Regulation to the law that establishes the Horizontal Property Regime
Law # 31 of June 18, 2010 is the current legal provision that establishes the Horizontal Property Regime in Panama, the law, in its article 98, states that: “The Executive Branch, through the Ministry of Housing and Land Management, will regulate the present law”.
From that year 2010 to date there have been several projects by the Ministry of Housing and Land Management to regulate this law, however, the issue is complex; achieving consensus to establish this regulation among all those involved (lawyers, associations of real estate companies, building managers, etc.) has not been easy.
Therefore, it was not until almost ten (10) years later that such consensus was reached and Executive Decree # 151 of June 16, 2020, published in the Official Gazette # 29048-B of that same day, was finally enacted.
As background, we can generally define Horizontal Property as a legal entity, which compiles the set of rules that regulate the division and organization of various properties, this as a result of the subdivision of a building or common land.
According to Law # 31, this includes: independent real estate units that have an exit to the public thoroughfare directly or through a common passage, however it is much more than that, since in addition to real estate units on common land, it includes projects built on land belonging to several people or given in concession of the use of the land, urban developments and constructions for any type of commercial activity, including parking lots, warehouses, etc. As a curious fact, with this new regulation of Executive Decree # 151, even an individual plot in a cemetery can be subject to be incorporated into the Horizontal Property Regime.
Executive Decree #151, is based on the development of three special concepts:
- Components: It refers to the activities (possible different uses) that are part of the same horizontal property and whose operation is different from the others;
- Original Horizontal Property: It is the one that arises from the incorporation of constructions, division into lots or urban developments susceptible of incorporation to the Regime and that are independent horizontal properties;
- Derived Horizontal Property: It is the one that arises from the incorporation to the Regime, of real estate unit constituted on a property already incorporated to the Horizontal Property Regime.
It is established that both the Original Horizontal Property and the derived ones, will each have their own Owners Assembly and their Board of Directors pursuant to Law # 31.
The Regulation of the Original Horizontal Property must indicate that the real estate units of that horizontal property may be constituted in derived horizontal properties with their own regulations and table of valuations and participation subject to the Original Horizontal Property.
The possibility of incorporating new properties as a reserve for the developer for future development can also be provided for.
Some important novelties introduced by the regulation when developing the law, are the following:
• The Co-ownership Regulations may not establish limitations to the free enjoyment and disposition of the real estate units by their owners, notwithstanding what is established in the Regulations of Use with the purpose of procuring an orderly and peaceful coexistence among owners;
• The communal property of the horizontal property may not be sold, encumbered or seized;
• To unify in a Horizontal Property, property of different owners it will be possible to incorporate, both the properties and their improvements, but it will require the consent of each owner, who must all appear in the request that is made of the incorporation to the Horizontal Property Regime;
• It is made clear that only non-profit organizations that comply with Resolution 28-2003 of February 21, 2003 of the Ministry of Housing and Land Management, which refers to the regulation of private streets in urbanizations, may be under a Horizontal Property Regime;
• It is defined and confirmed in this regulation that the properties that by their nature are Social Interest Horizontal Property and the real estate units that have different uses, including those destined to tourist lodging are subject to be incorporated to the Horizontal Property Regime;
It is confirmed that the attached properties (parking spaces, storage, etc.) that are part of the real estate units must be identified and described in the constitutive title by which a property is incorporated to the Horizontal Property Regime.
Just as it is also confirmed that they may not form separate properties from the real estate units to which they belong;
• The parking spaces that exceed the minimum amount required for each property incorporated to the Horizontal Property Regime and the storage areas that do not correspond to a specific real estate unit, will be freely disposed of by the initial owner, while the reserve established in the Co-ownership Regulations remains in force, if any. However, the parking lots or storage areas not reserved or assigned, will become communal property of the respective horizontal property;
• In these regulations, a segment, or title, dedicated to the reserves that can be executed by the promoter and supply of services is developed. In that sense, it defines more clearly the reserves for future development, reserves for exclusive use of certain real estate units, reserves on roofs, basements, facades and easements;
• Regarding the matter of the Assembly of Co-owners, it is wisely established that the owners can participate in it through electronic methods (video conference, etc.);
• It is made clear that with respect to the first Board of Directors of the Assembly, which is appointed by the Developer, they do not necessarily have to be owners of real estate units of the Horizontal Property and will occupy the position until the Developer maintains such status, or until a new Board of Directors is appointed by an Assembly of Owners;
• An Administration Committee is established in those cases where it is necessary, by provision of the law, which must be reflected in the Co-ownership Regulations. In the multipurpose real estate complexes this committee will be formed by a representative of each component. This committee shall supervise the Administrator and is empowered to make decisions regarding the administration;
• This new regulation also emphasizes the general requirements that will be requested by the Ministry of Housing and Land Management as the regulator of the Horizontal Property Regime, but also develops additional special requirements, concerning:
- Incorporation of properties whose owner is different from the owner of the improvements;
- Incorporation of private street urban developments that are governed through non-profit organizations;
- Incorporation of Original Horizontal Properties;
- Incorporation of Horizontal Properties of commercial use destined to public tourist lodging;
- Incorporation of buildings or urbanizations previously built and occupied;
- Incorporation of developments, subdivisions and other horizontal developments;
- Incorporation of developments, subdivisions and other horizontal developments with wells for drinking water supply or other special systems;
- Incorporation during the construction process of the improvements;
- Incorporation of development by stages;
- Incorporation of horizontal property with the name of a banking entity
- Incorporation of horizontal properties that have a name reservation before the Public Registry of Panama, and the;
- Presentation of modified blueprints approved during the process of incorporation into the Horizontal Property Regime.
• The Ministry of Housing and Land Management, as the regulating entity of the Horizontal Property Regime, will first hear about violations to any of the prohibitions established in Law # 31 and its regulation in Executive Decree # 151. For this purpose, said regulating entity must create the departments and offices it deems necessary.
• It should be noted that the Ministry of Housing and Land Management is also empowered to impose fines and penalties for non-compliance with Law # 31 and for non-compliance with the respective Co-ownership Regulations. These sanctions will range depending on the severity they determine, from B/. 50.00 to a maximum of B/. 1,000.00.
However, if the said regulatory body considers that it has no jurisdiction to resolve the infringement, it shall refer the case to the authority it considers competent.