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

By Ayleen Quintero – Associate

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

Due to the State of National Emergency, new provisions related to lease agreements have been enacted in order to guarantee compliance with the rights and obligations of both parties under the contractual relationship. The following is a summary of these provisions.

Leasing fees
In accordance with the new provisions, for the duration of the State of Emergency and until two (2) months after the lifting of said measure have elapsed, the amount of the rent (in leases for residential, commercial, industrial, professional, and educational use) frozen, as well as all contractual clauses related to the following matters shall remain unaltered:

1. Increases due to unilateral termination of the agreement.
2. Penalty for unilateral termination of the agreement.
3. Interest on arrears.

About the conflicts that may arise between the Lessor and Lessee due to rent not paid
The Lessor and Lessee may reach a mutual agreement on the conflicts that arise between them due to unpaid rent and must register said agreement with the General Directorate of Leases of the Ministry of Housing and Territorial Ordering. These agreements shall have a validity of two (2) years, effective from the date on which it is registered with the General Directorate of Leases, and will remain in force as long as the Lessee does not breach the agreement.

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

Actions that will give rise to the respective sanctions

• The Lessee refuses to pay rental fees even though the effects of the declaration of the State of National Emergency have already ceased.
• Tenants whose income has not been affected by the effects of the State of National Emergency and, despite of this, do not comply with the payment of the rent.
• Lessors that use pressure mechanisms against lessees to vacate the property, such as the suspension of the supply of public services (gas, water, electricity, among others).

Suspension of the eviction proceedings

All the eviction proceedings are suspended, without distinction of the amount of the rent or the purpose of the use of the property, be it residential, commercial, industrial, professional, or educational, while the State of National Emergency lasts.