Bill 523.

Summary.

The bill amends Article 79 of Law 45 of 2007 to specify the information and obligations that must appear in contracts made by suppliers of new residential construction, serviced or unserviced lots in urban or rural areas, and real property generally. Contracts with prospective purchasers and purchasers must state the total amount payable and the possibility of a justified increase under the proposed Article 79-A. A consumer may demand a proportional price reduction if the final conditions or specifications of a new construction differ substantially from those agreed in the contract.

Contracts must state when construction will begin and end and provide a fixed or ascertainable delivery date. If the delivery deadline expires, the supplier must explain the delay in writing and set a new date; the consumer may accept that date or terminate the contract. Where the business operator fails to perform, the consumer may seek a refund of payments, statutory interest, and damages without a penalty. Warranty terms must be clear, detailed and written. Coverage runs for ten (10) years for structural damage, construction defects and latent defects; five (5) years for installation defects that prevent or hinder normal use or habitability; and two (2) years for finishes. These periods run from issuance of the occupancy permit.

New business operators with no previous real estate developments must obtain an insurance policy or surety bond guaranteeing repayment of purchasers’ advance payments until the project receives an occupancy permit. A developer may use those payments if a surety instrument guarantees payment to consumers upon default. When a supplier belongs to a real estate business group, the group is jointly liable if the project is not completed or advance payments must be returned; the business operator must disclose its group affiliation to the Authority. If a project is not carried out for reasons attributable to the developer, the surety company must repay the advances plus interest accrued from the signing of the preliminary sale agreement. Financial institutions may finance suppliers once the required bond is documented. The Authority verifies compliance and may impose the administrative penalties in Article 104. Advertising for new residential construction forms part of the contract and binds the supplier.

Proposed Article 79-A makes any increase in the agreed price due to higher construction costs subject to mandatory verification by the Authority. Its determination binds both parties. The business operator pays for the procedure for each project or, where applicable, each phase or stage; the consumer pays nothing. The Authority regulates the procedure and fee and may place the resulting revenue in a fund for education, outreach and training in competition and consumer protection. Proposed Article 79-B makes suppliers answerable for claims concerning structural damage, installations and finishes. It requires a bond issued by a surety company licensed to operate in the Republic of Panama (República de Panamá), covering two percent (2%) of each home’s sale price for ten (10) years from delivery. The bond covers claims brought through administrative and judicial proceedings. Consumers may bring claims before the courts for damage exceeding the guaranteed amount.

The amendment to Article 114 establishes voluntary consumer arbitration, initiated by the consumer, for real estate disputes other than those concerning unfair contract terms. An application goes to the Authority, which must issue a procedural Guide. A panel of three (3) arbitrators hears the case. Its members are selected from lists supplied by consumer associations and recognized business groups, and from specialists registered following a call by the National Directorate for Consumer Protection (Dirección Nacional > de Protección al Consumidor). The award is adopted by a majority, binds the parties, has the effect of res judicata and may be enforced in court. Arbitration is initially free to the consumer, who must nevertheless pay the opposing party’s expenses if the claim is denied. The final articles identify the amendments and additions to Law 45 of October 31, 2007 and provide for commencement on the day following promulgation. The provisions concern the Authority, the National Directorate for Consumer Protection, financial institutions, surety companies, courts, real estate suppliers and consumers.