Legal

Tips Before Buying Real Estate in the Philippines

Here are tips a buyer must remember before buying any property in the Philippines, specially if you are buying a single property from an individual:

1. Make sure the "Transfer Certificate of Title" is authentic. The easiest way to check if the title to the property you are buying is authentic is by getting "Certified True Copy" of the title from the Register of Deeds. This office is usually located at the city or municipal hall where the property is located. Ask the seller of the property for a photocopy of the title -you will need the title number and the name of the owner to get a certified true copy of the title from the Register of Deeds.

2. Verify that title is clean - meaning the property is not mortgaged (no liens & encumbrances on the property). You can see that at the back of the title with the heading "Encumbrances". This page must be empty if you are told that the title is "clean". But sometimes the space for the technical description of the property on the front page of the title is not enough and the description of the property is continued on the "Encumbrances" page, this is of course all right.

3. Make sure that the land described on the title is really the land that you are buying. You can validate this at the Register of Deeds or by hiring a private land surveyor or a geodetic engineer. Land titles don't have any street name and number to pin point a property, it is a must to confirm that the actual property you are buying matches the technical description on the Transfer Certificate of Title.

4. Make sure that the sellers are the real owners. If you are buying from an individual property owner, ask for identification papers like passport or driver's license, it is also a good idea to talk to the neighbors or the Barangay Captain to confirm the identity of the sellers (you might as well ask some history of the property).

5. Confirm that the yearly real estate taxes are paid. Ask for certified true copies of the Tax Declaration and original Tax Receipts to confirm that real estate tax payments are up to date.

If the above check list is in order, it is generally safe to proceed with the purchase of real estate in the Philippines.

Home Buying Guide for Balikbayans

Former natural-born Filipinos who are now naturalized citizens of another country can buy and register, under their own name, land in the Philippines but limited in land area (see below). However, those who avail of the Dual Citizenship Law can buy as much land as any other Filipino citizen.

Under Republic Act 9225 (Dual Citizenship Law of 2003), former Filipinos who became naturalized citizens of foreign countries are deemed not to have lost their Philippine citizenship, thus enabling them to enjoy all the rights and privileges of a Filipino.

Steps to Gain Dual Citizenship:

·         If you are in the Philippines, file a "Petition for Dual Citizenship and Issuance of Identification Certificate (IC) pursuant to RA 9225” at the Bureau of Immigration (BI) and for the cancellation of your alien certificate of registration.

·         Those who are not BI registered and overseas should file the petition at the nearest embassy or consulate.

Requirements: 

·         Birth certificate authenticated by the National Statistics Office (birth certificate from the NSO can be requested online and mailed to you)

·         Accomplish and submit a “Petition for Citizenship and Issuance of Identification Certificate (IC) pursuant to RA 9225” to a Philippine embassy, consulate or the Bureau of Immigration.

·         Pay a $50.00 processing fee, schedule and take an "Oath of Allegiance" before a consular officer.

·         The Bureau of Immigration in Manila receives the petition from the embassy or consular office. The BI issues and sends an Identification Certificate of citizenship to the embassy or consular office.

If a former Filipino who is now a naturalized citizen of a foreign country does not want to avail of the Dual Citizen Law, he or she can still acquire land based on BP (Batas Pambansa) 185 & RA (Republic Act) 8179 but limited to the following:

For Residential Use (BP 185 - enacted in March 1982):

·         Up to 1,000 square meters of residential land.

·         Up to one (1) hectare of agricultural of farm land.

For Business / Commercial Use (RA 8179 - amended the Foreign Investment act of 1991):

·         Up to 5,000 square meters of urban land.

·         Up to three (3) hectares of rural land.

MODES OF ACQUIRING TITLE IN THE PHILIPPINES (TCT/CCT):
TCT - Transfer Certificate of Title
CCT - Condominium Certificate of Title

Private Grant –voluntary transfer or conveyance of private property by a private owner, such as sale or donation. 

Public Grant – acquisition of alienable lands of the public domain by homestead patent, free patent, sales patent, or other government awards.

Involuntary Grant – acquisition of private party against the consent of the former owners, such as foreclosure sale, execution sale, or tax sale

Inheritance – acquisition of private property through hereditary succession

Reclamation  - filling of submerged land, subject to existing laws and government regulations.

Accretion – acquisition of more lands adjoining the banks of rivers due to the gradual deposit of soil as a result of the river current

Prescription – acquisition of title by actual, open, continuous, and uninterrupted possession in the concept of owner for the period required by law

RIGHT TO OWN

1. General Rule – Only Filipino citizens and corporations at least 60% capital of which is owned by Filipinos are entitled to acquire and own land in the Philippines. 

2. Exceptions to the General Rule – Alien acquisition of real estate in the Philippines is allowed in the 
    following cases:
    a) Acquisition before the 1935 Constitution.
    b) Acquisition thru hereditary succession if the acquiree is a legal heir.
    c) Purchase of not more than 40% interest in a condominium project
    d) Purchase by former natural born Filipino citizens subject to limitations prescribed by B.P. 185 and R.A. 8179

3. A Filipina who marries an alien retains here Philippine citizenship (unless the law of her husband’s country makes her assume the citizenship of her husband because of such marriage) and can therefore acquire real estate in the Philippines. 

ACQUISITION BY FORMER NATURAL BORN FILIPINO CITIZENS

1. Mode of acquisition is not limited to voluntary deeds (such as sale or donation) but includes involuntary deeds (such as foreclosure, execution or tax delinquency sale)

2. Maximum area that may be acquired:
    a) For residential purpose – 1,000 square meters of urban or one hectare of rural land.
    b) For business purpose – 5,000 square meters of urban land or 3 hectares of rural land.

Business purpose refers to the use of land primarily, directly, and actually in the conduct of business or commercial activities in the broad areas of agriculture, industry, and services, including the lease of the land but excluding the buying or selling thereof.

In case of married couple where both spouses are former natural born Filipino citizens, both of them may avail of the right provided that the total acquisition shall not exceed the maximum area allowed.

A transferee who acquired urban or rural land for residential purpose while still a Filipino citizen may acquire additional urban or rural land for residential purpose which, when added to that already owned by him, shall not exceed the maximum area allowed by law.

Rule in case of double sale: The priority of rights in case of double sale of titled property shall be governed by the following rules:

1. The buyer who acquired in good faith and was the first to register the sale shall have a better right.

2.If none of the buyers registered the sale, the buyer who acquired to good faith and was the first one in possession shall have a better right.

3. If none of the buyers registered the sale or took possession, then the buyer who acquired in good faith and has the oldest title shall have a better right

CONTRACT OF SALE AND CONTRACT TO SELL

1. Distinction: In a contract of sale, there is already a transfer or ownership. In a contract to sell, there is no transfer of ownership yet but merely a mutual promise to buy and sell

Criterion: The test to determine whether a contract is a contract of sale or a contract to sell is not the manner of payment – whether cash or installment, but whether or not there is conveyance of ownership in the dispositive or grant clause of the deed. There is transfer of ownership when the dispositive clause states that the vendor “hereby sells, transfers and conveys unto the vendee in a manner absolute and irrevocable x x x”

Rights of buyer who has paid two years or more of installments:

1.  To pay, without additional interest, any installment due within the grace period which is equivalent to one month for every year of installment payment, provided that such right can only be availed of once every five years.

2. To receive a thirty-day notarial notice of cancellation before his contract can be cancelled for delinquency

Rights of buyer who has paid less than 2 years of installment

1. The grace period to pay without additional interest due is fixed as 60 days

2.  For cancellation of contract due to delinquency, the buyer is only entitled to receive a 30-day notarial notice of cancellation without right to receive the cash surrender value pf his payments

Right to refund under P.D. 957  & Maceda Law  
Presidential Decree 957:  Right to refund applies when the developer fails to complete the development within the required period. Refund is 100% of total payments
Maceda Law:  Right to refund applies as a requisite for cancellation of contract due to delinquency when the buyer has paid at least 2 years. Refund is 50% of total payments; additional 5% per year after the 5th year.

MACEDA LAW (R.A. 6552) When the buyer is delinquent in his payment
Objective: To protect installment buyers of real estate against onerous and oppressive conditions. 
Applicability – Applies to sale or financing of residential estate on installment payment covered by contract to sell and not sale with mortgage, but excluding industrial lots, commercial building, and sales to tenants under R.A. 3844. 

Rights of buyer who has paid two years or more of installments:

 a) To pay, without additional interest, any installment due within the grace period which is equivalent to one month for every year of installment, provided that such right can only be availed of once every five years.

b) To receive a thirty-day notarial notice of cancellation before his contract can be cancelled for delinquency.

c) To receive the cash surrender value of his total payments before his contract can be cancelled due to delinquency. The refund is equivalent to fifty percent of total payments and, after the fifth year, an additional five percent per year of installment payment, but not to exceed ninety percent of total payments.

d) To transfer or assign his right to the contract

e) To register or annotate his contract on the title

f) To pay, without additional interest, the full principal balance of the price before the term of the contract. 

Rights of buyer who has paid less than two years of installment – The buyer has practically the same rights as a buyer who has paid two years or more of installments, except for the following differences:

a) The grace period to pay without additional interest on any installment due is fixed at sixty days

b) For cancellation of contract due to delinquency, the buyer is only entitled to receive a thirty-day notarial notice of cancellation but without right to receive the cash surrender value of his payments.

FOREIGN OWNERSHIP OF CONDOMINIUM UNIT

In the condominium concept of ownership, absolute ownership by a foreigner is allowed not to exceed forty percent interest in the project. The unit owner is the absolute owner of the space within the interior surface of his unit, but is only a co-owner of the exterior façade of the unit. 

RIGHTS OF A CONDOMINIUM UNIT OWNER

Absolute ownership of his unit 
Co-ownership of land and common areas 
Exclusive easement of the space of his unit 
Non-exclusive easement to common areas for ingress or egress 
Right to sell, lease, or mortgage his unit 
Right to repair, paint, decorate the interior surface of his unit 
Right to participate and vote in condominium corporation meetings 

OBLIGATIONS OF A CONDOMINIUM UNIT OWNER

Pay the realty tax on his unit

Pay the insurance on his unit 

Pay the shared monthly dues for maintenance of common areas/amenities/garbage disposal 

Comply with use restrictions

Foreigner's Guide in buying real estate properties in the Philippines:

By law, foreigners don't have the right to acquire land in the Philippines. Only Filipino citizens can own land (there have been many proposals to amend this law but of this writing, the law remains unchanged.) The simplest way for a foreigner to acquire real estate properties is to have a Filipino spouse purchase a property in his/her name.

Exceptions:
Corporations or partnerships that is at least 60% Filipino owned are entitled to acquire land in the Philippines. An exception to this rule, is foreign acquisition of a Philippine real estate in the following cases:
* Acquisition before the 1935 constitution.

* Acquisition thru hereditary succession if the foreign acquire is a legal or natural heir. This means that when you are married to a Filipino citizen and your husband/wife dies, you as the natural heir will become the legal owner of his/her property. The same is true for the children. Every natural child (legitimate or illegitimate) can inherit the property of his/her Filipino father/mother even if he/she is not a Filipino citizen.

* Purchase of not more than 40% interest in a condominium project.

* Purchase by a former natural-born Filipino citizen subject to the limitations prescribed by law. (natural born Filipinos who acquired foreign citizenship is entitled to own up to 1,000 square meter of residential land, and 1 hectare of agricultural or farm land)

 
* Filipinos who are married to aliens who retain their Filipino citizenship, unless by their act or omission they have renounced their Filipino citizenship.

Owning of houses or buildings is legal as long as the foreigner does not own the land on which the house is build. 
Setting up a corporation with 40% of the stocks in the foreigner's name and 60% to Filipinos is a good alternative. There must be a minimum of 5 stockholders, and foreigner can have the Filipino stockholders sign blank transfer of the stocks for security.  

Rent
The land can be leased by the foreigner or a foreign corporation on a long term contract for an initial 50 year period and renewable every 25 years. A foreigner can rent a lot and at the same time legally own the house on the rented land.

Condominiums
The Condominium Act of the Philippines, R.A. 4726, expressly allows foreigners to acquire condominium units and shares in condominium corporations up to 40 % of the total and outstanding capital stock of a Filipino owned or controlled condominium corporation.

Those who claim that foreigners can own a house & lot in the Philippines have a condominium title to their property. There are a very few single-detached homes or Townhouses in the Philippines with condominium titles. Most condominiums are mid to high rise buildings.