Real Estate Law in Honduras

Main provisions governing the acquisition of assets in Honduras are set forth in the following legal texts: (i) Constitution of the Republic of Honduras; (ii) Civil Code; (iii) Property Law and Bylaws; and (vi) security liens law.

Ownership rights on real estate can be obtained through the following: (i) transfer agreements; (ii) inheritance; (iii) donation; (iv) legal/judicial mandate; (v) prescription of rights; and (vi) accession.

Acquisition of real estate or ownership must be authorized or granted by a public notary through a public deed. The public deed is the equivalent to the ownership title.

In the case of transfer agreements, acquisition or ownership can be obtained through: (i) sale/purchase agreements; (ii) transfer agreements; (iii) exchange; or (iv) mortgage, etc.

In the case of inheritance, acquisition of real estate may be obtained by a will or succession rights. In this case, a new public deed in the name of the successors is not required. With a court ruling or a notary resolution granting the succession, the ownership right is acquired, and it is considered the ownership title.

Also, property or ownership can be acquired by means of the following: (i) donation; (ii) legal or judicial mandate or concession; (iii) accession; and (iv) prescription of rights.

In the case of donation, the property title is proven by the public deed granted/authorized by a notary. However, in the case of legal or judicial mandates, accession or prescription of rights, an official court ruling, or resolution will be required to prove ownership or property title.

Generally, in order to acquire ownership rights on real estate, it is advisable to consult a lawyer specialized in this field, and the following must be carried out: (i) grant the public deed or obtain a court ruling or notary resolution; (ii) pay applicable taxes and official fees to the tax authorities and the registry; (iii) request the property registry with the Property Institute; and (iv) obtain Property Registry Certificate.

Non-residents may acquire real estate in Honduras, whether it is directly (personally) or indirectly (through a Honduran-incorporated legal entity). Exceptions and/or limitations exist only for properties in border or beach areas.

The Property Institute supervises all property registrations in Honduras. In the case of real estate, ownership must be registered with the Real Estate Property Registry. Also, encumbrances, liens and mortgages must be registered.

The Property Institute has a digitalized/electronic system where a complete registry of all property ownership is held, and it is of public access. That is to say that property ownership is public information.

Every property will be assigned by the system a registry number, which will include every registry annotation. It is required that all transactions involving the registry of ownership or property pay official fees and rates.

The seller is responsible to deliver the property in good faith and disclosing any defects and is liable to clear the property of any defects.

In case of any inconvenience regarding the property, which was either not disclosed or unknown, the seller is liable and is required to: (i) guarantee the legal and peaceful possession of the property; and (ii) remedy the hidden vices or defects that may appear.

Mortgages are collateral securities or liens which require a main loan or financing contract. In other words, they are sub-contracts or secondary agreements to the loan or financing contract.

Real estate may be mortgaged, as well as other property securities or encumbrances, which must be granted by means of a public deed authorized by a notary public and registered with the Property Institute.

The ownership of a property cannot be transferred if a mortgage annotation is registered to the property registry. Therefore, a mortgaged property can only be transferred if: (i) the mortgage is cancelled; or (ii) the lender or creditor of the loan issue a waiver authorizing the sale. The lender or loan creditor must issue a waiver, which should include the authorization to transfer the property, the loan and thus the mortgage.

The cancelation of the mortgage must be granted by the lender or loan creditor before a public notary and registered with the Property Institute.

The Tenancy Law and the Civil Code regulates matters regarding property leases intended for residential or commercial purposes.

The Government, Justice, and Decentralization Ministry, through the Tenancy Administration Department, supervises matters regarding property leases. The Tenancy Administration Department is the responsible authority for managing the control of the database of properties that are leased out.

As per provisions included in the Tenancy Law, property owners are required to register all lease agreements with the Tenancy Administration Department.

The leasing of other non-real estate assets is not required to be registered and is not administered or supervised by a regulatory authority. Therefore, asset leases may be entered into privately, as provided by law.

Property development in Honduras is supervised and regulated by the Municipal Authority of each municipality. Regulations vary in each jurisdiction, such as specific procedures and documents required for permitting.

Nevertheless, all construction works and sites require a building permit issued by the Municipal Authority. Cost of the construction permit is 1% of the construction price.

Commencing with the construction work without the permit triggers legal implications such as: (i) the construction work suspension; (ii) the labeling of the construction site as unauthorized for construction; and (iii) a fine, etc. The fine can be imposed for up to 200% of the construction cost.

Approval of the construction permit commonly takes between 15 days to a month.

The environmental license in Honduras is the permit that authorizes the construction and operation of projects with environmental impacts. Projects that require environmental licenses are the following: (i) for superficial water concession; (ii) underwater use; (iii) dumping permits; (iv) forest use; and (v) others.

If the construction site is in a protected forest area, a special permit is required to be issued by the Forest Conservation Institute.

Also, at a municipal level, the authorities regulate, for each jurisdiction, the specific requirements regarding environmental permits pursuant to the location’s particularities (such as forests, rivers, beaches).

Direct taxes applicable to the sale is capital gains tax and property transfer tax. Capital gains tax will be paid by the seller at a rate of 10% of the transaction value or the market value, whichever is higher. Sellers, for the property ownership transfer, are required to report and pay transfer tax. The transfer tax is paid at a 1.5% rate of the value of the transaction.

Chapter authors and key jurisdiction contacts: Ricardo Güell | Deloitte Legal | Honduras

Download: Handbook for Real Estate Transactions