Real Estate Transaction Responsibilities

Payment Process

• Payment for both the seller and government entities should be made with manager's checks.

Seller Responsibilities

• Seller provides original copies of the following documents:
  • Transfer of Certificate of Title (land) - Owner Copy
  • Condominium Certificate of Title (condominium)
  • Tax Declaration (Declaration of Real Property)
  • Tax Clearance (both land and improvement)
  • Tax Clearance (condominium unit and parking if applicable)
• Seller is responsible for paying the broker's fees.

Broker Responsibilities

• Selling broker handles payment of capital gains tax, documentary stamp tax, and filing documents with the Bureau of Internal Revenue (BIR) until the Certificate Authorizing Registration (CAR) is released.

CAR

• The CAR authorizes the transfer of title to the new buyer.
• It serves as clearance that all applicable taxes have been paid.

Buyer Responsibilities

• Buyer's broker handles payment and processing of the following:
  • Transfer tax to City Treasurer's Office
  • Business Tax to City Treasurer's Office
  • Registration Fees to Register of Deeds
  • Entry Fees - Register of Deeds
  • Notarial Fees - Register of Deeds
• Buyer's broker submits all required documents to the Register of Deeds.

Subdivision Plans

• A memorandum for notice can be added to the seller's title upon request, serving as notice to third parties.
• Once approved, a new title is issued for the sold portion, and the seller's title remains effective for the unsold part.
• The seller must still deliver the land per the Civil Code, even if a new certificate has not been issued.
• The buyer cannot be forced to pay until the subdivision plan is approved.

Discrepancies

• If there is a discrepancy between the subdivision plan and the original plan that may affect adjoining landowners, the Director of Lands must report the issue to the Regional Trial Court (RTC).
• The court resolves the dispute and addresses all related questions regarding the subdivision plan.

Ownership Limitations

• Previously, a new owner could deal with an undivided portion of land (e.g., selling or mortgaging) even before a subdivision plan was approved.
• Now, after a sale is annotated on the former owner’s title, no further transactions regarding the portion can be registered or annotated until the subdivision plan and technical descriptions are approved and a new certificate of title is issued.

Encumbrances

• Any existing encumbrances or claims on the property at the time of transfer must be noted on the new certificate of title unless they have been discharged.
• Cancelled encumbrances do not need to be included in the new title.
• Restrictive covenants continue to bind future purchasers.

Contract to Sell

• The vendee may mortgage the property or impose other charges on it.
• The vendor (seller) retains the right to redeem the property within the stipulated time.
• Upon redemption, the vendor is entitled to receive the property free of any charge or mortgage imposed by the vendee after the sale.
• The vendee must respect any lease agreements entered into by the vendor.

"Pacto de Retro" Sale

• The "pacto de retro" allows the seller to sell their property but retains the right to redeem or repurchase the property within a specified period and for a specific price.
• The legal title transfers from the seller to the buyer, but the seller holds an "equitable title."
• The seller's right to redeem is noted in the memorandum of encumbrances on the certificate of title.

Redemption Period (General Rule)

• In the absence of a specific agreement, the period for redemption is automatically set at four years from the date of the contract.
• If there is an explicit agreement, the period cannot exceed ten years.

Redemption Period (Limitations)

• Any action to recover the title or possession of the property after the right to repurchase has lapsed must be initiated within 22 years.
• This period is significant enough not only to bar the action but also to grant the possessor ownership through prescription.

When Redemption Period Starts

• The period for the vendor’s right to repurchase begins from the date of execution of the sale, not from its registration.

Other Considerations

• The sale of condominium units must come with a certificate of management from the condominium corporation.
• Lands previously covered by the Comprehensive Agrarian Reform Act cannot be sold for a period of 10 years after the issuance of the Certificate of Land Ownership Award (CLOA).

Documenting the Transaction

• The Deed of Absolute Sale must be executed as a public instrument, which means it must be notarized.

Taxes and Fees

• A capital gains tax of 6% is levied on the sale of real estate classified as a capital asset.
• A 12% value-added tax (VAT) applies to the sale of ordinary assets.

Additional Expenses

• Documentary stamp tax: 1.5% of the sale price.
• Local transfer tax: 0.5% of the sale price.
• Registration fee: 0.25% of the sale price for the issuance of a new title.

Legal Considerations

• Real estate titles include annotations of all registered encumbrances.
• Some restrictions may be found in the tax declaration.
• Owners may also be bound by contractual restrictions.
• Other restrictions, such as building height and use, are usually reflected in the title’s technical description.

Special Requirements for Land Transfers

• Philippine law requires the consent of both spouses when dealing with conjugal property.
• If one spouse fails to consent, the sale or encumbrance is considered void.