Sunday, July 15, 2007

Tough times for sellers of Panama City skycrapers?

120 draft construction proyects have been approved for buildings above 25 stories and 80 more have been applied for.

The value of construction permits in Panama City for Jan-Apr 2007 is of 321.9 million - 30% more than for the same 2006 period. 15 skyscrapers above 50-stories are already in the pipeline.

Ministry of Labor Executive Decree 15 of 2007 seeks to address the increasing number of worker fatalities in skycrapers by requiring that builders of projects above US$1million have an independent Safety Official. The issue was brought to the public's attention after several days of small demonstrations by trade unions.

The Executive Decree imposes a US$10,000 contribution to an Occupational Safety, Higiene and Health at Work for the Construction Industry Fund, run by the Ministry of Labor. Where I come from, that is called a tax, which cannot be enacted by Executive Decree, and is therefore unconstitutional.

Builders are not happy...

In a related story, the Minister of Housing signed July 13 a resolution imposing a 14-story limit on buildings around the Andres Bello park of the El Cangrejo neighborhood, as well as 5-meter clearance.

Residents of the 60-year old neighborhood lobbied the government for this limitation, being the first time residents succesfully curb the current construction boom. Destruction of sidewalks, debris (or workers) falling off construction sites, noise of machinery during evenings, cement poured unto streets and sewers (with the resulting overflow of fecal matter) and other inconveniences have made Panama City construction companies a very unwelcome corporate citizen, affecting current neighbors and even incoming snowbirds seeking their balcony in paradise.

In the meantime, the III Justice Tribunal has to decide on the appeal filed by a Panama corporation against a May 31 judgment of the 8th Civil Circuit Judge, whereby some clauses of a purchase agreement are deemed "abusive". The case started when the Consumer Protection Authority received the complaint of the buyer of a San Francisco apartment who signed a form agreement prepared solely by the seller with no negotiation. The judgment deemed as abusive 5 clauses which provide for:

  • A 5% unilateral increase in the purchase price if the seller deems that building materials have increased in price,
  • The seller to withhold all previous downpayments if it unilaterally considers that the buyer is in default of agreement obligations,
  • Billing the buyer a 1% monthly charge on the amount outstanding after issuance of the occupation permit, whether the buyer uses the apartment or not,
  • The seller to unilaterally decide not to build and simply return all downpayments without interest and with the seller waiving all claims for said action,
  • All disputes to be subject to arbitration excluding the consumer protection courts.

We can expect that after the appeal is decided, the defendant sellers will file a cassation action before the Supreme Court, so a final decision will take years to be effective.

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