Frequently Asked Questions on Philippine Real Estate Ownership, Sale and Lease

Who can own land in the Philippines?

The general rule is that only Filipino citizens and corporations or partnerships, at least 60% Filipino owned are entitled to acquire land in the Philippines. As an exception to this rule, an alien acquisition of Philippine real estate is allowed in the following cases:

• Acquisition before the 1935 constitution
• Acquisition by a foreigner by hereditary succession. This means that when you are 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 is not a Filipino citizen.
• Purchase of not more than 40% interest as a whole in a condominium project.
• Where a former natural born Filipino who became a citizen of another country but is now returning to the Philippines to reside permanently a.k.a. “Balikbayan”, they may acquire through sale, donation, or through a tax sale, foreclosure sale, or execution sale not more than 1,000 square meters for urban land or not more than 10,000 square meters for rural land to be used solely for residential purposes and for business purpose 5,000 square meters of urban land or three hectares of rural land. 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.
• Filipinos who are married to aliens retain their Filipino citizenship, unless by their act or omission they are deemed to have renounced their Filipino citizenship, may acquire and own private lands in the Philippines.
• • Former Filipino citizens born in the Philippines, but have immigrated to another country and obtained citizenship of that country may avail of dual citizenship which means having two citizenships and passports from two different countries. Dual citizenship allows the citizenship holder full rights of possession of Philippine real property.

Can a foreigner avail of Special Visas allowing 100% Condominium and Townhouse Ownership?

Special visas are available to foreigners that allow complete ownership and control of Philippine condo and townhouse units. Qualifications for this visa are as follows: 1) You must be at least 35 years old; and, 2) You should meet the bank deposit requirements which can be withdrawn at a later date for your investments.

The processing fee and the amount of the deposit/investment needed depends on whether or not you are married to a Filipino or former Filipino. This allows you almost all of the investment privileges of a Filipino citizen.

Can a foreigner rent or lease land in the Philippines?.

The land can be leased by a foreigner or a foreign corporation on a long-term contract for an initial 50-year period and renewable every 25 years. A foreigner or a foreign corporation can rent a lot and at the same time legally own the house or building on the rented land. Owning of houses or buildings is legal as long as the foreigner does not own the land on which the house is build.

Private corporations or associations, at least 60% of its capital is owned by Filipinos, may hold lands of the public domain by lease for a period not exceeding 25 years, renewable for not more than 25 years, and not to exceed 1,000 hectares in area.

How do you take title to Philippine Real Estate?

The “Deed of Sale” is the document showing legal transfers 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

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 and 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.

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.

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 not subject to prescription. The registered owner will never lose his ownership to squatters no matter how long such land was illegally occupied.

What are estimated taxes and closing costs?

This is the normal sharing of expenses between the buyer and the seller when transferring the title of the property to the buyer (new owner). However, buyers and sellers can mutually agree on other terms as long as it is done during the negotiation period (before the signing of the "Deed of Sale").

The Seller shoulders the:

• Capital Gains Tax, which is 6% of the contract price. This percentage could differ if the property assessed is being used by a business or is a titled to or owned by a corporation, in this case the percentage is 7.5%
• All other unpaid taxes due on the property prior to the sale
• Agent / Broker's commission

• Documentary Stamp Tax, which is 1.5% of the contract price, or zonal value or fair market value, which ever is higher
• Transfer Tax, which is at least 0.5% of the contract price, or zonal value or fair market value, which ever is higher
• Registration Fee, may vary depending on the value of the contract price
• Notary Fee, which is approximately 0.1% of the contract price.