FAQ on Land Ownership

Foreigners are NOT allowed to own land in the Philippines due to the Constitutional prohibition, except through hereditary succession. Private corporations or associations, at least 60% of whose 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.

Then how can I purchase land in the Philippines as a Foreigner?

Generally, only Filipinos are allowed by Philippine laws to acquire by purchase, transfer or assignment any lands in the Philippines. However Foreigners may be able to acquire properties in the Philippines by any of the following:

• Through a Filipino Trustee or wife – Have a Filipino (you can trust) where you can put the title or ownership of property in his/her name. This is the most common way for small-scale investors to buy property here.
• Purchase land as a Balikbayan – The Government of the Philippines has recently passed the Dual Citizenship Act which gives all former Filipinos the right to purchase land within the Philippines. See here for an article on how to purchase as a Balikbayan.
• Form a Corporation – You can form a corporation with Filipino partners with the sharing of 40% foreign - 60% Filipino capital. This is the most iron-clad form of property ownership for foreign investors, and definitely the preferred form of property ownership for those thinking of establishing a resort, or tourism facility. In fact, the majority of existing resorts and businesses owned by foreigners are using this form of ownership.
• Lease the Property -- You can lease public and private land for 25 years with an automatic renewal for 25 years, (just enough time for return on investments). This is also a cheap alternative, but it makes it difficult to make any sort of investment return on a property. However, it is ideal for those thinking of retiring here. Unlike many countries such as Thailand or Indonesia, a lease on property for a foreigner is a very easy and straightforward step to take in the Philippines. This is the easiest, least time-consuming, and safest way for a foreigner to purchase small areas of land within the Philippines. It can be done directly with the owner. But there is a safer alternative now.
• Buy A Condominium Unit -- You can own 100% of the unit but not more than 40% of the entire condominium project.
• Inherit the land if your Spouse dies -- This simply means, when your Filipina wife dies, you as the compulsory heir, together with your children if you have any, will become the legal owners of her property.

In the event of my death, can the property be transferred to my husband or children or both, who are all natural born American citizens?

Yes. Under Section 7, Article XII of the Philippine Constitution, foreigners can inherit land."

Are there limitations on hereditary succession?

No. There are no limitations on hereditary succession both with respect to citizenship and size of the property."

http://www.supremecourt.gov.ph/Constitution/1987_constitution-h.html

SEC. 7. "Save in cases of hereditary succession, no private lands shall be transferred or conveyed except to individuals, corporations, or associations qualified to acquire or hold lands of the public domain."

Can I form my own Land Holding Corporation?

Yes, provided that the foreigner (you) shall own a maximum of 40% and give away the other 60% to Filipino incorporators.

Can I form my own Philippines Corporation with “Dummy” executives?

A corporation set up whereby 40% is held by a foreigner and 60% is dolled out to various Filipino dummies is doubly against the law. The Law reads:

"Section 2-A. Any person, corporation, or association which, having in its name or under its control, a right, franchise, privilege, property or business, the exercise or enjoyment of which is expressly reserved by the Constitution or the laws to citizens of the Philippines or of any other specific country, or to corporations or associations at least sixty per centum of the capital of which is owned by such citizens, x x x in any manner permits or allows any person, not possessing the qualifications required by the Constitution, or existing laws to acquire, use, exploit or enjoy a right, franchise, privilege, property or business, the exercise and enjoyment of which are expressly reserved by the Constitution or existing laws to citizens of the Philippines or of any other specific country, to intervene in the management, operation, administration or control thereof, whether as an officer, employee or laborer therein with or without remuneration except technical personnel whose employment may be specifically authorized by the Secretary of Justice, and any person who knowingly aids, assists, or abets in the planning, consummation or perpetration of any of the acts herein above enumerated shall be punished by imprisonment for not less than five nor more than fifteen years and by a fine of not less than the value of the right, franchise, or privilege enjoyed or acquired in violation of the provisions hereof but in no case less than five thousand pesos; Provided, however, That the president, managers or persons in charge of corporations, associations or partnerships violating the provisions of this section shall be criminally liable in lieu thereof: Provided, further, That any person, corporation or association shall, in addition to the penalty imposed herein, forfeit such right, franchise, privilege and the property or business enjoyed or acquired in violation of the provisions of this Act: and Provided, finally, That the election of aliens as members of the board of directors or governing body of corporations or associations engaging in partially nationalized activities shall be allowed in proportion to their allowable participation or share in the capital of such entities."

If the corporation only owns the property where your house was built and then you leased it back to a 40% alien share holder you would likely violate 4-5 other laws.

On the other hand, if you found Filipino investors to actually buy into your corporation to the point where they truly owned 60%, then maybe you would get around the dummy law and have no problems. But to whom are you going to sell 60% of your property who will not want to move in?

Can my Filipina wife give me a lease?

Unless you have a prenuptial agreement establishing separate property regime, all property purchased by the married couple during the marriage is absolute community property by default. One spouse cannot donate or in any way transfer or surrender his conjugal share to another under an absolute community property regime. Neither can the spouses lease to each other. A long term lease, a deed of donation, a deed of sale, or any other document that might transfer possession/control of the property to the other spouse is a worthless scrap of paper.

Is it safe to buy land in the Philippines?

Yes, the Central Registration of documents ensures that you can buy with complete confidence. We can provide certified copies of documents evidencing title to and/or rightful possession over properties. If you want a certified copy of the title, we charge a small fee.

One does hear the odd horror story about land deals gone wrong, in the Philippines; but that is mainly because buyers were greedy, or stupid. When you investigate these stories they tend to involve somebody thinking they have gotten the deal of the century from a guy they met in a bar or hotel. If you buy through reputable real estate brokers and use reliable lawyers as you would at home, you can buy land with complete peace of mind. If someone offers you a deal that is too good to be true, it probably is! We are Registered Real Estate Agents, with State Registration. Our reputation depends on the safe transfer of Title, we are a Buyer's Agent! Our main obligation is to you, not to the seller.

What sort of land titles are used in the Philippines?

There are different kinds of evidences of title for lands in the Philippines. Titles under the Torrens System are absolute proof of ownership. Tax Declarations are proof of lawful possession and affords possessory rights under the law.

• Certificate of Stewardship CSA (Certificate of Stewardship Agreement) - A document issued by the government to qualified individual occupants pursuant to Stewardship Agreement (SA). A Stewardship Agreement is a 50-year contract entered into by and between an individual forest occupant or forest community association, or cooperative and the government allowing the former the right to peaceful occupation, possession, and sustainable management over the designated area. This is awarded by the State to individuals possessing properties that are in State Reservations. This certificate is transferable and it can even be used as loan instrument or collateral.
• Tax Declared - “Tax Declared” Properties are owned by the State but you have the right to possess, use, develop and dispose of it. With proper Leasehold Agreement and/or Land Use Agreement with the Government you can pursue construction and development of this kind of properties. A Tax Declaration is granted by the Philippines Government in lieu of freehold land. This is similar to all lands sold in strategic waterfront properties in Sydney and Melbourne (Australia), also much of the land sold in England, particularly London. They cannot be rescinded by the Government except in (very rare) cases of National Interest. Tax Declarations cannot be used as loan instruments or collateral. While Tax Declarations do not provide the absolute security of indefeasible title provided by a Torrens Title, it is however, the next best thing. Tax Declarations are universally recognized in Philippine jurisprudence as evidence of possession.
• Titled – The present land titling system of the Philippines was instituted just after the Americans colonized the Philippines in 1898. Act 496, or the “Land Registration Law of 1903” placed all public and private lands in the Philippines under the Torrens System. The law is almost a verbatim copy of the Massachusetts Land Registration Act of 1898, which, in turn, followed the principles and procedure of the Torrens System of registration formulated by Sir Robert Torrens who patterned it after the Merchant Shipping Acts in South Australia.

The Torrens System requires that the government issue an official certificate of title attesting to the fact that the person named is the owner of the property described therein, subject to such liens and encumbrances as thereon noted or the law warrants or reserves. The certificate of title is indefeasible and imprescriptible and all claims to the parcel of land are quieted upon issuance of said certificate.

If I buy a “Tax Declared” property can I get it “Titled or something to make me feel "safer"?

Yes. With the recent lifting of the moratorium on the disposition and granting of any title, concession, permit or lease on all small islands nationwide by virtue of Administrative Order No. 2003-06 of the Department of Environment and Natural Resources, certain islands that are tax declared can now be titled for as long as they are classified as alienable and disposable. However, certain types of land may never be titled.

What are the disadvantages of a Tax Declared vs. Titled property?

Tax Declarations are proof of possession, but they are not deemed as desirable or 100% secure as a Titled property. That's because there exists the possibility of disputes of property boundaries and ownership with tax declarations, especially if the property is not held by a single owner, but by the “Heirs”. Because of this we extensively research our Tax Declared properties to ensure they are free of problems. It would be counter-productive for us to sell properties that later have troubles when the sale is taking place.

In general it is easier to commercially develop Titled properties than Tax Declared, but there is very little difference involved and not having title is no prohibition on development. It is simply that a bit more process must be completed to commercially develop a Tax Declared property. However, in the instance of the property being used to locate a residence there is virtually no difference between the two.

When I buy a beach, how much of the beach do I own?

The shoreline of the whole Philippines belongs to the government. When you buy a piece of beachfront lot you have to obtain a “Foreshore Lease” from the government which shall afford you possession and control of the beach from the High Tide – to the Low Tide mark as lessee thereof. This law was promulgated to prevent squatters living on beaches within the Philippines, and to protect the environment. No development is allowed on any beach closer than 30 m to the high tide mark.

How can I be certain that these properties are legitimate?

Prior to your arrival we can send certified copies of title for any of the properties you inquire about. We charge an upfront fee for this. We also charge upfront fees for additional photos of the property as we must make a long trip, often by boat to inspect and take more photographs. We are in the process of taking digital images of all the properties, but this will take time.

Upon your arrival we can arrange you to have a meeting with our lawyer, and can also take you to an independent lawyer who specializes in real estate laws of the Philippines. We are registered Real Estate Agents, certified by the State, and can (if needed) supply contact details of happy clients who will verify their satisfaction with our service.

What are the terms of the sale?

Financing is available, but not common in the Philippines. The most common form of payment is 20% deposit and then the balance when the title is changed over. This payment must be paid in cash, at the time of the sale. Philippine Pesos or U.S. dollars are accepted. Transfer taxes and associated closing costs will amount to about 5% of reported price of your property. We charge 10% commission, which must be paid upon signature of the sale agreement by the seller.

What about if I want a discount?

It is only natural that you as the buyer should ask for a discount, and we always endeavor to make our customers happy. But as the seller pays our commission, we lose money by obtaining a cheaper price; this is counterproductive financially for us. Therefore we ask that the buyer make up the balance of the commission, which we would have received upon the original sale price. By this method you can still make a considerable saving, and we still receive a fair reward for our efforts. In most cases we have made savings of 5-20% on the listed sale value using this method. However, the negotiability on price is determined by the owners of the property, not us, and we can offer no guarantees as to discounting or negotiability.

What are estimated taxes and closing costs?

A property transfer tax is based on the transaction value and is 2% payable to the Bureau of Internal Revenue (BIR). An additional 3% should be anticipated for legal fees and other closing costs. The annual property taxes are 1% of the assessed value of the property.

Transfer & Registration Tax: 2%

Documentary Stamp Tax: 2%

Notarial Fee: 1%

Is there title insurance?

No, Property Title Insurance is not available in the Philippines.

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