You are a “snowbird” who only lives in Panama during the cold winter months “up north” and find it expedient to rent out your house here for the remaining months. Or perhaps you have made the decision to purchase a house or condo in Panama for the rental income and, hopefully, profit from its sale down the road. Either way it is imperative that you are aware that the landlord/tenant laws here are uniquely Panamanian.
Your best bet is to hire a qualified and trustworthy Panamanian attorney. He or she will pave the way for you and, most importantly, assist you in avoiding any unnecessary pitfalls.
In regards to the initial property purchase: educate yourself on this country’s real estate and rental market. It is essential to buy a property which is affordable to you, making sure that the monthly rental income will not only cover your mortgage payment but also the regular and unforeseen repair and maintenance expenses.
As in the purchase of any property anywhere, these factors must all be addressed: – Appropriate neighborhood – Available amenities such as adequate parking – Good schools – Accessible bus routes
Now the house or condo itself. Not only sturdy construction but ease of access to plumbing, electricity, air conditioning, and waterworks are very important for those problems down the road. Most tenants will not appreciate long delays and a torn apart home when things go wrong and are in need of repair.
If you are purchasing a house, take the landscaping into consideration. Simple and not labor intensive are key.
A licensed home inspection is highly recommended. This could save a major headache and expense further down the road.
A property management company is also a necessity if you live too far away to oversee the property and renters yourself. Even if you live nearby but will be gone for extended periods, this is the way to go.
Decide on an appropriate rental rate according to similar dwellings in similar areas. In most cases it is a good idea to require the tenants to pay the utilities as well, insisting on them being billed in their names. This avoids the unpleasant experience of tenants departing under dark of night, leaving not only unpaid rent but huge utility bills in arrears. Unfortunately this happens everywhere and Panama is no exception.
Now for the legalities. The laws on renting property in Panama are geared towards the landlord in most cases, with a few exceptions. As for raising rents, in the case of low amounts (rent under and up to $150.00 per month) landlords must get written permission from the Ministry of Housing who will assess the request. Security deposits amount to one months rent, common in most countries. Length of rental agreements are not binding and tenants need only give thirty days notice of termination. Rent increases are usually from three to five percent annually.
Non payment of rent is not a pleasant situation in this country. Tenants can be evicted but numerous legal procedures must be followed and this can take up to one hundred twenty days. The landlord must be prepared to attend court and, as in many countries, excessive workloads on the part of the courts can prolong the process. When signing up a renter it is a “better safe than sorry” idea to utilize an estate agent who will act on behalf of both landlord and tenant, drawing up a lease agreement that is fair and amenable to both.
For the most part owning a rental property in Panama is consistent with and similar to those in other countries. If due diligence is carried out, legalities are followed, and common sense is at the forefront, owning a Panamanian rental property should be a seamless, profitable venture for all concerned.