Foreigners are generally restricted from owning land in the Philippines. There are exceptions, however, that you can explore that will allow you to acquire or utilize real estate transactions in the Philippines.
Foreigner Defined
To better understand the laws covering real estate transactions in the Philippines, you must first know how the law classifies a “foreigner”.
A “foreigner” can be a person or a corporation. A person is considered a foreigner if:
- He is a citizen of another country since birth
- He was a natural-born Filipino but has lost his Filipino citizenship (former Filipinos)
A corporation majority owned by Filipinos is considered a Filipino corporation. Only those with at least 60% Filipino ownership, however, is allowed to purchase land in the country.
Land Ownership by Former Filipinos
Former Filipinos have land acquisition rights that are not available to other foreigners. They may own any real estate type in the country, whether for residence or business, but land ownership is subject to the following limitations:
- No more than two lots that have to be in two different municipalities or cities. Total area owned, whether with one or two lots, should not exceed:
- For residential use – 1,000 sq.m. for urban land or one hectare for rural land;
- For business use – 5,000 sq.m. for urban land or three hectares for rural land;
- Land purchased as investment may be used forvarious business activities, except the buying and selling of the said land
- Either urban or rural land may be owned, but not both at the same time
Real Estate Ownership by Non-Filipinos
Foreigners who are not former Filipinos are not entitled to land ownership in the Philippines. However, they may own land through inheritance, such as in the case of a spouse’s death, where the spouse was a Filipino citizen who owned land in the country.
Foreigners may also own land indirectly if they have an interest in a corporation which is at least 60% Filipino-owned.
There are fewer restrictions on the ownership of condominiums and other real properties. Under RA No. 4726, or the Condominium Act, foreigners may have up to 100% ownership of a condominium unit.
The Condominium Act defines a condominium as a building with sections that can be individually owned by different persons or corporations, whether for residential, commercial or industrial use. The boundaries of a condominium unit are its interior walls, floors, and ceilings, so the land on which a condominium unit may sit is not considered part of the property.
A condominium corporation or project, however, is allowed only up to 40% foreign ownership.
Leasing land
As an alternative to owning land, foreigners can consider leasing land instead. Favorable laws make leasing a viable option for foreign nationals, particularly investors who want to build or purchase a manufacturing or service facility.
In general, foreigners – individuals or corporations – may lease land for 25 years, renewable for another 25 years. Land to be used for business activities, such as assembly or processing plants, factories, industrial estates and others, may be leased for a term of 50 years, subject to renewal for another 25 years. This policy also covers land in government-designated economic zones.
Any property built on leased land, including buildings and machineries, may be 100% foreign-owned, and a title or proof of ownership separate from the land title may be had.
Real Estate Transactions
Buying and selling real estate in the Philippines requires due diligence on the part of the buyer and seller. It starts with establishing the seller’s ownership of the property, and any lien and encumbrance attached to it.
The primary proof of land ownership is the Transfer Certificate of Title, the original of which is retained by the Registry of Deeds at the Philippine Land Registration Authority (LRA).
Ownership of condominium units is evidenced by the Condominium Certificate of Title issued by the LRA, while ownership of buildings and other non-land properties is evidenced by a tax declaration. Ownership of some private lands is also covered by a tax declaration instead of a Transfer Certificate of Title.
Specific legal requirements may apply in some transactions. These include:
- The consent of both spouses in the sale of a conjugal property
- Shareholder consent for a property owned by a corporation
- A Condominium Certificate of Management for the sale of a condominium unit
- Clearance from cultural authorities for a designated Philippine cultural property
How We Can Help
Real estate transactions are often complicated and should be handled with extreme care by both buyers and sellers. They can get even more complex if you’re a foreigner. If you’re buying or selling property in the Philippines, check out our Real Estate transactions page and contact us to get the expert legal assistance and protection that you will need.
