. PUBLIC REGISTRY: Public Deed of Transfer of Title is "registered"

PANAMA - REAL ESTATE LAWS By Sébastien Picart y Manoj Chatlani REAL ESTATE TRANSACTION PHASES: "PH" (HORIZONTAL PROPERTY): Important Points in Pre-Construction: 1. Construction completion delay 2. Building not ready and Occupation Permit issuance 3. Increase of Construction Costs 4. Rent or Monthly Fee if payment by Promise to Pay Letter or payment delay 5. Land proportional value "not Exonerated" of Property Tax

PANAMA - REAL ESTATE LAWS By Sébastien Picart y Manoj Chatlani REAL ESTATE TRANSACTION PHASES: "PH" (HORIZONTAL PROPERTY) - CLOSING: Occupation Permit Promise to Pay Letter delivery Closing Legal docs completion: Minutes of Sale, etc. Sales Contract signature Notary and Public Registry registration Bank payment of balance Property Inspection Property fixings Property 2nd Inspection / Keys collection "Acta de Entrega" Utilities connection Furniture

PANAMA - REAL ESTATE LAWS By Sébastien Picart y Manoj Chatlani REAL ESTATE TRANSACTION PHASES: LEASE CONTRACT - CLAUSES: 1. PARTIES 2. PROPERTY DESCRIPTION AND OWNERSHIP 3. INTEREST TO LEASE - OBJECT OF THE CONTRACT 4. RENTAL PRICE. MUST INCLUDE 7% ITBMS 5. 7% ITBMS PAYMENT TO M.E.F. 6. DEPOSIT 7. CONTRACT TERM 8. INVENTORY (FURNISHER) 9. OBLIGATIONS OF THE LESSOR 10. OBLIGATIONS OF THE LESSEE 11. PROPERTY INSPECTION - KEYS RECIPT STATUS AND KEYS RETURN STATUS 12. EARLY TERMINATION BY LESSOR -VS- EARLY TERMINATION BY LESSEE 13. PROPERTY VACATION RIGHT AT JUDICIAL COURT: - 2 MONTHS OF NON PAYMENT - TERMINATION OF CONTRACT 14. PICTURES

PANAMA - REAL ESTATE LAWS By Sébastien Picart y Manoj Chatlani REAL ESTATE TRANSACTION PHASES: BROKERAGE COMMISSION - CONTRACT: 1. Exclusivity -vs- Representation (Commission) Agreement 2. Formality 3. Mistakes by Brokers (not calcullation of sales taxes and sales commission) Standard Sales Commission 5% (Also 3% - 10%) 4. Percentage -vs- Fix amount 5. "Sobreprecio" 6. Several Brokers SELLERBUYER SELLER'S BROKER 1 SELLER'S BROKER 2 SELLER'S BROKER 3 BUYER'S BROKER 1 BUYER'S BROKER 2 BUYER'S BROKER 3

PANAMA - REAL ESTATE LAWS By Sébastien Picart y Manoj Chatlani REAL ESTATE TRANSACTION PHASES: PICTURES (BEST EVIDENCE): Benefits: 1. Avoid squatters rights 2. Keeps evidence of status of things during time 3. Etc. After rentBefore rent

PANAMA - REAL ESTATE LAWS By Sébastien Picart y Manoj Chatlani REAL ESTATE TRANSACTION PHASES: CONTACT DIRECTORY: 1. Seller phone 2. Seller's Broker phone 3. Seller's Attorney phone 4. Seller's Bank Officer (mortgage cancellation) phone 5. Buyer phone 6. Buyer's Broker phone 7. Buyer's Attorney phone 8. Buyer's Bank Officer (mortgage constitution) phone

PANAMA - REAL ESTATE LAWS By Sébastien Picart y Manoj Chatlani REAL ESTATE TRANSACTION PHASES: BROKERS - ESCROW PAYMENTS: Responsibility of Seller: Clean Title & Property Responsibility of Buyer: Payment

PANAMA - REAL ESTATE LAWS By Sébastien Picart y Manoj Chatlani Thank You