Conveyance in Fee PDF

CONVEYANCE IN FEE  Procedure for Transferring Registered Land: 1. The landowner must execute a deed of conveyance. 2. The deed, along with the grantor's duplicate certificate, is presented to the Registry of Deeds. 3. The Registrar issues a new certificate of title in the name of...

CONVEYANCE IN FEE  Procedure for Transferring Registered Land: 1. The landowner must execute a deed of conveyance. 2. The deed, along with the grantor's duplicate certificate, is presented to the Registry of Deeds. 3. The Registrar issues a new certificate of title in the name of the new owner (grantee). 4. The original and duplicate certificates are updated with the transfer details. 5. The old certificate is cancelled, and the deed is filed with proper endorsements.  Description of Land in a Conveyance: 1. Proper Description Required: Land must be described with lot number, block number, location, boundaries, and area. 2. Correction of Mistakes: If an error in the deed includes land not intended for sale, the vendor can correct the instrument. 3. Boundaries Over Area: Boundaries take precedence over area in identifying land, but unclear boundaries may invalidate the deed. 4. Unregistrable Deed: A deed is defective if the description in the deed does not match the title or lacks crucial information.  Rule on Boundaries vs. Area in Land Description: 1. Boundaries Must Match: If the boundaries in the registration plan don't align with the actual title, the rule prioritizing boundaries over area doesn't apply. 2. Boundaries Take Precedence: If boundaries are clear and correct, errors in the land's area can be ignored. 3. When Boundaries Are Unclear: If boundaries are uncertain, the stated area should be followed. 4. Conflict Between Boundaries and Area: When boundaries are correct, boundaries will always prevail over the area.  Lump Sum Sale of Real Estate: 1. Fixed Price for Boundaries: If the sale is for a lump sum and not based on area (e.g., per square meter), the price cannot change even if the actual area is different, as long as the land within the boundaries is delivered. 2. Vendor’s Liability for Shortfall: If the vendor fails to deliver the full land within the boundaries, the price may be reduced proportionally to the missing area. 3. Vendee's Right to Rescind: The buyer (vendee) may cancel the contract if they are dissatisfied with the discrepancy in area.  Conveyance of Part of Land Covered by Title: 1. Subdivision Plan Approval: No transfer certificate is issued for a portion of land until the subdivision plan and technical descriptions are approved by the Director of Lands. 2. Memorandum for Notice: Upon request, a memorandum of the sale can be added to the seller's title, serving as notice to third parties until the plan is approved. 3. Issuance of New Certificates: Once approved, a new title is issued for the sold portion, and the seller’s title may remain effective for the unsold part. 4. Seller's Obligation: The rule does not invalidate the sale if no new certificate has been issued yet; the seller must still deliver the land per the Civil Code. 5. Vendee's Payment: The buyer cannot be forced to pay until the subdivision plan is approved, as the exact area and ownership of the lot are uncertain.  Discrepancy Between Subdivision Plan and Plan of Origin: 1. Court Involvement: 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). 2. Court’s Role: After proper notice and hearing, the court resolves the dispute and addresses all related questions regarding the subdivision plan.  Limitation to Right of New Owner of Part of Land in Former Owner’s Certificate: 1. Old Practice: Previously, a new owner could deal with an undivided portion of land (e.g., selling or mortgaging) even before a subdivision plan was approved, with transactions noted on the former owner’s title. 2. New Rule (RA 93): 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.  Subsisting Encumbrances to Be Carried Over to New Title: 1. Encumbrances Carried Forward: Under Section 59 of P.D. No. 1529, 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. 2. Cancelled Encumbrances: Encumbrances that have been cancelled do not need to be included in the new title, as they no longer have legal effect. 3. Restrictive Covenants: Restrictions (e.g., land use limitations) annotated on the title continue to bind future purchasers, even if not mentioned in the new deed.  Vested Right in Contract to Sell: 1. Perfected Sale: A sale is considered perfected once both the seller and buyer agree on the subject and price, even if neither has been delivered. Possession or enjoyment of the land strengthens this. 2. Exception for Aliens: If a contract to sell was made before constitutional restrictions (e.g., on land ownership by aliens), such as before the 1935 Philippine Constitution, the buyer's vested right remains protected. 3. Vested Right Defined: A vested right is complete, unconditional, and not subject to contingencies. It cannot be taken away without due process or consent.  Sale with Duress: 1. Duress Defined: For duress to void a sale, the intimidation must be reasonable and well- grounded as per Article 1335 of the Civil Code. 2. Conditions for Duress: 1. The threat must be probable and serious. 2. The person issuing the threat must have the ability to carry out the injury (to the person or property).  Inadequacy or Non-payment of Price Cannot Invalidate Sale: 1. Inadequacy of Price: While it may invalidate an execution sale, it does not cancel a voluntary contract of sale that is otherwise valid. 2. Non-payment of Price: 1. Non-payment alone does not automatically cancel a sale unless stipulated as a condition. 2. The unpaid price can be treated as an encumbrance on the property under Article 2242 of the Civil Code. 3. Vendor’s Remedies: If the price is unpaid, the seller can: 1. Demand legal interest for delay. 2. Rescind the sale in court or through notarial demand, even if the contract has an automatic rescission clause.  Ang Bentahan ng Lupa ay Kasama ang Mga Pagpapabuti (Improvements): 1. Pangkalahatang Tuntunin: Ang bentahan ng lupa ay awtomatikong kasama ang mga gusali at pagpapabuti maliban kung mayroong reserbasyon. 2. Epekto ng Pagpaparehistro: Kapag ang lupa ay nairehistro sa pangalan ng isang tao, kasama na rin sa kanyang pagmamay-ari ang lahat ng mga gusali at pagpapabuti doon, maliban kung may espesyal na reserbasyon. 3. Eksepsiyon sa Pagbabayad ng Hulugan: Ang isang bumibili na hindi nakabayad ng hulugan ay hindi maaaring humiling ng karagdagang panahon kahit na may mga pagpapabuti siyang ginawa sa lupa. 1. Eksepsiyon sa Ari-Arian ng Mag-asawa: Kapag ang bahay ay itinayo sa lupa na pag-aari lamang ng asawa (lalaki), ang lupa ay nagiging bahagi ng ari-arian ng mag-asawa, ngunit ang asawa (lalaki) ay dapat bayaran para sa halaga ng lupa. 2. Pagbebentang Labag sa Moralidad: Ang pagbebenta ng lupa at bahay sa isang kabit ng isang asawang lalaki na iniwan ang kanyang pamilya ay walang bisa dahil ito ay labag sa moralidad at pampublikong patakaran. 1. Case Example: 1. First sale: Land was sold to A in 1929 via a private document. 2. Second sale: Same land was sold to B in 1939 via a notarized deed of cession. 3. B acted in bad faith knowing that the land had already been sold to A. 4. The second sale to B was declared null and void. 2. Article 1544 Rule: 1. For movable property, ownership goes to the one who first took possession in good faith. 2. For immovable property, ownership goes to the one who first recorded the sale in good faith. 3. If there is no registration, it goes to the one who was first in possession in good faith, or in the absence of possession, to the one who presents the oldest title.  Contract with "Pacto de Retro" Not Abolished: 1. Legal Foundation: Contracts of sale with a right to repurchase, or pacto de retro, continue to be recognized under Articles 1601 and 1618 of the Civil Code (formerly Articles 1507 and 1520). These contracts can be registered in the same manner as mortgages under Act No. 1108. 2. No Repeal: There is no indication that the Civil Code's provisions on conventional repurchases have been repealed. The language of the law makes it clear that the pacto de retro contract remains valid. 3. Tendency to Discourage: Despite its legality, there is a growing trend to discourage this kind of transaction due to concerns about usury. The law now requires a judicial order for the buyer to register the consolidation of ownership, based on findings that some pacto de retro contracts are used to circumvent usury laws. Vendee’s Title in "Pacto de Retro" Sale In a sale with pacto de retro, the vendee (buyer) acquires legal title to the property. This means the buyer becomes the owner in fee simple, but the ownership is subject to the vendor’s right of redemption. Here are the key points: 1. Rights of the Vendee: 1. The vendee is subrogated to the rights and actions of the vendor, meaning the buyer steps into the seller’s shoes with regard to the property. 2. The vendee may mortgage the property or impose other charges on it. 2. Vendor’s Right of Redemption: 1. The vendor (seller) retains the right to redeem the property within the stipulated time. 2. Upon redemption, the vendor is entitled to receive the property free of any charge or mortgage imposed by the vendee after the sale. 3. Respect for Lease Agreements: The vendee must respect any lease agreements entered into by the vendor, provided the lease was made in good faith and in accordance with the customs of the location where the property is situated.  Registration of “Pacto de Retro” Sale 1. Significance of "Pacto de Retro" The "pacto de retro" is a contract that allows the seller to sell their property to the buyer but retains the right to redeem or repurchase the property within a specified period and for a specific price. 2. Transfer of Title Legal Title: In a sale with "pacto de retro," the legal title transfers from the seller (vendor) to the buyer (vendee) at the time of the sale. Seller's Rights: Although the buyer has legal ownership, the seller holds an "equitable title," allowing them to reclaim the property. 3. Registration Registration Method: The registration of a "pacto de retro" sale is done similarly to mortgages. This means the seller's right to redeem is noted in the memorandum of encumbrances on the certificate of title. Certificate of Title: The title remains in the seller's name but includes an annotation about the buyer's right. For example, if Juan sells land to Maria, the title will remain in Juan's name with an annotation regarding Maria's right.  4. Example -Contract Preparation: Juan sells his land to Maria for PHP 1,000,000. Juan retains the right to reclaim the land within one year. -Registration: The transfer of title is recorded, but there is an annotation stating that Maria has the right to ownership until Juan reclaims it. -Effect on Subsequent Owners: If Maria sells the land to Pedro, Pedro must respect Juan's right to reclaim the land. 5. Seller's Rights The seller's right to reclaim the land is a real right or interest that can be registered, thus becoming a legal right even after the property has been transferred to another person. Period of Redemption in "Pacto de Retro" Sale 1. General Rule: 1. In the absence of a specific agreement on the period for redemption in a pacto de retro sale, the period is automatically set at four years from the date of the contract. 2. If there is an explicit agreement, the period cannot exceed ten years. 2. Limitation on Action: 1. Any action to recover the title or possession of the property after the right to repurchase has lapsed must be initiated within 22 years. 2. This period is significant enough not only to bar the action but also to grant the possessor ownership through prescription. Period of Redemption in "Pacto de Retro" Sale 1. General Rule: 1. In the absence of a specific agreement on the period for redemption in a pacto de retro sale, the period is automatically set at four years from the date of the contract. 2. If there is an explicit agreement, the period cannot exceed ten years. 2. Limitation on Action: 1. Any action to recover the title or possession of the property after the right to repurchase has lapsed must be initiated within 22 years. 2. This period is significant enough not only to bar the action but also to grant the possessor ownership through prescription. 3. Indefinite Time for Repurchase: 1. If the agreement states that the vendor can repurchase “at any time they have money,” it is considered an indefinite period. Under Article 1606 of the Civil Code, such an indefinite agreement cannot exceed ten years. 4. Absence of Express Agreement: 1. A mere mention that the property is subject to repurchase does not qualify as an express stipulation regarding the time for repurchase. 2. Therefore, the law provides a default period of four years from the date of the contract. 5. Expiration of Period During Litigation: 1. If the agreed period expires while a civil case is pending regarding the validity of the sale, the vendor may still exercise the right to repurchase within 30 days from the time the court's judgment becomes final, even if the original period has lapsed.  Period of Redemption: When to Commence 1. Issue: 1. When a sale with a pacto de retro is executed, the question arises as to when the period for repurchase should begin. Should it start from the execution of the deed or its registration in the Registry of Deeds? 2. General Rule: 1. Period Starts from Execution: The period for the vendor’s right to repurchase begins from the date of execution of the sale, not from its registration. 2. Legal Basis: Section 51 of P.D. No. 1529 (Property Registration Decree) provides that even without registration, a deed affecting registered land operates as a contract between the parties. The act of registration mainly serves to protect the buyer from third-party claims. 3. Effect of Non-Registration: 1. If the sale is not immediately registered, it remains valid between the contracting parties, but it may not be binding on third persons who could claim rights over the property due to later transactions. 2. The registration is primarily for notice purposes and to protect the buyer from any future third-party claims, but the absence of registration does not affect the agreement between the original vendor and vendee. 4. Example: 1. Suppose Juan sells his land to Maria on January 1, 2020, under a pacto de retro agreement, allowing Juan to repurchase the land within five years. If the deed is registered on March 1, 2022, the five-year redemption period is still reckoned from January 1, 2020, not from the date of registration. Right of Vendor "a Retro" 1. Right of Redemption: 1. In a pacto de retro sale, the only right left to the vendor a retro is the right to redeem or repurchase the property within the agreed period. He has no other interests or rights over the property that can be transferred or assigned to others. 2. Redemption by Heirs: 1. If the vendor a retro dies and leaves multiple heirs, each heir can only redeem the portion of the property corresponding to their share of the inheritance. They cannot redeem the entire property unless they act together. 3. Payment Refusal: 1. If the vendee a retro (the buyer) refuses to accept the redemption payment, the vendor a retro is not required to deposit the money (consignation) in court. This is because redemption is a right, not a debt to be settled. A tender of payment is sufficient to preserve the vendor’s right to repurchase the property. 4. Reimbursement: 1. To exercise the right of redemption, the vendor must reimburse the vendee for: 1. The sale price. 2. Contract expenses. 3. Necessary and useful improvements made by the vendee on the property. 2. The vendee a retro has the right to retain possession of the property until the vendor fully reimburses these expenses. The vendor cannot force the vendee to remove any useful improvements made to the property. Example: 1. If Pedro sells his land to Juan under a pacto de retro agreement and Juan spends on improving the land, Pedro must repay not just the original sale price but also the costs Juan incurred for those improvements if Pedro wishes to redeem the property. If Pedro's heirs want to redeem after his death, they can only redeem their specific shares. A SIMPLE GUIDE TO CONTRACTS First, determine the type of contract you wish to enter into. 1. It will be a Deed of Absolute Sale if full payment is made and there is immediate transfer of ownership. 2. It will be a Deed of Conditional Sale if payment will be made in installments or there is some condition before transfer of full ownership. Second, ensure that there are proper parties. 1. Seller – If married, the spouse must signify his or her consent. Otherwise, the sale is void. Under the family Code, if the spouse sold the property without the consent and knowledge of the other spouse, then the sale is void. However, the transaction shall be considered as a continuing offer and may be perfected upon acceptance of the other spouse. On the other hand, if the spouse sold the community property with the knowledge but without the consent of the other, the contract is merely annullable. The other spouse has 5 years from the date of the contract to go to court and seek the annulment of the contract. 2. 2. Buyer – no need for spousal consent but best to include. It may form part of the Absolute Community of Property or Conjugal Partnership of Gains anyway. 3. Ensure that all parties are of legal age (18 years of age and above), of sound mind (not declared insane) and not laboring under any restrictions (under guardianship, etc.) 4. State the names, addresses, civil status and Tax Identification Number of the parties. Third, specify the details of the property 1. Specify the address 2. Specify the TCT Number 3. 3. Specify the Technical Description and boundaries because this will govern the scope of your ownership. Fourth, state clearly the consideration and other terms agreed upon. 1. State the price. This will be used by the Bureau of Internal Revenue (BIR) as a basis to assess capital gains tax. If the zonal value is higher, then the BIR will use the higher value. Please know that the capital gains tax is six percent 6% of the value of the property. Hence, please ensure that the seller will be shouldering this. Although, in some cases, the buyer agrees to pay for the capital gains tax. 2. The transfer taxes to be paid to the local government unit concerned and the Register of Deeds is borne by the buyer. 3. If in installment, state the amount of downpayment and the period of installment and amount for each amortization. Oftentimes, post-dated checks are given by the buyer. If you are planning to sell your real estate property in the Philippines, you need to follow the correct procedures to avoid putting yourself into a nightmarish situation. While it does not take rocket science to sell a property, familiarizing yourself with the procedures is a must as there are some legal documents that you need to secure. 1. Sign A Contract of Agreement The owner or broker will first discuss the terms of the sale, the commission and the fees. It is also necessary to scrutinize the documents to make sure that the land title meets the condition and free from encumbrances, liens and loans. 2. Issue an Authority to Sell The purpose of the agreement or contract is to bind the broker as the agent of the owner providing the essential information and the amount of commission of the property that will be sold. The contract will also indicate if the owner will bestow upon the exclusive rights of the broker or a non-exclusive authorization to sell the property. The broker will secure the necessary documents before selling the property to ensure that there are no problems concerning the property. The broker will also check if the property is free from encumbrances. An encumbrance means that another person has interest in, right to, or legal liability on the property that either deter the process of transferring the title or diminish the value of the property. 3. Assessment of property by the broker The broker will check the property as a way of assessing its current market value. It is important for the property to be appraised to determine its actual price. There are several factors that will be taken into account in determining the asset's value such as the area and location of the property. 4. Broker will offer and sell the property Before a broker can market the property, it is important that the owner agrees on how to market the property. There are also some limitations that should be taken into consideration such as privacy when realising photos or disclosing the location online. Both parties must also decide on how to split the marketing costs such as communication and transportation expenses. Nowadays, the common practice is that the broker shoulders the expenses depend on the amount of the commission. 5. Viewing of the Property Once the buyers get in touch with the broker or owner, they will proceed with viewing the property. The owner needs to make sure that the property is presentable to add value to the property. 6. Write a Letter of Intent or Offer to Buy The buyer will also offer a Letter of Intent to the property owner declaring the intention to purchase. More often than not, the Letter of Intent is given at the first stage in documenting a sale of real property. 7. Acceptance of Owner The owner accepts the Letter of Intent once signed. This indicates acceptance of the terms given by the buyer. Upon acceptance, the seller will be bound to promist not to offer the property to other buyers so long as the buyer does not breach the conditions in the letter. 8. Provide Earnest Money The earnest money is provided as means of holding the property subject to the buyer's due diligence. It can be forfeited when there is default on the buyer's part. The money can also be used as refundable subject to deductions depending on the agreement that both parties made. 9. Preparation of Legal Documents The legal documents must be secured in preparation of the transfer of ownership to the buyer. These documents must be obtained from the Register of Deeds: Certified True Copy of Transfer Certificate of Title ( Land ) Certified True Copy of Condominium Certificate of Title ( Unit ) Certified True Copy of Condominium ( Parking – if applicable ) The owner or broker must procure these documents from the Assessor's Office: Certified True Copy of Tax Declaration ( Land ) Certified True Copy of Tax Declaration ( Improvement / Building ) Certified True Copy of Tax Declaration ( Condominium ) Certified True Copy of Tax Declaration ( Condominium parking, if applicable ) Real Estate Tax Clearance for Current Year Certificate of Non-Improvement if property is bare and without structures such as a house or a building The Property Owner should also secure the following documents" Certificate Authorizing Registration from the Bureau of Internal Revenue (BIR) Original Real Estate Tax Receipts – Current Year Lot Plan / Subdivision Plan Deed of Absolute Sale Process 1. Preparation and Signing of the Deed of Absolute Sale: 1. A Deed of Absolute Sale is a document where the seller transfers the ownership of the property to the buyer. It should be signed by both parties for the buyer to be legally recognized as the new owner. 2. Payment of Taxes and Fees: 1. After the signing, both parties will settle expenses such as: 1. Capital Gains Tax. 2. Documentary Stamp Tax. 3. Registration Fees. 4. Transfer Tax. 3. Transfer of Ownership: 1. Once the full purchase price and other necessary fees are paid, the contract will be signed and the ownership will be officially transferred to the buyer. 2. It is crucial to notarize the Deed of Absolute Sale to convert it into a public document. 4. Turnover of Documents: 1. The seller must hand over essential documents to the buyer, such as: 1. Original Transfer Certificate of Title (for land) or Condominium Certificate of Title (for condos). 2. Tax Declarations and Tax Clearances (for both land and improvements or for condominium units and parking). 5. New Tax Declaration: 1. The buyer must secure a new tax declaration under their name. Once this is done, the seller’s obligations regarding the property are officially terminated. Standard Procedure for Property Sale in the Philippines Below is an outline of a proper sales procedure for selling a property in the Philippines. 1) Seller and Selling Broker discuss details of the property and agree on Professional Fees, terms and conditions of sale. It’s at this point where transparency on status of property is known ( clean title, existing loan, liens and encumbrances, etc ). 2) Authority to Sell ( Exclusive or Non-Exclusive ) 3) Selling Broker views property for proper assessment of market value 4) Selling Broker puts property on the market ( marketing cost to advertise must be mutually agreed upon but the normal practice in general brokerage is that all expenses are Selling Broker’s cost. 5) Property viewing by Buyers / Network Brokers 6) Buyer prepares a Letter of Intent or Offer to Buy if interested on property 7) Seller accepts ( conforme ) the Letter of Intent 8) An earnest money agreement may be given at this time to hold the property subject to due diligence of the buyer. Earnest money may either be forfeitable or refunded depending on the status of the documents. 9) Due diligence begins with the following documents : ( Some owner’s / professional brokers get the documents below prior to marketing the property to assure that the property has no liens or encumbrances ). An authority to transact signed by the owner addressed to the Selling Broker would be needed to get the certified true copies of the Title, Tax Declaration and Tax Clearance. REGISTER OF DEEDS a) Certified True Copy of Transfer Certificate of Title ( Land ) Certified True Copy of Condominium Certificate of Title ( Unit ) Certified True Copy of Condominium ( Parking – if applicable ) ASSESSOR’S OFFICE a) Certified True Copy of Tax Declaration ( Land ) b) Certified True Copy of Tax Declaration ( Improvement / Building ) c) Certified True Copy of Tax Declaration ( Condominium ) d) Certified True Copy of Tax Declaration ( Condominium parking, if applicable ) e) Real Estate Tax Clearance for Current Year f) Certificate of Non-Improvement if property is a “vacant lot” PROPERTY OWNER a) Certificate Authorizing Registration ( Bureau of Internal Revenue document from previous sale when current owner bought property, this document may have not existed depending on the year bought ). Should this document not be available with owner, the Register of Deeds should have a copy. b) Original Real Estate Tax Receipts – current year c) Lot Plan / Subdivision Plan 10) Preparation of Contract to Sell / Deed of Absolute Sale 11) Preparation of summary of expenses for both Seller and Buyer : Capital Gains Tax / Creditable Withholding Tax ( whichever applies ) b) Documentary Stamps Tax c) Business Tax ( if applicable ) d) Transfer Tax e) Registration Fees 12) Upon a mutual agreed contract and a finalized Deed of Absolute Sale / Contract to Sell, a date to finalize transaction is made. 13) Full payment and signing of the Deed of Absolute Sale. All check payables both to the Seller and Government Entities for applicable taxes must be in Manager’s Checks. 14) Deed of Absolute Sale Notarization 15) Seller turns over the ORIGINAL copies of the following : a) Transfer of Certificate of Title – ( land ) – Owner Copy b) Condominium Certificate of Title ( condominium ) c) Tax Declaration ( Declaration of Real Property ) d) Tax Clearance – ( both land and improvement ) Tax Clearance – ( condominium unit and parking if applicable ) 16) Upon clearance of Manager’s Check payment, owner pays Broker’s Professional Fees although some owners wait until the Certificate Authorizing Registration is issued by the Bureau of Internal Revenue. 17) Selling Broker normally handles payment Capital Gains Tax and Documentary Stamps Tax payment and the filing of appropriate document to BIR until the Certificate Authorizing Registration ( CAR ) is released by BIR. CAR is the document that authorizes the transfer of title to the new buyer, it’s basically clearance that all the right taxes have been paid by the Seller and gives way for the Register of Deeds to transfer title into the name of the Buyer. 18) Upon release of CAR, all documents are now turned over to the Buyer’s Broker for him / her to handle the payment and processing of the following ; a) Transfer Tax payment to City Treasurer’s Office ( must be paid within 60 days of notary otherwise, corresponding penalty applies ) b) Business Tax to City Treasurer’s Office – if applicable ( be sure to check with the City Treasurer where the property is located ) c) Registration Fees to Register of Deeds d) Entry Fees – Register of Deeds e) Notarial Fees – Register of Deeds 19) Buyer’s Broker then submits all required documents to Register of Deeds : a) Deed of Sale b) Certificate Authorizing Registration with 4 page Tax Clearance c) Original Transfer Certificate of Title / Condominium Certificate of Title d) Original Tax Declaration e) Tax Clearance – Real Estate Tax f) Certificate of Management ( condominium ) g) Certificate of Non-Improvement ( vacant lot ) 20) Upon release of new Transfer Certificate of Title / Condominium Certificate of Title, a certified true copy of the new Title and a photo of the property are needed to process the new Tax Declaration in name of new Owner. 21) Issuance of New Tax Declaration When dealing with the issuance of a new tax declaration for a property, it is crucial to understand that the processes and requirements in government agencies may change over time. As a property owner or buyer, it’s your responsibility to keep yourself updated with new laws or improvements in services. To avoid unnecessary complications and ensure legal compliance, it's highly recommended to work with a licensed real estate broker. The implementation of the Real Estate Service Act (RESA) Law in the Philippines now penalizes unlicensed individuals involved in real estate transactions. This makes it even more critical to engage professionals for your safety and to ensure that both parties are well-informed of any laws that could benefit or disadvantage them. Real Estate Ownership in the Philippines The ownership of private land in the Philippines is reserved exclusively for Filipino citizens or corporations that are at least 60% Filipino-owned. Foreign nationals or companies cannot directly own private land, except in specific cases such as owning up to 40% of a corporation that is considered a Philippine national.  Ownership Options for Foreign Nationals: 1. Condominium Ownership: Foreigners can own condominium units, but the ownership of units by foreigners cannot exceed 40% of the entire condominium project. 2. Land Leasing: Foreign nationals and companies can lease land for up to 25 years, renewable for another 25 years. Under the Investors' Lease Act, foreign investors can lease private land for up to 50 years, with the possibility of renewal for another 25 years. This lease term applies to properties used for purposes such as industrial estates or agro-industrial projects. The legal complexity of real estate ownership in the Philippines is heightened when dealing with foreigners or foreign corporations, and it is regulated by different statutes and local government ordinances. Therefore, professional guidance is highly advisable.  Owning Real Estate Other Than Land Since the prohibition on foreign ownership in the 1987 Philippine Constitution only applies to private land, foreign nationals and corporations can own 100% interest in buildings and other types of real property (other than land), such as machineries. Foreigners may also own condominium units under the Condominium Act, which allows them to hold title to these units as long as no more than 40% of the total project is foreign-owned. The Land Registration Authority (LRA) issues Condominium Certificates of Title for these types of properties, ensuring that foreign investors can legally hold ownership of their units. However, not all lands in the Philippines are covered by Transfer Certificates of Title. In such cases, tax declarations may serve as proof of ownership, particularly for lands not yet titled but under private possession.  Common Real Estate Structures for Foreigners Due to restrictions on land ownership, foreign nationals or companies typically enter into a leasehold agreement for land, usually for 25 years, renewable for another 25 years. They can, however, hold full ownership of the buildings or improvements on the leased land. Another option is for foreigners to own 40% of a corporation that owns land, which is allowed under Philippine law, provided that Filipinos hold at least 60% of the corporation. In cases where foreign nationals plan to construct commercial buildings, they can also enter real estate through the Condominium Act, allowing them to own certain portions of the building, while adhering to the 40% ownership cap on land.  Due Diligence in Real Estate Transactions Foreign investors are encouraged to perform due diligence before entering into real estate transactions. This includes verifying the ownership of the land and ensuring that the person or entity claiming ownership can present legitimate documents, such as a Transfer Certificate of Title or a certified copy of the title retained by the LRA. Legal and property advisors are often retained to mitigate risks, ensure compliance, and guide on matters like lease rates or purchase prices. Liens and Encumbrances Attached to Property When a foreign investor purchases real estate in the Philippines, the title they acquire is subject to any liens and encumbrances that have been previously registered or annotated on the property. Some important considerations include: Cultural Property: Buildings that are at least 50 years old or designed by a Philippine national artist may be classified as Philippine cultural property. These cannot be sold without prior approval from cultural authorities, as mandated by the National Cultural Heritage Act. Condominium Sales: The sale of condominium units must come with a certificate of management from the condominium corporation. This ensures that selling to a foreign investor does not violate the 40% foreign ownership limit. Agricultural Land: 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). Such lands are also restricted to agricultural use unless reclassified. Documenting the Transaction To formalize a real estate sale, Philippine law requires the Deed of Absolute Sale to be executed as a public instrument, which means it must be notarized. If the document was executed outside the Philippines, it needs to be authenticated by a Philippine embassy. Before issuing a new Transfer Certificate of Title (TCT) in the buyer’s name, the Bureau of Internal Revenue (BIR) must issue a Certificate Authorizing Registration (CAR) to confirm that applicable taxes have been settled. Taxes and Fees Involved When selling real estate classified as a capital asset, a capital gains tax of 6% is levied, based on the higher value between the sale price and the zonal value. For ordinary assets, the income generated is treated as ordinary income, and a 12% value-added tax (VAT) applies.  Additional expenses include: 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. Other Legal Considerations Real estate titles in the Philippines, whether TCTs or Condominium Certificates of Title, include annotations of all registered encumbrances. However, not all liens may be reflected in the owner's duplicate copy. Some restrictions may be found in the tax declaration. Owners may also be bound by contractual restrictions, which require prior consent (e.g., from banks) before transferring encumbered or mortgaged property. Other restrictions, such as building height and use, are usually reflected in the title’s technical description. Special Requirements for Land Transfers Other legal requirements that may affect the transfer of land include: Consent of Spouses: 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. Corporate Transactions: If a Philippine company is selling substantially all its assets, shareholder approval is required.