COVID-19 Regulations: Recent provisions related to lease contracts in Panama

By Ayleen Quintero – Associate

(Executive Decree No. 145 of May 1, 2020)

Due to the National State of Emergency, new provisions have been issued regarding lease contracts in order to ensure compliance with the rights and obligations of both parties in the relationship. Below is a brief summary of these provisions.

Lease fees

In accordance with the new provisions, the rental fees (leases for residential, commercial, industrial, professional and educational use), as well as all contractual clauses related to the following are frozen for the duration of the State of Emergency and up to two (2) months after the lifting of said measure :

1. Increases due to unilateral termination of the contract.
2. Penalty for unilateral termination of the contract.
3. Interest for late payment.

Regarding conflicts that may arise between the Landlord and Tenant due to unpaid rents

The Landlord and Tenant may reach a mutual agreement on any conflicts that may arise between them due to unpaid rents and must register said agreement with the General Directorate of Leases. If this is the case, these agreements would be valid for two (2) years, counted from the date they are registered with the General Directorate of Leases and will remain valid as long as the Tenant does not breach the agreement.

Expiration and validity of lease contracts

If the lease expires during the period of suspension of the eviction and foreclosure measures, its validity will be extended for the same period as the Executive Decree that established these new provisions (Executive Decree No. 145 of May 1, 2020), and the other contractual conditions will be maintained.

Actions that will give rise to the respective sanctions

• That the Tenant refuses to pay the fees even though the effects of the declaration of a national state of emergency have ceased.
• Tenants whose income has not been affected by the effects of the National State of Emergency and who nevertheless do not comply with the payment of their rent.
• Landlords who use pressure mechanisms against tenants to vacate the property, such as suspending the supply of services (gas, water, electricity, among others).

Suspension of eviction and foreclosure proceedings

All procedures for eviction and eviction proceedings are suspended, regardless of the rental fee or the purpose of use of the property, whether residential, commercial, industrial, professional or educational, for the duration of the National State of Emergency.