The Philippine real estate market is governed by a complex set of rules without a unifying system. While laws on the ownership of land are entrenched in the Constitution, there are a slew of rules and regulations found elsewhere governing ownership and lease of real estate properties, including land, buildings, houses and condominiums. Local ordinances also regulate transactions related to real estate.
Rules on Ownership and Lease
As stated in the 1987 Constitution, only Filipinos – individuals or corporations – can own land in the Philippines. The definition of “Filipino”, however, has been broadened to include natural-born Filipinos who have adopted a new citizenship, as well as Filipinos with dual citizenship. These individuals may own land in the Philippines, but only with a limited area and land type.
Foreign nationals who are not natural-born Filipinos, on the other hand, are prohibited from owning land, except when they inherit land from a deceased Filipino spouse. However, they may be partial land owners if they subscribe to a Filipino corporation (one that’s at least 60% Filipino-owned) that purchases or owns land.
Foreign nationals may also be full owners of condominiums, buildings and houses, but not the land on where these structures sit. A condominium corporation or project may also have only up to 40% foreign ownership.
Foreign nationals may lease land for up to 50 years, renewable for another 25 years. Thus, if they want to build a home or a building on a parcel of land, their best option may be ownership of the home or building, and a long-term lease of the land where it sits.
Real Estate Transaction Services
Given the complexities in real property ownership in the Philippines, foreign investors woulddo well to seek the help of professionals who are well-versed not only in the local real estate industry, but the legal issues that go with real estate ownership and utilization as well.
Our team of experts provides the assistance that you will need to ensure you enter into the best-value transactions, and to protect you from the many potential pitfalls of investing in real estate in the Philippines.
Our services encompass the following areas:
Due Diligence
Sadly, there’s no lack of unscrupulous entities who will try to sell you properties with dubious titles or ownership. Verifying the authenticity of titles is very important, especially when you’re dealing with individual sellers or with companies of lesser repute. It pays to check the original copy of a title at the Registry of Deeds.
Proof of ownership for land is a transfer certificate of title, while that for condominiums is a Condominium Certificate of Title. Proof of ownership for buildings and properties other than land is often a tax declaration for the said property.
A tax declaration may also be provided as proof of ownership for land instead of a title. However, while this may be valid in some cases, it can be anomalous and subject to encumbrances in others. A legal expert can help you determine if a tax declaration as proof of ownership is acceptable or not.
Due diligence also includes checking on liens, encumbrances, mortgages, pending suits and claims, and other such issues that may be attached to a property.
Documentation and Processing
The process of buying or selling real estate involves a large volume of paperwork including:
- Deed of Sale
- Tax Clearance Certificate
- Certificate Authorizing Registration
- Transfer Certificate of Title
The transaction requires processing with various agencies, including the Registry of Deeds, the Bureau of Internal Revenue, and the Assessor’s Office.
Payment of Taxes
Several taxes need to be paid in a real estate transaction, including:
- Real property tax
- Transfer tax
- Capital gains tax or Value Added tax if the property being sold is being used in the course of doing business
- Documentary stamp tax
While there are general guidelines on who between the buyer and seller pays for each tax type, it all boils down to the agreement between the two parties.
