Thread: HOA (Home Owner Association) in Panama

As Viewpoint mentioned in the TOC thread, there is a lot of unsold and shadow inventory in Panama and more being built every day.

I have personally dealt with quite a few HOAs in the US that had maybe 20-30% of the units paying the monthly maintenance. It was quite easy to get sorted out, but foreclosures really slam the HOAs hard since the banks only have to pick up ~25-50 % of the backdues.

There will be some deals available in Panama over the next few years in "ghost buildings". The question is, are you getting a deal or a nightmare.

1. What happens with all the maintenance backdues that the developer was supposed to contribute from occupancy permit? They might be sitting on 75 % of the units and pay absolutely nothing.

2. Where are the books kept for the HOA?

3. Are the liens permanent or can some type of legal action, such as a foreclosure wipe them out?

4. What actions can be taken by HOA to collect backdues? Cut water, collect rent directly from person renting, cut gas, electric lines, cable? Do they have to put liens in the registro publico?

Great post and those points are right on. These associations need a lot of scrutiny, even in the US I hated them and avoided properties that had obvious wingnuts that were in charge.

Here in Panama It seems that these associations will be much less regulated. Maybe this is a good thing...

Meck

Anyone knows if the do "HOA estoppels" on sales in Panama? I.e. can they block transfer of clean title and bill the new owner and such if things were not done right?

I have only had one bad experience in the US, someone foreclosed on the developer and starting treating me like their renter.... they got certified mail with requests for balance sheets, financial statements and such immediately. Now they are in violation of the law and I can ignore them. I am sure they use it as their personal piggy bank.

I keep hearing that maintenance fees collection is a disaster in Panama. Any insights would be great. I don't want to share amenities with someone without being able to force collections.

Originally Posted by Meck

Great post and those points are right on. These associations need a lot of scrutiny, even in the US I hated them and avoided properties that had obvious wingnuts that were in charge.

Here in Panama It seems that these associations will be much less regulated. Maybe this is a good thing...

In my limited experience, at my PH there was a late fee of $15, after 14 days which discouraged tardy payers and the appt could be rented out by the HOA to recover outstanding fees. The purchaser's lawyer shouldn't let the title be transferred without paz y slavo which included a receipt for the current month's maintenance fees. Saying that the building was fully occupied and didn't have any problems apart from the unforseen exterior paint job which needed a hefty supplement.

Ok, so after 14 days and a $15 fee it's an interest free loan for life? If that's the case I can see why they have problems collecting. In at least one of my US HOAs we have 18 % interest, lowest of $25 or 5 % of existing balance per month on top of that.

Originally Posted by Richy Rich

In my limited experience, at my PH there was a late fee of $15, after 14 days which discouraged tardy payers and the appt could be rented out by the HOA to recover outstanding fees.

Originally Posted by EdBowers

Anyone knows if the do "HOA estoppels" on sales in Panama? I.e. can they block transfer of clean title and bill the new owner and such if things were not done right?

I have only had one bad experience in the US, someone foreclosed on the developer and starting treating me like their renter.... they got certified mail with requests for balance sheets, financial statements and such immediately. Now they are in violation of the law and I can ignore them. I am sure they use it as their personal piggy bank.

I keep hearing that maintenance fees collection is a disaster in Panama. Any insights would be great. I don't want to share amenities with someone without being able to force collections.

You are correct in the a deed can't be transferred through the Panama Public Registry that transfers ownership of a shared ownership property (condo) of any kind without 1) Paz y Salvo from the P.H. Administration 2) Paz y Salvo from the Property Tax 3) Paz y Salvo from DIAN and proof of payment of the 2% transfer tax and the 3% capital gains tax.

The only other way (known to me) to transfer a property without the above is by judical order from the court who can issue a judical order directing the Panama Public Registry to transfer a "specific property title" subject to said liens which would be assumed by the new owner. If a P.H. Administrator issued a Paz y Salvo on a property without the adminsitration fee for the unit being paid in full through the current period it would be a fraud and against the law.

Ok, I know in the US, the developer controls the HOA to a certain point so they collect all the payments to their own account and is responsible for paying any difference until a certain point has been reached, might be 50 % sold or similar. If they have a similar system in Panama it could be disastrous when buying several units in a ghost building. They basically send you a bill for whatever they want with limited transparency.

What about foreclosures? If that wipes out HOA debts it could be a huge problem with a developer owning 75 % of the units and being foreclosed on, leaving me with special assessments for several years to cover the difference.

Then we have the issue of just that, special assessments. In Miami they are a complete nightmare and I mean COMPLETE NIGHTMARE, there are many buildings that consistently run with special assessments that are about the same as the HOA fee, usually the result of the 40 year certification.

From what I can tell in Panama, the HOAs do not even have money to change light bulbs, much less paint where needed. Will all this be a coming special assessment then?

Originally Posted by EdBowers

Ok, so after 14 days and a $15 fee it's an interest free loan for life? If that's the case I can see why they have problems collecting. In at least one of my US HOAs we have 18 % interest, lowest of $25 or 5 % of existing balance per month on top of that.

The normal late charge for a deliquent P.H. Administration fee is 10% after 10 days from the due date and it's interest fee thereafter, however, the P.H. Administration, after 60 days of deliquency, can withdrawl common area services such as access to parking, termination of gas service, termination of any P.H. Administration services like cable TV, internet or phone, assistance of P.H. Administration employees, elevator access for moving, access for non-owner (or tenants) visitors or maintenance people, deactivation of magentic access cards and if you have a large apartment encompassing one floor they will shut (block) the elevator to your floor. Then they will take legal action when the amount gets great enough to warrant that can include sequestering all your furniture and property in the apartment just to name a few legal remedies. So it's not just as easy to avoid payment and live interest fee. The only thing they can't do is shut your water off as that is considered a health hazard but they will do that too. From our experience a foreclosure will NOT wipe out unpaid P.H. Administration fees.

Foreclosure can force the transfer of the title without the P.H. Administration fees being paid (as I mentioned above) however the title to the property can't be transferred again to anyone without the P.H. Administration fees being paid in full including all penalties prior to transfer.

You want to play poker aginst those kind of odds ?? LOL

So it's a never ending battle with nothing to collect in the end but what they owed you. What an incredibly stupid system. I can see why people don't pay their fees then.

Originally Posted by Viewpoint

The normal late charge for a deliquent P.H. Administration fee is 10% after 10 days from the due date and it's interest fee thereafter, however, the P.H. Administration, after 60 days of deliquency, can withdrawl common area services such as access to parking, elevator access for moving, access for non-owner (or tenants) visitors or maintenance people, deactivation of magentic access cards and if you have a large apartment encompassing one floor they will shut (block) the elevator to your floor. Then they will take legal action when the amount gets great enough to warrant that can include sequestering all your furniture and property in the apartment just to name a few legal remedies. So it's not just as easy to avoid payment and live interest fee. The only thing they can do is shut your water off as that is considered a health hazard but they will do that too.

You want to play poker aginst those kind of odds ?? LOL

"Ok, so after 14 days and a $15 fee it's an interest free loan for life? If that's the case I can see why they have problems collecting. In at least one of my US HOAs we have 18 % interest, lowest of $25 or 5 % of existing balance per month on top of that."

The PH fee was $135 so it was about an 11% penalty, I never found out about additional remedies for late payers. Also, compared to how the rest of Panama works the administration of this particular building was run like a Swiss clock. The developer had long ceased any involvement and accounts were readily available and you could vote at the resident meetings.

Originally Posted by EdBowers

So it's a never ending battle with nothing to collect in the end but what they owed you. What an incredibly stupid system. I can see why people don't pay their fees then.

Actually the system works quite well for collecting deliquent P.H. Administration fees. It certainly is a better system than the USA and here in Panama collection is a more certain outcome. I have seen realtors representing promoters denied access to show their units to prospective clients because of deliquent fees. In other words the realtors were stopped by security and denied access to show a unit.

Water source airconditioning can be terminated or access to common areas to maintain compressors can be denied. Out of 700 accounts we oversee I can only think of 10-15 accounts past 60 days and out of those 10-15 accounts only 2 accounts are existing without the services as the rest have not had their services terminated.

Ok, that is very reassuring. The normal operation seems to be working quite well then.

My main concern is the developer aspect of things with them holding on to a substantial number of units.

What are the possible outcomes if I buy 10 or 15 units in a ghost building 2-4 years from now with only 25 % of the units sold with either a non-paying developer in charge or a mix of foreclosures and other things going on.

From what I understand so far is each unit accumulate past dues and late fee individually, but laws are sometimes surprising.

In the US the banks have to pay 1 % of the foreclosed note or 12 months, whatever is lower. That's 20 cents on the dollar after the bank wasted years foreclosing as slowly as possible. So the banks work slowly and the HOA is legally forced to pay the bill for it, completely sick of course.

Originally Posted by Viewpoint

Actually the system works quite well for collecting deliquent P.H. Administration fees. It certainly is a better system than the USA and here in Panama collection is a more certain outcome. I have seen realtors representing promoters denied access to show their units to prospective clients because of deliquent fees. In other words the realtors were stopped by security and denied access to show a unit.

Water source airconditioning can be terminated or access to common areas to maintain compressors can be denied. Out of 700 accounts we oversee I can only think of 10-15 accounts past 60 days and out of those 10-15 accounts only 2 accounts are existing without the services as the rest have not had their services terminated.

Originally Posted by EdBowers

Ok, that is very reassuring. The normal operation seems to be working quite well then.

My main concern is the developer aspect of things with them holding on to a substantial number of units.

What are the possible outcomes if I buy 10 or 15 units in a ghost building 2-4 years from now with only 25 % of the units sold with either a non-paying developer in charge or a mix of foreclosures and other things going on.

From what I understand so far is each unit accumulate past dues and late fee individually, but laws are sometimes surprising.

In the US the banks have to pay 1 % of the foreclosed note or 12 months, whatever is lower. That's 20 cents on the dollar after the bank wasted years foreclosing as slowly as possible. So the banks work slowly and the HOA is legally forced to pay the bill for it, completely sick of course.

Ed

You have a good point because a P.H. Administrator's leverage for collecting the P.H. Administration fees depends a lot upon the owner or developers necessity to access the unit by realtors or necessity to use all the P.H. Administration services in the normal course of ownership, occupancy or marketing.

If a developer owned a large part of a building and walked away the P.H. Administrator's ability to collect the administration fees would be limited and could take an extended period of time. The P.H. Administration (Board of Directors) would have to call a special owners meeting to discuss options to fund the budget shortfall including options of how to collect the deliquent fees from the non-paying owner(s). These options might include a special assessment or increased maintenance fees necessary to fund the essential services to the owners (or their tenants) that pay their P.H. Administration fees.

I know we have both seen how this played out in Florida and we have both seen projects boarded up and closed because a developer exhausted their financial resources and couldn't (or wouldn't) pay their condo maintenance fees.

Yes you are right in that it could happen here as Panama is not immune to these kind of problems.

Governments and taxes are bad enough - don't sign up for yet another entity that has unlimited access to your pocketbook.

Well, all this is very interesting and sobering. I always hated HOAs in the US because they were always litigation factories. Here the problem seems to be to what extent the HOAs are well run and properly enforce the payment of monthly dues. The nightmare is buying into a project where you pay your dues on time but it is full of deadbeats who don't and then you are expected to make up the difference somehow. Then it accumulates deferred maintenance needs. Makes me wonder whether it would be best to avoid highrises and gated communities. But that's another risk.

Originally Posted by jonr

Governments and taxes are bad enough - don't sign up for yet another entity that has unlimited access to your pocketbook.

Avoiding HOA's and condominium associations is not a bad idea in general. The problem is that in many areas they represent almost all of the new development that is taking place. I don't know if that is the case in panama but if they are going to exist, the least you need is competent management, which even in the U.S. is hard to find and the management industry has been around for at least 40 years in most parts of the U.S. My company has been considering trying to establish a management company in Panama in an effort to offer qualified management services and help to raise the bar as far as professional practices and standards go.

I would be very interested in anyone's feedback, if you have had personal experience with condo and/or HOA management firms within Panama; either as a full-time resident or someone who lives outside the country but owns a property within the country.

Avoid Playa Las Lajas Sol y Mar, big HOA fees and no service. The trash is burned on site.... Possible that the fees are being pocketed by the developer but I don't know. Las Lajas Panama International Inc refuses to share information as to where the fees are spent... Also they refuse to show a spread sheet showing where the money given the developer was spent for the construction of homes in this project. I believe they may also have been involved in tax evasion on properties sold to unsuspecting retiries for enflated prices and then registered at 25% of the money collected.

[/QUOTE]I keep hearing that maintenance fees collection is a disaster in Panama. Any insights would be great. I don't want to share amenities with someone without being able to force collections.[/QUOTE]

Good point. I read recently that IDAAN (the water utility) is owed around $20 million by Pana deadbeats who don't pay their water bill and I got the impression that they had little recourse. If the largest water utility in Panama can't collect for selling water, what hope do HOAs have for going after their deadbeats?

I think the answer is 1. don't buy anything that isn't already built (to your satisfaction) and 2. avoid gated communities with HOAs

"Avoid Playa Las Lajas Sol y Mar, big HOA fees and no service. The trash is burned on site.... Possible that the fees are being pocketed by the developer but I don't know. Las Lajas Panama International Inc refuses to share information as to where the fees are spent... Also they refuse to show a spread sheet showing where the money given the developer was spent for the construction of homes in this project. I believe they may also have been involved in tax evasion on properties sold to unsuspecting retiries for enflated prices and then registered at 25% of the money collected".

Is that in Chiriqui along the coast south of David? Seems like there are quite a few homes for sale from there on Vivium.com.