Buying Real Estate in Honduras

By Jose F. Avilla

Ownership Restrictions

Article 107 of the Honduran Constitution of 1982 stated that only native or naturalized Hondurans could acquire direct ownership of land within 40 kilometers from the shores and national borders. However, a law passed in 1990, was designed to let foreigners buy and hold land in coastal and border areas under their own name, from which they were previously excluded. Foreigners are allowed to purchase up to 3,000 square meters (32,292 square feet) of land. However, foreigners can purchase land in excess of this limit by securing a resident's visa and forming a corporation. By forming a corporation, you have complete ownership and designate yourself as general manager. You are then entitled to all rights of a Honduran citizen regarding ownership of your property. You may develop the land as you like, and working in the country will be treated equally without distinction between local and foreign capital.

"Residentes pensionados"

"The Honduran Senate approved a legislative decree offering foreign retirees relocating to Honduras a generous incentive program titled "Residentes pensionados" o "Residentes rentistas".Under this program foreign retirees who take residence are allowed a onetime exemption from all import duty. To qualify, the retiree must prepare a list of everything that they will move to Honduras and have it notarized by an official of the Honduran Embassy or Consulate in the United States. The notarized list is to be presented to the customs agent at the airport or at the port of entry.

The retiree may include any kind of household goods, appliances, personal effects, clothing, etc. In addition, the retiree is permitted to bring into the country, also duty free, one car and one boat. The car maybe traded every five years and the new car may also be brought in duty free. The opportunities for foreigners to invest in Honduran real estate are presently good.

Real Estate Market

By: José Francisco Avila

The Honduras real estate market functions according to its own set of loose rules, which aren't readily apparent to outsiders. A problem that must be confronted is the fact that local agents feel that foreigners should pay more for a piece of property of land. One reason for this attitude, is the fact that most of the people acting as real estate agents are landowners with vested interest in achieving the highest price possible, or in some cases are American expatriates who purchase land from the locals at low prices and resell it at highly inflated prices.

The absence of a sophisticated real estate industry is a problem, as brokers are not required to be licensed. The absence of a Multiple Listing System means that common information available to U.S. brokers, such as selling price, price per square foot, etc. are not available in Honduras. It is also known that some agents in many cases have sold the same property to more than one buyer. In 1993, the U.S. Embassy in Tegucigalpa reported 45 cases in which U.S. citizens found themselves involved in legal battles over the conveyance of title to property they had purchased legally.

National Land

One thing to be aware of, is the fact that a lot of Honduran real estate is national land or government property parceled out to citizens who wanted to farm them or build on them. Technically, the government still has a claim to that property, regardless of who tries to buy or sell it now. These lots were acquired through government concessions. These lots will vest upon the municipality at the conclusion of the concession.

The methods for this conveyance are controlled by Decree No. 134-90 (Ley de Municipalidades, Chapter II, Article 70). According to this decree, all real estate which is not legally registered will vest in the municipality where the property is located. Despite this, the municipality may convey title to the person having possession of the real estate but not duly registered upon payment by such person of an agreed amount which shall be no less than ten percent of the appraised value. No person may acquire more than one 5,382 square feet rural lot.

This does not include lots acquired through government concessions. These lots will vest in the municipality at the conclusion of the concession. This shows the importance of verifying that the person who sells you real estate has what is known as Dominio Pleno or a General Warranty Deed . It is through this document that government property is conveyed to a private citizen. Prior to issuing the document, the local government will hold a meeting to give third parties the opportunity to object to the conveyance. Once the property has been conveyed, your attorney will proceed to register the property in the Local Property Registry.

Notario

In civil countries, Honduras included, it is the notary, who provides the necessary legal advice and performs most of the legal and registration services connected with the real estate transaction. Notaries in Honduras are accredited attorneys. They conduct title searches, write the legal documentation for the transaction, register the deed with the Public Registry of Property (a necessity to protect the buyer against intervening third party claims), and explain the legal consequences of the real estate transaction.

One thing to be careful of, is the fact that individuals who have completed Law School are allowed to open their own private practice, even though they are not accredited attorneys. These individuals are known as Licensiados, which means that they hold a Bachelor Degree in Law.

Although they can represent you in a criminal case, they are not authorized to write legal real estate documentation. They practice by accepting the legal work and then farming it to a Notario who through previous agreement has accepted such assignments.

Where To Buy

Most foreigners looking for a retirement or second home in Honduras tend to consider Roatan first. This is due to the tremendous amount of publicity the island has received in the foreign press and its tremendous resemblance to the Caribbean and its lower prices. However, you may want to consider other areas with appreciation potential such as Tela and Trujillo.

In buying property in Honduras, caution is the best advice anyone can give you. You should deal with a broker who's familiar with local and U.S. real estate procedures.

José Francisco Avila is a licensed real estate broker in the state of Texas and is president of Avila Realty. He is a Certified International Property Specialist Candidate.

Jose F. Avila

Avila Group@aol.com

P.O. Box 333 Allen, TX 75002-0333

Tel: (214) 250-8080 office (214) 390-7985 home (214) 390-0171 fax