For many prospective buyers, the first question is whether a foreigner can actually own property in Roatan. The answer is yes. And Honduran residency is not required merely to purchase and own the property.
A foreign buyer may hold title personally or, when appropriate, through Honduran companies. The method normally depends upon the size of the property and whether it is already owned by a company.
Real estate transactions are handled by Honduran lawyers specially qualified as “notarios” (translated as “notaries,” but they are not the same as “notary publics” in pother jurisdictions. The notary researches the title, advises the buyer concerning the appropriate form of ownership, prepares the documents and completes the transfer. What follows is a practical description of the customary process, not legal advice. The notary handling a particular purchase will advise the buyer concerning that property and transaction.
A foreign buyer may own property in Roatan directly in his or her own name when the land does not exceed 3,000 square metres—0.30 hectares, or approximately 0.741 acre.
That is sufficient for many homes, condominiums and residential lots. In a direct purchase, the notary prepares an escritura pública transferring title from the seller to the purchaser. Once the transaction has been completed and registered, title stands in the buyer's name.
For a property exceeding this approximately ¾-acre, Honduran lawyers commonly establish a two-company structure.
The foreign buyer forms or buys a Honduran holding company and owns its shares. The holding company, together with a Honduran by birth, hold the shares of a second Honduran company, often referred to as the investment company. The investment company takes title to the real estate.
The property is therefore owned by the investment company, while the foreign buyer owns and controls the holding company. The formation documents may appoint the buyer as sole administrator, giving the buyer authority to conduct transactions on behalf of the companies.
The notary prepares the companies, share documents and governing instruments. Although the use of two companies may initially sound elaborate, it is a familiar structure for Honduran notaries handling larger properties in Roatan.
The companies require some attention after the purchase. Tax filings and governmental requirements must be kept current even if the corporation has no income. The notary or an accountant can explain the modest ongoing work and costs involved.
When an investment company already owns the property, the transaction may sometimes be completed by purchasing the shares of that company and changing its administration rather than transferring the real estate itself.
That can simplify the transfer and reduce some transaction costs. It also means, however, that the buyer is acquiring the company together with its history. The notary must therefore examine both the title and the company’s records, obligations and tax status.
Alternatively, the buyer’s newly-formed investment company may purchase the property itself. In that event, the notary prepares an escritura transferring the real estate from the existing owner to the buyer’s company.
The preferable method depends upon the existing ownership, the condition of the seller’s company, the costs of the alternatives and the buyer’s circumstances. The notary will recommend which structure is suitable.
Once a buyer selects a property, the broker prepares an offer setting out the proposed price and terms. The offer ordinarily identifies the property, the amount of the deposit, the closing date, what is included in the sale and any conditions that must be satisfied before closing.
Those conditions may include satisfactory review of title, confirmation of the survey and boundaries, inspection of the improvements and, where relevant, review of community or condominium documents and confirmation that dues in any homeowners’ associatiuon have been paid..
A deposit is customary after an offer has been accepted. Ten percent is common, although the amount and timing can be negotiated. The offer should identify who will hold the deposit, when it becomes refundable or nonrefundable and what happens if a condition of the purchase is not satisfied.
Once a buyer selects a property, the broker prepares an offer setting out the proposed price and terms. Its purpose is to state clearly what the parties have agreed upon and what must occur before the purchase is completed. The offer ordinarily identifies the property, the amount of the deposit, the closing date, what is included in the sale and any conditions that must be satisfied before closing.
The buyer selects the Honduran notary who will handle the legal work. If the buyer does not already know one, the broker can provide the names of lawyers experienced in Roatan real estate transactions. The choice remains with the buyer.
The notary’s first task is to determine what the seller owns and whether it can be transferred as proposed. This ordinarily includes reviewing the registered title, the history of ownership, recorded mortgages or other claims, property taxes, the survey and the seller’s authority to complete the transaction.
If the property is owned by a corporation, the review also extends to that company. The notary examines its formation documents, shareholders, administrators, corporate records, tax status and authority to own and transfer the property.
The buyer does not need to supervise this research or master the Honduran registration system. The practical point is to provide the notary sufficient time for the investigation to be completed before the purchase becomes unconditional or the balance of the price is released.
The physical condition of the house is a separate matter. The buyer may also retain an inspector, contractor or engineer to examine the buildings, equipment and other improvements. Buyers may also inquire as to the costs of utilities, maintenance, property taxes and any hmeowners’ association dues.
When the title investigation has been completed and the conditions of the offer have been satisfied, the notary prepares the escritura pública. This is the formal instrument that describes the property, identifies the parties and records the terms under which title is transferred.
At closing, the required documents are signed, the balance of the purchase price is paid and the seller transfers the property. The notary then attends to registration of the escritura and the other filings required to place the transaction in the public records.
Registration takes place after the parties have signed and the funds have been delivered, so the final registered documentation is not necessarily handed to the buyer on the day of closing. The notary follows the filing through completion and provides the buyer with the resulting documentation
When the transaction instead involves purchasing the shares of an existing investment company, the closing documents transfer the shares and establish the buyer’s control and administration of the company. The real property remains titled in the company’s name.
A buyer does need not necessarily return to Roatan for the closing. If the buyer cannot attend, the notary may prepare a limited power of attorney authorizing a designated person to sign and complete specified parts of the transaction. Company formation documents may also authorize a representative to complete the acquisition on behalf of the new company.
A power of attorney signed outside Honduras will ordinarily need to be notarized and apostilled or completed through a Honduran consulate, as the notary directs. Because the language and formalities matter, the Honduran notary should prepare or approve the document before it is signed abroad.
Many buyers nevertheless prefer to attend in person, particularly when making a first purchase. Either method is familiar and workable.
The buyer normally pays the expenses associated with acquiring and registering the property, including the notary’s fees, transfer and registration charges, certificates and related filing costs.
For an escritura transferring the real estate itself, Roatan firms commonly suggest budgeting approximately 5 to 7 percent of the purchase price, although the actual amount depends upon the value and complexity of the transaction.
A purchase accomplished through the transfer of an existing company’s shares may cost less because title to the real estate remains in the company. That saving must be considered together with the additional work required to investigate the company and confirm that its records and obligations are in order.
Formation of new companies, financing, unusual title work, surveys, inspections and powers of attorney can add to the ordinary costs. Before the buyer becomes committed, the notary should provide an estimate based upon the particular transaction.
Annual property taxes in Roatan are generally very low when compared with those imposed on similarly valued property in the United States or Canada. They are administered locally and are based upon the municipality’s valuation.
The notary confirms that taxes on the property have been paid through the closing date. After the purchase, the owner—or the investment company, if it holds title—becomes responsible for keeping the account current.
Formation of new companies, financing, unusual title work, surveys, inspections and powers of attorney can add to the ordinary costs. Before the buyer becomes committed, the notary should provide an estimate based upon the particular transaction.
Buying property in another country naturally involves unfamiliar terminology and documents, but the buyer’s role is straightforward.
The broker helps the buyer identify the property, prepare the offer and coordinate the transaction. The notary investigates the title, establishes the proper ownership structure, prepares the escritura or corporate transfer documents and completes the required filings. Inspectors and other specialists can be retained when the property warrants them.
The buyer does not need to become an expert in Honduran property or corporate law. The important decisions are choosing the property carefully, selecting an experienced notary and allowing sufficient time for the title, company and physical condition of the property to be reviewed before closing.
Foreign ownership in Roatan is neither novel nor unusual. The legal and professional framework for it is well established, and experienced Roatan brokers and notaries handle these transactions regularly.
