More Accountability Sought in the Real Estate Sector in Panama

In recent months the consumer protection arm of the government, prompted by the enormous volume of complaints issued against real estate developers, promoters, etc.., have embarked upon a lobbying campaign to promote the passage of a law that would seek to protect consumers from unscrupulous practices in the real estate sector.

With 2,796 complaints received between May of 2006 and June 2012 ACODECO (la Autoridad de Protección al Consumidor y Defensa de la Competencia) it shouldn’t surprise anyone to hear stories of developers who abandon projects, thereby abandoning the consumers, in direct and unabashed violation of the guarantees offered in the purchase contracts once the buildings, presumably, have been completed.

We’re also talking approximately $207 million dollars at stake; not a figure to be ignored especially when the credibility of an entire industry- construction in Panama- is in question on an international level. Given this reality ACODECO proposes to create a trust by way of a Law that would seek some guarantees in curbing these abuses.

The basic idea is that the down payments or, what in some cases is called “good faith” money, of willing buyers remain untouched in the trust fund until the project they bought into begins to show progress and/or reaches that certain pre-sale level where its full implementation is ensured. The law does not yet define the exact time that the funds would need to remain in trust.

Pedro Meilan, ACODECO’s director, has led discussions with people in the business circles related to the this industry, that is, developers, builders, trade association leaders and lawyers in meetings in Panama’s Chamber of Commerce of what this bill of law would entail in presenting it to the National Assembly.

The proposed law would be part of the changes ACODECO intends to include in the amendments to Law 45 of 2007 which sets standards for consumer protection. In addition to the security aspects and down payments it would include provisions that would expose hidden (and vicious) agendas. In this aspect what the law seeks is for someone to take responsibility. That is, when there is damage to the building, the developer, builder or society through which the project is financed would assume responsibility.

By no means is this the first time such a proposed measure is presented to our legislature. Just four months ago president Martinelli vetoed a similar measure to protect the home and property buying consumer proposed in the law that expanded the range of housing available for the preferential interest mortgages. Meilán pointed out that this initiative was vetoed due to the fact that it was not consulted among industry leaders.

In addition, the way the bill was worded, it placed the responsibility for the management of the trust in the hands of the insurance companies, who themselves have many questionable practices. It was no wonder that the real estate developers closed ranks and categorically opposed the measure. In fact, they are basically opposed to the current changes proposed by Meilán and the ACODECO.

Gastón Regis, president of The Builder’s Chamber, alleges that should these new measures be applied the ensuing effects would be an increase in their building costs which they, in turn, would pass on to the consumer since the down payments are used to mitigate their financial costs in building their projects.

Frankly, when you observe the drastic changes in Panama City’s skyline and notice the dire effects of over building with its consequent legion of new towers that remain practically unoccupied and in danger of becoming “ghost towers” within a few short years, you wonder just how much intelligence is behind this unrelenting push to build without rendering any accountability to the consumers who fuel their industry. The bill being introduced by ACODECO has been long over due.

Facts for the preceding article were garnered from La