A reservation is not a purchase

In many pre-sale projects, the first thing that truly exists is not the permit, the construction, or the property. It’s the contract.”

The typical scenario

A buyer reserves an apartment in a pre-sale project where the building has not yet been constructed and the project is still undergoing the permitting process.

The developer provides a reservation agreement and later a promise to purchase and sale, with an estimated delivery timeline of 30 to 40 months, offering a price that appears attractive, a convincing render, and a project that sells quickly.

Up to this point, nothing seems out of the ordinary. However, there are several concepts that must be considered.

What the contract usually says

In practice, the contract typically establishes:

• an initial payment (reservation fee plus installments),
• an estimated delivery date,
• clear penalties if the buyer defaults,
• broad flexibility clauses in favor of the developer.

What is not always clearly defined is:

• what happens if permits are delayed,
• what happens if the scope of the project changes,
• what happens if construction does not progress as projected,
• what happens to the funds paid while the project still does not legally exist.

Many contracts include protective clauses for the developer that anticipate these scenarios, including:

• variations in the unit’s square footage,
• adjustments to the sale price,
• and even price increases of up to 5%, duly supported by increased construction costs.

The critical point: the project does not yet legally exist

In this type of pre-sale, the buyer assumes a contractual relationship conditioned upon future events. This is not inherently wrong, but those events must be clearly defined.

Example: The purchase agreement states that the developer will use its “best efforts” to obtain the necessary permits and deliver the project within the estimated timeframe.

The key questions then become:

• What happens if those permits are not obtained within that period?
• Is there a real deadline?
• Can the buyer terminate the agreement without penalty?
• How and when are the funds returned?

If the contract does not address these issues with precision, in most cases the risk is borne by the buyer.

The clause that defines everything

In a pre-sale, the value of the contract is not found in the description of the property.

It lies in what happens if the ideal scenario does not occur.

A well-structured agreement should clearly define:

• which permits are conditions to proceed (for example, construction permits or occupancy permits),
• how long those permits may be delayed,
• which changes are acceptable without the buyer’s consent,
• what happens if the project does not move forward.

When these points are not clearly addressed, the buyer becomes bound to:

• indefinite waiting periods,
• forced renegotiations,
• costly exits.

ITBI in pre-sales: why it must now be considered

In Panama, the transfer of real estate through a public deed is subject to a 2% Real Property Transfer Tax (ITBI).

This tax is not paid at the time of reservation or upon signing the purchase promise. It is triggered at the moment the deed is executed and the property is legally transferred.

With the recent legal amendment, the general rule has changed:

• the sale of new residential properties is subject to ITBI,
• unless very specific and temporary conditions are met.

The remaining ITBI exemption is primarily linked to the preferential housing regime, which expires on December 31. As of 2026, that regime will no longer exist.

In most pre-sale transactions:

• the contract is signed today,
• construction is completed years later,
• and the deed is executed when the preferential regime no longer applies.

Although ITBI is legally withheld and reported by the seller, its economic impact is ultimately reflected in the pricing structure and at closing.

For developers

Continuing to sell pre-sale units under the assumption of a general ITBI exemption:

• creates expectations that will likely not be met,
• generates friction at closing,
• and leads to unnecessary renegotiations.

Today, ITBI must already be factored into the project’s economic analysis.

The Fine Print

The Fine Print doesn’t tell you whether a pre-sale is good or bad… it tells you when the risk starts running before you even notice it.