ROP Now and the Future

Most signs point to the eventual titling of all rights of possession (ROP) as each attempt at legislation governing ROP gets progressively more balanced and fair.

Article Highlights

  • Momentum to title ROP continues to build. Legislative attempts to title ROP continue to mature. Even if the current attempts fail, it is a matter of when, not if, titling of ROP holdings happen.
  • There is virtual unanimity amongst the Panamanian professional class that ROP hinders the progressive image that Panama attempts to portray.
  • There is every reason to believe that ROP holders will be able to turn their ROP claims into full title at little or no cost.

President Ricardo Martinelli rode into power by combining populist politics with a solid business background. It sounds like a strange combination, but a President who’s already earned a fortune isn’t as likely to succumb to the pull of corruption that’s plagued many Panamanian politicians. And, as someone who understands the needs of business, there is a lot of hope that he can help both rich and poor by accelerating the expansion of the economy.

In his inaugural address, Martinelli specifically mentioned ROP as one of the government priorities.

We will begin a massive land titling program, so that I can tell everyone who’s listening who has possessory rights, prepare these rights because you’re going to have your piece of land titled.

Martinelli’s comments aren’t all that new.Previous governments have made similar pronouncements and little has come of it. It’s not believing that Martinelli will succeed where others have failed that makes now the time to be buying ROP land, but rather seeing Martinelli as part of a trend that is rapidly leading towards fully titling Panama.

Current Legislation

Previous governments have also identified ROP as a hindrance to foreign investment and have taken steps to reform the system with varying degrees of success.

The Agrarian Code, implemented by the department of Agricultural Reform has a very consistent and effective titling program. All through the countryside there are signs declaring “La tierra es tu futuro. ¡Titúlela!”, or “The land is your future. Title it!” in English. The only big problem with the Agrarian Code is that a lawyer is needed to get the paperwork done. This necessity excludes many poorer Panamanians.

Unfortunately, the Agrarian Code only applies to agricultural land which is defined as land more than 200 meters from the high-tide mark.

Oceanfront property isn’t easily titled. Holders of ROP from before 2006 can apply for title under Law 2, 2006, the “Island Law,” but the laws governing oceanfront title are confusing and applied unevenly. Foreign investors who have attempted to title oceanfront property under the “Island Law” mostly only got legal bills to show for their efforts.

The most recent legislation is also the most practical attempt at titling coastal land.

Law 23, 2009 calls for title to be practically given away making it reasonable for locals who can’t afford to spend much to title their land.

There is a capital gains tax of 25% on the first sale which essentially shifts the cost of titling the land to the sale where even the poor can afford it and gives the government their share for government-owned land.

And it satisfies investors worried about the security of their property by giving a clear way of titling the land.

The Future of ROP

While rights of possession may eventually fall entirely into disuse, there is every reason to believe that ROP holders will be able to turn their ROP claims into full title at little or no cost. The ROP system is too entrenched to disenfranchise ROP holders many of whom are too poor to pay more than token fees to transform their ROP into fully titled holdings.

There is virtual unanimity amongst the Panamanian professional class that ROP hinders the progressive image that Panama attempts to portray.

The current government has made titling land a priority. Those with experience doing business in Panama know that previous governments have made titling land a priority only to have progress hindered and stopped by competing interest groups.

So what’s changed?

In a word, nothing. The current government has the most practical plan yet to be put in place. But it’s not any single plan or piece of legislation that’s important, but rather the evolution of plans and legislation.

Momentum to title ROP continues to build. Legislative attempts to title ROP continue to mature. Even if the current attempts fail, it is a matter of when, not if, titling of ROP holdings happen.

Author’s Update

We have already seen a new law since we wrote this article. With Law 80, Panama has begun titling coastal land and islands. The current law provides a title for free on the first 5 hectares (12.5 acres) and a pricing table for larger tracts. The first regions seeing titles are Bocas del Toro & Las Perlas.

NEXT: Titling ROP

About Park

Park Wilson, co-founder of Emerging Terrains, has been living and actively investing in the Latin American real estate markets since 2007. His boots-on-the-ground approach to scouting and choosing properties has led to the purchase of more than 6 miles of Latin American coastline. To reach Park, please e-mail him at info@emergingterrains.com Read More

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