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REAL ESTATE LAW in the PHILIPPINES

 

 

Right To Own Philippine Real Property

Non-Filipinos don't have the right to acquire real estate properties in the Philippines. The easiest way for a foreigner to acquire real estate properties is to have a Filipino spouse purchase the property. Having a Filipino partner is also another alternative when acquiring a property. Either both share the property with equal rights, or the partner owns 51% or more and the remainder is owned by the foreigner. Special visas are available for foreigners who want complete and total control of a property. (More information on special visas).

Only Filipino citizens and corporations (at least 60% Philippine-owned) are entitled to acquire land in the Philippines. As an exception to this rule, a foreign acquisition of a Philippine real estate is allowed in the following cases:

* Acquisition before the 1935 constitution.

* Acquisition thru hereditary succession if the foreign acquire is a legal or natural heir.
This simply means that when your 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 does not any Filipino citizenship.
* 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.

* 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 possible as long as the foreigner does not own the land on which the house is build. The land can be leased by the foreigner on a long term contract, and the house can be legally his. (More information on foreign leasing).


New Dual Citizenship Laws Affecting Property Ownership

Dual citizenship means having two citizenships and passports from two different countries. Dual citizenship is now available for the following:

* Former Filipino citizens born in the Philippines, but have immigrated to another country and obtained citizenship of that country.

* A foreign spouse married to a Filipino citizen.

Dual citizenship allows the citizenship holder full rights of possession of Philippine real property. This is a new law and it is still unclear as to the procedures involved to implement it.


 Foreigner Married to a Filipino Citizen

If holding title as an individual, a typical situation would be that a foreigner married to a Filipino citizen would hold title in the Filipino spouse's name. The foreign spouse's name cannot be on the Title but can be on the contract to buy the property. In the event of death of the Filipino spouse, the foreign spouse is allowed a reasonable amount of time to dispose of the property and collect the proceeds or the property will pass to any Filipino heirs and or relatives.


 Foreign Ownership as a Philippine Corporation

Foreign nationals or corporations may completely own a condominium or townhouse. To take ownership of a private land, residential house and lot, and commercial building and lot, foreign nationals or corporations forms a Philippine corporation. The corporation is to be 40% foreign-owned (maximum) and 60% Filipino-owned (minimum), and with at least five [5] incorporators. Upon incorporation, a main bank account should be tied to it. A foreign national may be the sole person in the bank account, allowing him/her total control over the funds derived from the corporation and the income or sale of the asset or property.


Former Filipino Citizens

Former natural-born Filipino citizens, a.k.a. "Balikbayan", are entitled to own a maximum of 1,000 square meters of residential land and one hectare of agricultural or farm land. For business purposes, a maximum of 5,000 square meters of urban land or three hectares of rural land is allowed. In the case of married couples, one or both of them may avail of the privilege provided that if both avail, the total area acquired shall not exceed the maximum.

In the case of a transferee already owning an urban or rural land for business or other purposes, he/she shall still be entitled to be a transferee provided that when added to those already owned by him/her shall not exceed the maximum.


Foreign Leasing of Philippine Real Estate Property

A foreign national and or corporation may enter into a lease agreement with Filipino landowners for an initial period of up to 50 years, and renewable for another 25 years.


Taking Title to Philippine Real Estate

a.. The "Deed of Sale" is the document showing legal transfer of real estate property ownership. The deed of sale is then taken to the Registry of Deeds to be officially recorded. "Tax Declarations" are sometimes used but are not very enforceable in court because there may be many others with a tax declaration claiming ownership to the same property. A property may be Titled by taking the Tax Declaration to the Registry of Deeds to process to be officially titled. Always purchase property with a proper deed of sale if possible, and if there is not one, a tax declaration is your last choice. Owners must be active in enforcing their property rights. Possession is 90 percent ownership. If the property owner can only show a tax declaration as an evidence of ownership, that means the land is untitled and not registered under the Torrens system, the buyer will not get as much protection, as his title will not be absolute and can yield to one who has a better right, like the person actually possessing and occupying or tilling the land, and who subsequently applies for the titling of the land in his name. It is possible for two or more tax declarations issued to different persons with exactly the same technical description, or referring to the same property.


Philippine Law Real Estate Acquisition and Disposition Definitions

a.. Acquisition is the act of procuring or getting a hold of real estate property. Disposition is the manner of alienation, transfer of possession and ownership thereof as prescribed by the Philippine law. The acquisition and disposition of real estate is embodied in written agreements or contracts voluntarily entered into and subscribed by the selling and buying parties thereof, before a public officer designated as the Notary Public of the City or Province where the subject property is located. Thereafter, the instrument embodying the particular real estate transaction is required by law to be recorded in the Registry of Deeds in the City or Province where the real estate property
is involved and located. The Philippines uses the "Torrens" system of real estate ownership. See below for more information.


Torrens System of Real Estate Ownership


a.. An adapted form of the "Torrens" system of land registration is used in the
Philippines. The system was adapted to assure a buyer that if he buys a land covered by an Original Certificate of Title (OCT) or the more familiar Transfer Certificate of Title (TCT) issued by the Registry of Deeds, the same will be absolute, indefeasible and imprescriptibly. The registered owner will never lose his ownership to squatters no matter how long such land was illegally occupied.


Condominium Residential Commercial Development Ownership Law

a.. Presidential Decree No. 957, which regulates the sale of subdivision and
condominium developments, and providing penalties for violations thereof. The National Housing Authority has exclusive jurisdiction to regulate real estate trade and business, a function, which is presently exercised by the Housing and Land Use Regulatory Board (HLURB). Certain conditions are required before a license to sell condominium development units and or subdivision development lots and homes is issued to a Filipino or foreign-owned individual or corporation. The requirements include a certificate of registration, a performance bond, and an approval of the building plans and specifications. Violation of these rules could mean fines, cancellation of license and or imprisonment.


Typical Transaction Costs - Purchases from Individuals

a.. Capital gains tax - 6% of actual sale price. This is paid by the seller but in
some cases it might be expected that the buyer pays. This percentage could differ if the property assessed is being used by a business or is a title- owned by a corporation, in this case the percentage is 7.5%

a.. Document stamp tax - 1.5% of the actual sale price. This is paid by the seller
but in some cases it might be expected that the buyer pays.

a.. Transfer tax - 0.5% of the actual sale price.

a.. Registration fee - 0.25% of the actual sale price.


Typical Transaction Costs - Purchases from Developers

a.. Capital gains tax - 10% of actual sale price. This value might be expressed as part of the sale price.

a.. Document stamp tax - 1.5% of the actual sale price.

a.. Transfer tax - 0.5% of the actual sale price.

a.. Registration fee - 0.25% of the actual sale price.


DISCLAIMER: This document is for information purposes only. No representation is made or warranty given as to its accuracy. The USER assumes all risks of use. PHILIPPINE REAL PROPERTIES FOR SALE assumes no responsibility for such use.