Trade and Commercial Law Assessment - Honduras - Economic ...

TRADE AND COMMERCIAL LAW ASSESSMENT DECEMBER 2004
HONDURAS
Lawyers’ and judges’ objections to the new system seem to stem, in part, from the fact that the
role of notaries would be largely eliminated in the system. Some justices have expressed concern
about reforming the traditional Spanish-colonial registry but were unable to provide evidence
that changes would violate the Constitution. One justice admitted that the LdP was necessary but
foresaw problems in integrating registries and a national cadastre. The same justice said that if
the LdP were declared unconstitutional, it would only be declared so in a partial sense.
Currently, perhaps because of the complexity of the issues involved, there is a lack of knowledge
regarding the intentions and forecasted benefits of the LdP as it pertains to the daily lives of
Hondurans.
The Supreme Court’s ruling on the law may be a source of conflict. Supreme Court decisions
regarding unconstitutionality must be published by Congress to take effect. 31 When asked about
their contingency plan if the Supreme Court were to declare the law unconstitutional, a member
of the presidential commission in charge of drafting the law stated that the court’s failure to
ratify the law could create a constitutional crisis if Congress refused to publish the mandate of
the Supreme Court. The Supreme Court disputed Congress’s ability to circumvent its decisions
stating that its decisions are valid immediately and that failure to publish does not affect the
validity of a ruling. A Supreme Court justice said that if Congress denied publication of the
decision, the Supreme Court could order its publication.
Honduras has a National Zoning Law Ley de Ordenamiento Territorial, to cover all zoning
issues. Under the Law on Municipalities, or the Ley de Municipios, municipal authorities
encourage participation of civil society before issuing zoning plans. Building of any kind
requires a construction permit, which must accord with the municipal zoning plan.
Under the old system, valid until January 2005, there was a tax on transfers of real property
based on the property’s value. The tax was 4 percent for urban unimproved property, 3 percent
for urban built property, 3 percent for rural unimproved property, and 2 percent for rural built
property. If the LdP is passed, the tax will be reduced to 1.5 percent of the value of purchase
price for all land categories. Registry fees, currently at $0.30 for each $50 of the property’s
value, will be eliminated entirely. There is also an annual municipal tax on land use, calculated at
3 percent of land value for properties valued at greater than $5,400.
Non-liquid rights on real property, such as a portfolio of mortgage credits, cannot be secured and
converted into tradable instruments. Securitization of real property rights and issuance of bonds
secured with mortgage portfolios are prevented by the absence of laws on securitization and an
underdeveloped stock market.
In summary, Honduras has a chance to dramatically improve its property system through the
correct and peaceful implementation of the LdP. Such changes would provide access to capital
and credit for millions of the country’s citizens. Besides providing access to capital and credit,
the LdP would improve the business climate and create an environment conducive to growth.
There is, however, a need to build political consensus to avoid a constitutional crisis and ensure
implementation of the LdP.
31 Const. Art. 216.
V-3