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Roatan Buyer’s Guide

Roatan Buyers Guide

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Tugliani & Tugliani

Since 1974

Professional Corporate Law Office

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Presentation …

  • Honduras- Legislation Overview
  • Real State in General
  • Real State involving Individuals
  • Real State involving Corporation
  • Closing Documents Checklist
  • Closings – Step by Step

Legislation Overview – Prohibitions
Constitutional Article #107:

State, Municipal or Private Properties situated along neighboring countries or coastlines of both seas in an extension of 40 km towards the interior of the country, including islands, cays, reefs, rocks and sand banks, may only be acquired, possessed or held at any title by Hondurans by birth, corporations formed entirely by Hondurans, and, government institutions, under penalty of nullity of the act or contract.

The acquisition of urban properties located in the limits indicated in the above paragraph shall be subject of a special legislation.
(Congress Decree 90-90)
Property registrars are forbidden to record documents that contravene these dispositions.

Legislation Overview – Permissibles
Congress Decree # 90-1990

  • 3,000 m/2 for Residential Purposes in a Foreigner’s Name (approx 0.72 acres)
  • Improvements (Residency) to be made in 3 years from purchase.
  • Larger areas for tourism projects with authorization from the Honduran Institute of Tourism

Firm’s Interpretation and Notes:

  1. 2 individuals may Not buy more land jointly;
  2. Improvements Building condition is not regulated (yet);
  3. For larger areas, even if for tourism projects, we recommend the use of a corporate structure.

Corporate Structures

From Constitutional Article # 107 we’ve learned that any of the following 3 elements are required to acquire land in excess of what allowed by congress Decree # 90-90 (3,000 m/2):

  1. To be a Honduran by Birth;
  2. A Corporation formed entirely by Honduras;
  3. Government Institution.

# ‘s 1&3 are Not options, therefore, we’ll analyze #2….

Honduran Civil Code

Article # 50:
The Corporations, Foundations and Associations recognized by the Law and which are domiciled in Honduras shall have Honduran Citizenship if they have the concept of a juridical person as per the dispositions stated in this code.

Article #56 :
Juridical Persons are :

  1. Associations of particular interest ; civil, mercantile or industrial to which the law their own personality, irrelevant to the one of its associates.

Therefore, any corporation formed in Honduras, regardless of the Nationality of its shareholders, HAS HONDURAN CITIZENSHIP.
ABC Holding Company, S.A

Is a corporation chartered and domiciled in Honduras, therefore, has Honduran Citizenship. Can it own land according to Constitutional Article # 107?

Answer =No !!!

Because it is not formed entirely by Hondurans.

To comply with the element “formed entirely by Hondurans” we must take another step…

“Juan Perez” shall be a Honduran National who will aid in the chartering process of the corporation since a minimum of 2 shareholders are required for the purpose.

His/Her stock certificate shall be transferred by simple, blank endorsement as allowed by commerce Code Articles # 126, 480, 482, 483, 484, 487, 489, 490, 491, & 492.

Real Estate in General.

1st. Feel comfortable with:
a) The property you intend to purchase;
b) Your real estate agent;
c) Your attorney.

2nd… Pay special attention to the terms and conditions you agree to when signing the agreement to purchase property.

In your Real Estate experiences you will find transactions:

  1. From Individuals to Individuals;
  2. From Individuals to Corporations;
  3. From Corporations to Individuals;
  4. From Corporations to Corporations;
  5. Purchase of a Corporation with its Assets.

Closing Documents Checklist

  • Agreement to Purchase Property stating all terms, conditions and contingencies.
  • Property Title of the land, vested in the name of the Seller; and, if applicable, property Title of parcel providing access.
  • Dully recorded Power (S) of Attorney in the event seller (s) or easement grantor shall not be present.
  • Survey of the land with Polygonal description and area, signed and stamped by a Honduran Civil Engineer or Architect.
  • Cadastral Certificate of the Property subject of the Contract (desirable but not mandatory)
  • Passports, Residency Cards or other forms or ID of all parties involved in the contract.
  • Suggested name for Corporation (when applicable). Also desired stock distribution and administration.
  • Final payment of the Land and Closing Costs should already be in escrow by the time of closing.

Title Searches

It is very important that the Closing Attorney you choose checks the current Property Title, as well as the antecedents going back at least 20 years.

*Ordinary Statute of limitation = 10 years (Involves Fair Title and Good Faith)
*Extraordinary Statute of limitation =20 years (No Title and No Good Faith)

  • Fauls and actions against the Government are NOT interrupted by Statute of limitation; ever.

Accessories to Closing

Title Insurance
– First American Title Insurance Company
– Stewart Title

  • Mortgages
  • Easements of any sort
    – Pedestrian or Vehicle Access
    – Water
    – Public Utilities

Closing Costs

  • Transfers Tax = 1.5% of Purchase value
  • Cadastral Certificate = 1% or 2% (Depending on the Municipality the property is Located. Applicable only to the Bay Islands.)
  • Registry Fees = US$1.00 per every Thousand.
  • Bar Association Stamps, Miscellaneous Expenses, Notary’s Fees, Corporations, etc..
  • Closing Costs, in average, are equivalent to approx. 5% of the transaction’s value.
  • All Real Estate Transactions involve an Attorney (Notary). Transactions documented in Private documents do NOT have any legal effect before third parties.
  • All closing documents MUST be recorded at the Registry House. Average time, currently, approx. 3-4 months.
  • Closing Costs are customarily payable by the Purchaser.

Pre & Post Closing Procedure

  1. Spotting the Right Property for you
  2. Negotiation.
  3. Signing of Agreement to Purchase Property
    – Deposit of 10% Earnest Money
    – Establishing Terms, Conditions and Contingencies
    – Setting a Closing Date Signing of Agreement to Purchase Property
  4. Closing- Transfer of Ownership (Signing of Public Instrument) and Disbursement of Payments, Commissions and Closing Costs.
  5. Payment by Attorney of Transfers Tax, Registry Fees, Bar Association Stamps, etc. (72 hours)
  6. Release of Authorized First Copy by the Notary
  7. Issuance of Cadastral Certificate by the Local Municipality
  8. Submission of the Deed to the Registry.
  9. Registration of Deed

Purchasing Corporations
Purchasing a Corporation along with its asset (s) involves a slightly different procedure than Real Estate Closings.

  • No Transfer Tax Payment Since there’s no transfer of ownership involved. Property remains in the name of the Corporation.
  • Instead, a change of Administrator’s) or Board of Directors takes place through a Public Instrument as well.
  • All Property Documents and Corporate Documents, including BLANK ENDORSED Stock Certificates as allowed by the Honduran Commerce Code.
  • Same Closing Documents Checklist For Real Estate is Applicable plus ALL Corporate Documents.

Sense of Security –Convention Between the USA & Honduras

Congress Decree No. 207-98, published in the Official Gazette November 28, 2000 (vol. 29,339)- Bilateral Treaty (USA-Honduras) relative to Reciprocal Sponsorship and Protection of Investments.

Main Topic.

  • No Expropriations; unless for Public Interest which is followed by the corresponding indemnification.

Tugliani & Tugliani

This presentation is a General Overview of Real Estate transactions in General.

All Transactions have their own level of customization to them, therefore, if you feel you need to ask a specific question, please contact us…

Italo, Gio & Alex Tugliani
Roatan: Tel/Fax (504) 445-3130 & 445-3028
Tegucigalpa: Tel/Fax (504) 231-0722