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

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TRADE AND COMMERCIAL LAW ASSESSMENT DECEMBER 2004 HONDURAS take years to prosecute and pass judgment on a case, and the number of cases pending resolution has increased considerably over the past few years.” 33 Expropriation of property is possible. According to the U.S. Department of State, “The Honduran government generally expropriates property for purposes of land reform (usually related to a land invasion by farmer groups) or for public use such as construction of an airport. Land disputes related to actions by the Honduran National Agrarian Institute (INA) are common for both Honduran and foreign landowners. According to the National Agrarian Reform Law, idle land fit for farming can be expropriated and awarded to landless poor. Generally, an INA expropriation case begins after squatters target and invade unprotected property. In most cases, claimants have found that pursuing the subsequent legal avenues is costly and time consuming, and rarely leads to positive results. Compensation for land expropriated under the Agrarian Reform Law, when awarded, is paid in 20-year government bonds. Based on newly available evidence of significant expropriation, Honduras’s property rights score is 1 point worse this year.” 34 Alternative dispute resolution mechanisms are available to settle property claims. In 2002 a law was passed providing for conciliation and arbitration. There are two arbitration centers in Honduras—one in Tegucigalpa, one in San Pedro Sula. The chamber of commerce manages the arbitration center of Tegucigalpa. It is expected that the Tegucigalpa center will be operating at full capacity within 5 years. The center has been in place for almost 3 years and has managed eight cases. There have been workshops to promote the arbitration centers, but only businesses have shown interest in their services. The institutions that implement the real property legal framework are disorganized. Passing and implementing the LdP, however, along with the creation of the Instituto de Propiedad, would mark a significant step in making registration of property transactions an easy, timely, and inexpensive process. Such improvements will tremendously enhance opportunities for wealth creation, investment attraction, and economic growth. D. SUPPORTING INSTITUTIONS Until the LdP is fully in place, real estate transactions need to be public, that is, they must be authenticated by a public notary. Notaries in Honduras are lawyers that have been approved by the Supreme Court after passing an oral examination. The Supreme Court devises the examination on a case-by-case basis. Within the Colegio there is division for notaries named Instituto de Notariado meant to study and analyze notary-related issues. Under the LdP, notarization and registration of property transactions could be completed electronically. In addition, the Instituto de Propiedad will issue electronically formatted documents for commonly requested forms, to be accessed online by the registering party. 33 Id. 34 Heritage Foundation, Economic Freedom Index for 2004. http://www.heritage.org/research/features/index/countries.html V-6
TRADE AND COMMERCIAL LAW ASSESSMENT DECEMBER 2004 HONDURAS A Real Estate Brokers’ Chamber of Commerce has existed for 10 years. The chamber has 78 corporate members, which played an important role in lobbying on behalf of the LdP. In general, the chamber’s members are enthusiastic about the benefits the new law will bring and look forward to the opportunity of “professionalizing” their profession. Interviewees expressed a belief that many of the frauds committed regarding real property are performed under auspices of purported brokers. To increase professional standards, the real estate chamber of commerce has developed a special 5-month diploma course for would-be brokers. In addition, the chamber is working on a bill to regulate, enhance professional standards, and set admissibility requirements for the profession of real estate brokers. Several companies provide escrow and title guaranty services devoted to protecting the potential buyer and indemnifying losses. E. SOCIAL DYNAMICS Regularization of land tenure is a national priority, and the national government has built significant popular support for the LdP. Unfortunately, cases before the Supreme Court threaten to delay the law. The Supreme Court will decide on two or three challenges to the constitutionality of the law in the near future. The Attorney General issued a nonbinding legal opinion in support of the law and civil groups have threatened to demonstrate at courthouses if the law is repealed. The World Bank PATH project will assist in the automation and integration of registries planned under the LdP. However, the fact that the LdP could be declared unconstitutional places many of the existing reforms at risk. Under the LdP, authentication of transactions will still be necessary. Because the law allows for electronic authentication, however, persons besides notaries will be authorized to validate and process property registrations. The Supreme Court is working on a statute under which stronger admissibility requirements would be imposed on notaries. The bill would restrict non-notary authentication of property transactions, however, and in fact would undermine the efficiencies the LdP was intended to create. The Law on Judicial Career, Ley de Carrera Judicial, offers the legal framework for accountability and monitoring of legal professions, but judges are allegedly still appointed and removed through outdated procedures that no longer comply with the law. The business community has voiced demands for quicker judicial procedures The Supreme Court is now working on a draft civil procedure code; however, this does not provide for oral procedures, but rather for a combination of written and oral procedures. The reluctance to embrace a full-scale oral-based system is attributable to the perception of the change as a costly reform for which there are no funds. There is a housing deficit in Honduras. The size of the deficit is formidable, but there have been no comprehensive studies to determine the extent and distribution of the crisis. Properties can be bought for as little as $20,000 at an interest rate of 24 percent in local currency and 14 percent in US dollars, according to interviews conducted for this assessment. There are currently no government-led plans to supply housing to those in need. The Fundación Covelo, a philanthropic entity set up by the industry association, is working with a nongovernmental organization V-7
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