What to Do About Construction Delays and Defects in Panama

What makes buying pre-construction real estate in Panama City different?

Buying pre-construction in Panama City means you sign and pay long before the building exists, so your main protection is the contract, consumer law, and the developer's track record. Delays, design changes, and defects are common, so you must verify permits, warranties, and what happens if the project is late or never finished.

In Panama City, the pre-construction market is very active, especially for condos targeting local professionals and foreign investors. Units are often sold based on brochures, floor plans, and model apartments.

• You usually pay in stages: reservation, formal promise-to-purchase contract, then construction progress payments, and final payment on delivery.
• Panama uses PAB (Balboa) at a 1:1 rate with USD, and in practice prices and contracts are in USD.
• The main legal frameworks affecting you are:
  • Law 45 of 2007 - Consumer Protection and Competition.
  • Horizontal Property Law (Law 31 of 2010 and amendments) - condos and shared property rules.
  • Civil Code of Panama - contract rules and hidden defects.
  • Construction regulations administered by MIVIOT and the Municipality.
• Most disputes arise around three moments:
  1. Project delays or design/specification changes.
  2. Delivery with defects or missing finishes.
  3. Project cancellation or serious construction problems after delivery.

What legal documents and permits should you check before buying pre-construction?

You should confirm that the developer holds a valid building permit, has filed or obtained the horizontal property regime, and can show clean title to the land. You must also review the promise-to-purchase contract in detail, especially delivery date, penalties, and what happens if the project is canceled.

Core documents to request and review

• Building permit from the Municipio de Panamá:
  • Confirms the municipality approved the construction.
  • Check that the permit corresponds to the actual project (same address, number of floors, use as residential, etc.).
• MIVIOT approvals:
  • Zoning and land use compatibility.
  • In some projects, social interest or preferential mortgage program approvals.
• Land title certificate from the Registro Público:
  • Shows who owns the land and any mortgages, liens, or restrictions.
  • Ideally, the registered owner is the same developer or its project company.
• Horizontal Property regime (PH):
  • If already registered: review the Reglamento de Propiedad Horizontal and the approved plans.
  • If not yet registered: ask for the draft and timeline to register it.
• Developer credentials:
  • Commercial registration (Registro Público) of the developer company.
  • Construction license or registration of the contractor or builder.
  • Previous projects delivered and any known complaints at ACODECO.

Key contract clauses to double-check

The promise-to-purchase contract (contrato de promesa de compraventa) is central to your rights against delays and defects.

• Delivery date and grace period:
  • Is there a fixed delivery month or quarter, or only a vague timeline tied to permits?
  • Is there a grace period (for example, 6 months) and what happens if the developer exceeds it?
• Penalty for late delivery:
  • Many contracts state a daily or monthly penalty (for example, a rent-equivalent amount) if delivery is late.
  • Check if the penalty is automatic or if you must make a written claim.
• Right to rescind for developer breach:
  • Under Panamanian law, you generally can rescind for serious or long delay, but clear wording in the contract helps.
  • Look for clauses about full refund plus interest if the project is canceled or cannot be built.
• Changes to design or finishes:
  • What is the allowed variation in area (for example, up to 5 percent less without compensation)?
  • Can the developer change materials or layouts, and must replacement be of equal or higher quality?
• Warranty language:
  • Warranty periods should match or exceed the legal minimums (see warranty section below).
  • Beware of clauses that try to waive legal warranties or limit your right to complain.

What is ACODECO and how can it help with real estate disputes?

ACODECO is Panama's consumer protection authority, and it can hear complaints from buyers of residential units against developers and real estate companies. For disputes up to a certain monetary cap (in PAB/USD), it can issue binding decisions and order refunds, repairs, or compensation without you going to court.

ACODECO's role in real estate conflicts

• Who it protects:
  • Natural persons buying units for personal or family use are typically considered consumers.
  • Investors buying multiple units for business may or may not qualify, depending on the case.
• Types of real estate cases ACODECO often handles:
  • Defects in new apartments or houses.
  • Failure to honor warranties.
  • Unjustified retention of reservation fees or deposits.
  • Late delivery without paying agreed penalties or compensation.
  • Misleading advertising about size, views, amenities, or finishes.
• Jurisdictional limit:
  • ACODECO's conflict resolution bodies can only decide disputes up to a monetary limit set by regulation, commonly in the low five figures (for example, around PAB/USD 5,000 to 10,000).
  • Above that amount, ACODECO can still mediate and support your complaint, but you usually need to go to the civil courts or arbitration for a full damages claim.
  • You should always confirm the current cap directly with ACODECO, as it can change.

How the ACODECO complaint process works

The process is free and designed for consumers to file without a lawyer, although legal advice is still useful in more complex property disputes.

1. Prepare your evidence:
   • Contract, payment receipts, bank transfer slips.
   • Promotional material and brochures showing what was promised.
   • Photos, videos, and engineer or architect reports for defects.
   • Emails and letters exchanged with the developer.
2. File your complaint:
   • Go to an ACODECO office or use its online platform (if available).
   • Clearly state the facts, what you are claiming (refund, repair, compensation), and the amount.
3. Mediation / conciliation:
   • ACODECO usually tries to reach a negotiated solution between you and the developer.
   • Many developers prefer to settle at this stage to avoid formal sanctions and publicity.
4. Administrative decision:
   • If there is no agreement and the amount is within ACODECO's cap, its internal tribunal can issue a decision.
   • It can order the developer to repair, compensate, refund, or pay a penalty.
5. Enforcement and appeals:
   • Developers can appeal within the administrative system and sometimes to the courts, but ignoring decisions can lead to fines and enforcement measures.

ACODECO vs court for real estate disputes

What warranty periods apply to new construction in Panama?

New residential construction in Panama generally has a 10-year warranty for structural defects and a shorter warranty, usually around 1 year, for finishes and minor defects. The warranty period typically starts from the delivery date of the unit to the first buyer.

Legal and practical warranty framework

• Structural defects - usually 10 years:
  • Covers serious issues that affect the stability or safety of the building, such as foundations, columns, slabs, beams, and main load-bearing walls.
  • If a structural defect appears within this period, the developer and often the builder can be responsible for repair or compensation.
• Finishes and minor defects - usually 1 year:
  • Covers items like paint, tiles, doors, windows, cabinetry, plumbing fixtures, and electrical points.
  • Most contracts and practice grant around 1 year of coverage for these items, often called the finishing or workmanship warranty.
• Hidden defects (vicios ocultos):
  • Under the Civil Code and consumer law, if a hidden defect makes the property unsuitable for its normal use or significantly reduces its value, you can claim repair, price reduction, or contract termination.
  • Timing to complain on hidden defects depends on when you discover them and the contractual terms, but you should notify the developer as soon as you detect the problem.

How to use your warranty in practice

1. Inspect the unit at delivery:
   • Developers usually schedule a walkthrough where you list visible defects in a snagging or punch list.
   • Be detailed and take photos; ask the developer to sign the list.
2. Request repairs in writing:
   • Send email and, ideally, a formal letter with the list of defects and a reasonable deadline for repair.
   • Keep proof of delivery (courier receipt, acknowledgement email).
3. For serious or structural issues, get an expert report:
   • Hire an independent engineer or architect to document the defect, its seriousness, and recommended solution.
   • The report becomes key evidence before ACODECO or in court.
4. Escalate if the developer does not respond:
   • If they ignore or deny your claim, file a complaint with ACODECO attaching the report and correspondence.
   • For high-value or structural risks, consult a lawyer about court or arbitration options.

Typical warranty coverage snapshot

How can you claim compensation for late delivery of a pre-construction unit?

You can claim compensation for late delivery by relying on the penalty clauses in your contract and, if needed, on Panamanian consumer and civil law to seek additional damages or even cancel the contract. The usual strategy is to calculate the delay, quantify your loss (often rent-equivalent), and claim through negotiation, ACODECO, or the courts.

Step-by-step approach to a late-delivery claim

1. Determine the delay:
   • Compare the agreed delivery date (after any contractual grace period) to the actual or expected delivery date.
   • If the contract ties delivery to obtaining certain permits, confirm when the developer obtained them.
2. Review the contract penalty clause:
   • Some contracts include a fixed monthly penalty (for example, a set amount per month) or a daily rate.
   • Others promise to pay an amount equivalent to local rent for a similar unit during the delay.
3. Quantify your loss:
   • Calculate contractual penalties owed for the delay period.
   • Add additional losses if applicable, such as rent you paid elsewhere, moving costs, or extra bank interest if your loan disbursed later.
4. Send a formal demand:
   • Write to the developer referencing the contract clause, stating the delay and the amount claimed.
   • Give a specific deadline for payment or agreement, for example 15 business days.
5. Escalate to ACODECO or court:
   • If the amount is within ACODECO's cap, file there first; attach the contract, your calculation, and evidence of the delay.
   • For larger sums or if you also want to cancel the contract, speak with a lawyer about suing in the civil courts or using any arbitration clause.

When can you cancel instead of waiting longer?

• Serious or very prolonged delay:
  • If the delay is long enough to be a serious breach, you can usually ask the court (or arbitrator) to terminate the contract and order a refund of all payments plus interest.
  • What counts as serious depends on the specific facts, size of the delay, and the wording of your contract.
• Developer clearly unable to complete:
  • Financial problems, stopped works, or lack of permits can support an argument that the project will not be finished within a reasonable time.
  • Here, you may not want to wait only for penalties; you want to exit and recover your funds.
• Clauses that favor consumers:
  • Under Law 45 of 2007, contract clauses that are abusive or unreasonably favor the developer can be declared invalid.
  • Even if the contract tries to limit your right to cancel for delay, a court or ACODECO may not enforce such limits in extreme cases.

Can you get your deposit back if the project is canceled in Panama?

Yes, if the project is canceled or never built, you can usually claim a full refund of your deposit and any other payments, plus legal interest, under consumer and contract law. In more serious cases, you may also claim additional damages, such as lost opportunities or extra rental costs.

Typical project cancellation scenarios

• Developer formally cancels the project:
  • You receive a notice that the project will not proceed or that your tower/phase is canceled.
  • In this case, you should expect a full refund, and the developer should propose a clear refund schedule.
• Silent cancellation / abandoned works:
  • Construction stops for a long period with no communication or visible resumption.
  • Here, you may need an engineer's report, photos, and official records to show that the project is effectively abandoned.
• Permits revoked or refused:
  • If MIVIOT or the Municipality revoke key permits and the project cannot legally move forward, the developer should refund buyers.
  • Failure to do so can lead to consumer protection actions and civil lawsuits.

How deposit refunds should work

Deposit protections to look for before you buy

• Escrow accounts:
  • Some projects use escrow so that your funds are released to the developer only when certain milestones or conditions are met.
  • Ask which bank holds the escrow and request a copy of the escrow agreement or at least its key terms.
• Completion guarantees:
  • Projects with strong bank financing may have bank guarantees or insurance policies to back completion.
  • These structures can improve your chances of a timely refund if things go wrong.
• Clear cancellation and refund clauses:
  • Your contract should state what happens if the project does not start or is canceled, with explicit refund rights.
  • Avoid contracts that waive your right to a refund for reasons outside your control.

Using ACODECO and courts for canceled projects

• ACODECO:
  • Useful to pressure the developer and resolve individual refund claims up to the monetary cap.
  • Can investigate misleading advertising and abusive clauses used in the project.
• Civil courts or arbitration:
  • Needed for large refund claims, class-style actions by many buyers, or when you also claim substantial damages.
  • If your contract contains an arbitration clause, you may have to arbitrate instead of going to ordinary courts.

How do you handle construction defects after you receive your unit?

You should document defects early, notify the developer in writing within the warranty period, and insist on repairs or compensation, escalating to ACODECO or the courts if needed. The sooner and more systematically you act, the stronger your position under Panamanian law.

Practical steps right after delivery

1. Conduct a detailed inspection:
   • Check all rooms, windows, doors, plumbing, electrical outlets, and appliances.
   • Test water pressure, drainage, electrical load, and air conditioning if installed.
2. Create a defects list:
   • List all defects, from minor finishing issues to serious cracks or leaks.
   • Attach photos and, if possible, short videos.
3. Notify the developer quickly:
   • Send your list by email and letter; keep proof of sending.
   • Ask for a written schedule of repairs.
4. Track responses and repairs:
   • Record dates of visits and what was fixed.
   • If repairs are poor or incomplete, update your list and notify again.
5. Get expert help for serious defects:
   • For structural or major water infiltration issues, hire an independent engineer to prepare a report.
   • Use this report to support claims before ACODECO or court.

Common mistakes to avoid with defects

• Waiting too long to complain, which can let the warranty periods expire.
• Accepting verbal promises from site staff instead of formal written commitments.
• Performing your own repairs on major issues before documenting them and notifying the developer.
• Signing broad waivers or settlement agreements without legal advice, especially if compensation is low compared to the defect.

When should you hire a lawyer or real estate expert in Panama?

You should hire a Panamanian real estate lawyer before signing a pre-construction contract or when facing serious delays, large deposits at risk, or major defects. For high-value units or complex disputes, combining legal advice with technical reports from engineers or architects is often essential.

Situations where expert help is strongly recommended

• Before signing or paying a large deposit:
  • Have a lawyer review the contract for abusive clauses, weak penalty language, and poor cancellation protections.
  • A lawyer can also help verify permits, title, and horizontal property documentation.
• Large or prolonged delivery delays:
  • If the delay is many months beyond the grace period, you need advice on whether to push for penalties, renegotiate, or cancel.
  • Legal counsel can help you avoid steps that weaken your right to rescind.
• Serious structural or water infiltration problems:
  • Here you want both an engineer (to define the technical case) and a lawyer (to frame the legal claim).
  • This combination is key if you may need to sue the developer, builder, or insurer.
• Project cancellation and mass buyer conflicts:
  • If many buyers are affected, a lawyer can help organize a group strategy and negotiate or litigate more effectively.
  • They can also check if class-style or collective actions are possible in your situation.
• High-value investments or multiple units:
  • Business investors face more complex tax, financing, and liability issues.
  • A lawyer and possibly a tax advisor can help structure purchases and exit strategies more safely.

What a Panamanian real estate lawyer typically does for you

• Reviews and negotiates your promise-to-purchase contract and final deed.
• Checks title, liens, permits, and horizontal property status at the Registro Público and relevant authorities.
• Advises on risk allocation, payment schedules, and escrow or guarantee mechanisms.
• Drafts and sends formal demands and negotiation letters to the developer.
• Represents you before ACODECO, in court, or in arbitration if the dispute escalates.

What are the next steps if you have a dispute with a developer in Panama?

Your next steps are to gather documents, calculate your claim, notify the developer in writing, and choose the right forum (negotiation, ACODECO, or court/arbitration) based on the amount and seriousness of the dispute. Acting early and in an organized way will increase your chances of a fair outcome.

Immediate actions you can take

1. Collect everything in one file:
   • Contracts, addenda, payment proofs, emails, messages, and promotional materials.
   • Photos, videos, and any expert reports regarding delays or defects.
2. Clarify your objective:
   • Do you want to keep the unit with compensation/repairs, or do you want out and a refund?
   • Your strategy will differ depending on this objective.
3. Send a formal written notice:
   • Describe the problem, cite key contract clauses, and state what you request (repair, penalty payment, refund, etc.).
   • Set a clear deadline for response.
4. Decide on ACODECO vs direct legal action:
   • For small to medium claims within ACODECO's cap, file there promptly; it is free and often enough.
   • For large investments, project cancellations, or structural risks, schedule a consultation with a real estate lawyer to plan court or arbitration steps.
5. Coordinate with other buyers when appropriate:
   • If many owners share the same issue, forming a buyer group can increase pressure and reduce legal costs per person.
   • You can still keep individual claims for specific damages while coordinating strategy.

Checklist before taking formal legal action

• Have you clearly identified the legal basis of your claim (breach of contract, defects under warranty, misleading advertising, consumer rights)?
• Have you quantified the amount you will claim, even if approximately?
• Have you given the developer a reasonable chance to resolve the issue voluntarily?
• Have you checked whether your contract contains an arbitration clause that affects where you can sue?
• Have you confirmed whether your claim amount fits within ACODECO's jurisdictional limit?