Lease Agreements in Panama: The Three-Year Rule Landlords Don't Expect.

A rental law built to protect long-term occupancy

Panama's Rental Law, Law 93 of October 4, 1973, still governs residential, commercial, professional, industrial and teaching-use leases of private real property today, and it contains provisions that catch landlords — particularly foreign owners used to more flexible jurisdictions — genuinely off guard. The law declares rentals of this kind a matter of public order, meaning its protections cannot simply be contracted away, even with both parties' consent.

The three-year minimum term, and the tenant's renewal right

The single most consequential rule in Law 93: no lease, and no renewal of a lease, may be entered into for a term shorter than three years. On top of that minimum, a tenant who is current on their payments when the lease term ends has the right to a further three-year extension — the landlord cannot simply decline to renew a compliant tenant at the end of the term without cause recognized under the law.

This structure exists to give tenants housing security, and it means a landlord planning a short-term or flexible rental arrangement in Panama needs a fundamentally different strategy than in jurisdictions with month-to-month or one-year default terms — options like a genuine short-term vacation rental fall outside this framework's typical scope, but standard residential and commercial leases do not.

What the written contract must include

Every lease must be in writing, using the format supplied by the General Directorate of Rentals, and must state: the date; the parties' names, personal identification numbers, and addresses; a precise description of the property, including its location by street, plaza, and corregimiento; the property's cadastral number and Public Registry inscription details; the rental amount (even if partly paid in services or in kind); the term; and the use the property will be put to.

The filing obligation most landlords miss

Within five business days of signing, the landlord must deliver a copy of the lease to the General Directorate of Rentals of the Ministry of Housing. This is not a formality landlords can safely skip: an unfiled lease weakens the landlord's position in a future dispute, particularly in an eviction proceeding, where a properly filed and compliant lease is the clearest evidence of the terms actually agreed.

Clauses that are void no matter what the lease says

Law 93 expressly prohibits certain clauses, and including them does not make them enforceable — they are simply void regardless of both parties' signatures:

1. Requiring the tenant to pay rent in advance.
2. Charging the tenant any amount beyond the agreed rental fee.
3. Having the tenant waive any right the law grants them.

A lease drafted around these prohibited terms — for example, framing an advance payment as a "deposit" that functions identically — invites a dispute the landlord is likely to lose, since Panamanian courts and housing authorities look at the substance of the arrangement, not just its label.

Nondiscrimination in rental decisions

The law also prohibits refusing to rent property based on race, marital status, sex, nationality, age, political or religious belief, or because the tenant has children — a standard worth building into any screening process for prospective tenants, particularly for landlords managing multiple units.

What happens when a tenant stops paying, or when you need to remove an occupant with no lease at all

A compliant lease is also your foundation if you later need to remove a non-paying tenant or a trespasser. Panama treats these as legally distinct processes: eviction for non-payment (lanzamiento por mora) follows a different path — and different tenant protections — than removing someone with no lease relationship at all (lanzamiento por intruso). Our dedicated guides cover eviction for non-payment and eviction of a trespasser or unauthorized occupant in detail.

Getting the lease right protects you long after signing

A lease drafted without Law 93's specific requirements in mind can look perfectly reasonable on signing day and then become a serious liability the first time a dispute arises — whether over renewal, non-payment, or a clause that turns out to be unenforceable.