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Philippines Land Ownership

and Acquisition
In general, only Filipino citizens and corporations or partnerships with least 60%
of the shares are owned by Filipinos are entitled to own or acquire land in the
Philippines. Foreigners or non-Philippine nationals may however purchase
condominiums, buildings, and enter into a long term land lease.

K&C assists foreigners, non-Philippine nationals, Filipinos, OFW, Balikbayans, and


corporations purchasing and acquiring real property in the Philippines and can
provide relevant information on Philippine laws and regulations regarding
property purchase and acquisition, review general contracts, asset protection
contracts, deeds of sale, taxes, and handle entire estate planning. In addition,
K&C can introduce you to local real estate brokers to assist you in finding the
property you are looking for in the Philippines.

Foreign Ownership of Land in the


Philippines
Ownership of land in the Philippines is highly-regulated with land ownership
reserved for persons or entities considered Philippine nationals or Filipino
citizens. For this purpose, a corporation owned 60% by Filipino citizens is treated
as a Philippine national. Foreigners interested in acquiring land or real property
through aggressive ownership structures must consider the provisions of the
Philippines Anti-Dummy Law to determine how to proceed. A major restriction in
the law is the restriction on the number of alien members on the Board of
Directors of a landholding company which is limited to 40% alien participation.
Another concern is the possible forfeiture of the property if the provisions of the
law is breached.
Exceptions to the restriction on
foreigners acquisition of land in the
Philippines are the following:
Acquisition before the 1935 constitution
Acquisition through hereditary succession if the foreigner is a legal or
natural heir

Purchase of not more than 40% interest in a condominium project

Purchase by a former natural-born Filipino citizen subject to the limitations


prescribed by law. (Natural-born Filipinos who acquired foreign citizenship
is entitled to own up to 1,000 sq.m. of residential land, and 1 hectare of
agricultural or farm land)

Filipinos who are married to aliens who retain their Filipino citizenship,
unless by their act or omission they have renounced their Filipino
citizenship

Foreigner Ownership as a Philippine


Corporation
Foreign nationals or corporations may completely own a condominium or
townhouse in the Philippines. To take ownership of a private land, residential
house and lot, and commercial building and lot, foreigners may set up a
Philippine corporation in the Philippines. This means that the corporation owning
the land has less than or up to 40% foreign equity and is formed by 5-15 natural
persons of legal age as incorporators, majority of whom are Philippine residents.

Foreigners Leasing of Philippine


Real Estate Property
Leasing land in the Philippines on a long term basis is an option for foreigners or
foreign corporations with more than 40% foreign equity. Under the Investors
Lease Act of the Philippines, a foreign national and/or corporation may enter into
a lease agreement with Filipino landowners for an initial period of up to 50 years
renewable once for an additional 25 years.

Foreigners Owning Houses in the


Philippines
Foreigners owning a house or building in the Philippines is legal as long as the
foreigner does not own the land on which the house is build.

Foreigners Owning Condominiums


& Townhouses in the Philippines
The Condominium Act of the Philippines, R.A. 4726, expressly allows foreigners
to acquire condominium units and shares in condominium corporations up to not
more than 40% of the total and outstanding capital stock of a Filipino-owned or
controlled condominium corporation. However, there are a very few single-
detached homes or townhouses in the Philippines with condominium titles. Most
condominiums are high rise buildings.

Foreigners Married to a Filipino


Citizen
If holding a title as an individual, a typical situation would be that a foreigner
married to a Filipino citizen would hold title in the Filipino spouses name. The
foreign spouses name cannot be on the Title but can be on the contract to buy
the property. In the event of death of the Filipino spouse, the foreign spouse is
allowed a reasonable amount of time to dispose of the property and collect the
proceeds or the property will pass to any Filipino heirs and/or relatives.
Former Natural-born Philippine
Citizen now Naturalized American
Citizen
Any natural-born Philippine citizen who has lost his Philippine citizenship may
still own private land in the Philippines up to a maximum area of 5,000 square
meters in the case of rural land. In the case of married couples, the total area that
both couples are allowed to purchase should not exceed the maximum area
mentioned above.

Filipinos & Former Filipino Citizens,


Balikbayans & OFW
Former natural-born Filipinos who are now naturalized citizens of another country
can buy and register, under their own name, land in the Philippines but limited in
land area. However, those who avail of the Dual Citizenship Law in the Philippines
can buy as much as any other Filipino citizen. Under Republic Act 9225
(Philippines Dual Citizenship Law of 2003), former Filipinos who became
naturalized citizens of foreign countries are deemed not to have lost their
Philippine citizenship, thus enabling them to enjoy all the rights and privileges of
a Filipino regarding land ownership in the Philippines.

Steps to Gain Dual Citizenship:


If you are in the Philippines, file a Petition for Dual Citizenship and
Issuance of Identification Certificate (IC) pursuant to RA 9225 at the
Bureau of Immigration (BI) and for the cancellation of your alien certificate
of registration.
Those who are not BI-registered and overseas should file the petition at the
nearest embassy or consulate.

Requirements:
Birth certificate authenticated by the Philippines National Statistics Office
(NSO)
Accomplish and submit a Petition for Dual Citizenship and Issuance of
Identification Certificate (IC) pursuant to RA 9225 to a Philippine embassy,
consulate, or the Bureau of Immigration

Pay a $50.00 processing fee, schedule, and take an Oath of Allegiance


before a consular officer

The Bureau of Immigration in Manila receives the petition from the


embassy or consular office. The BI issues and sends an Identification
Certificate of citizenship to the embassy or consular office.

If a former Filipino who is now a naturalized citizen of a foreign country does not
want to avail of the Dual Citizen Law in the Philippines, he or she can still acquire
land based on BP (Batas Pambansa) 185 & RA (Republic Act) 8179 but limited to
the following:

For Residential Use (BP 185 enacted in March 1982):

Up to 1,000 square meters of residential land


Up to one (1) hectare of agricultural of farm land

For Business/Commercial Use (RA 8179 amended the Foreign Investment Act
of 1991):

Up to 5,000 square meters of urban land


Up to three (3) hectares of rural land

Real Estate Transaction Costs in the


Philippines
Purchases from Individuals:
Philippines Capital gains tax 6% of actual sale price. This is paid by the
seller but in some cases it might be expected that the buyer pays. This
percentage could differ if the property assessed is being used by a
business or is a title owned by a corporation, in this case the percentage is
7.5%
Philippines Document stamp tax 1.5% of the actual sale price. This is
paid by whether the buyer or the seller upon agreement. Normally however,
it is the buyer who shoulders the cost.

Philippines Transfer tax 0.5% of the actual sale price

Philippines Registration fee 0.25% of the actual sale price

Purchases from Developers:


Philippines Capital gains tax 10% of actual sale price. This value might
be expressed as part of the sale price.
Philippines Document stamp tax 1.5% of the actual sale price

Philippines Transfer tax 0.5% of the actual sale price

Philippines Registration fee 0.25% of the actual sale price

What is avulsion?
It is the deposit of known (identifiable) portion of land detached
from the property of another which is attached to the property of
another as a result of the effect of the current of a river, creek or
torrent.

Note: Art. 459 states that Whenever the current of a river, creek,
or torrent segregates from an estate on its banks a known
portion of land and transfers it to another estate, the owner of
the land to which the segregated portion belonged retains the
ownership of it, provided he removes it within 2 years.
What are the requisites of
avulsion?

1. Transfer is caused by the Current of a river, creek, or torrent.

2. Transfer is sudden or Abrupt

3. The Portion of the land transported is known or identifiable.

What is the rule on acquisition of


titles over an avulsion?

General Rule: Original owner retains title.

Exceptions: The owner must remove (not merely claim) the


transported portion within 2 years to retain ownership,
otherwise, the land not removed shall belong to the owner of the
land to which it has been adjudicated in case of:

1. Abandonment; or

2. Expiration of 2 years, whether the failure to remove be


voluntary or involuntary, and irrespective of the area of the
portion known to have been transferred.
What are the requisites for easement
on right of way?

1. The easement must be established at the point least


Prejudicial to the servient estate

2. Claimant must be an Owner of enclosed immovable or with real


right

3. There must be no adequate Outlet to a public highway

4. The right of way must be absolutely Necessary not mere


convenience

5. The isolation must not be Due to the claimants own act

6. There must be payment of proper Indemnity.

Can easement of right of way be


acquired by prescription?

No, because it is discontinuous or intermittent (Ronquillo, et al.


vs. Roco, GR No. L-10619, Feb. 28, 1958).
What if the property is not the
shortest way and will not cause
the least damage to the servient
estate?

The way which will cause the least damage should be used even
if it will not be the shortest. The easement of right of way shall
be established at the point least prejudicial to the servient
estate and where the distance from the dominant estate to a
public highway is the shortest. In case of conflict, the criterion of
least prejudice prevails over the criterion of shortest distance.

What are the rights of the


usufructuary as to the thing and
its fruits?

1. To Receive the fruits of the property in usufruct and half of the


hidden treasure he accidentally finds on the property (Arts. 566,
438, NCC)

2. To enjoy any Increase which the thing in usufruct may acquire


through accession (Art. 571, NCC)

3. To personally Enjoy the thing or lease it to another (Arts. 572-


577, NCC) generally for the same or shorter period as the
usufruct
4. To make such Improvements or expenses on the property he
may deem proper and to remove the improvements provided no
damage is caused to the property (Art. 579, NCC)

5. To Set-off the improvements he may have made on the


property against any damage to the same (Art. 580, NCC)

6. To Retain the thing until he is reimbursed for advances for


extraordinary expenses and taxes on the capital (Art. 612, NCC)

7. To Collect reimbursements from the owner for indispensable


extra ordinary repairs, taxes on the capital he advanced, and
damages caused to him

8. To Remove improvements made by him if the same will not


injure the property

What are the rights of the


usufructuary as to the usufruct
itself?

a. To Alienate or mortgage the right of usufruct (Art. 572, NCC)


XPN: parental usufruct (Arts. 225, 226 FC)

b. In a usufruct to Recover property/real right, to bring the action


and to oblige the owner thereof to give him the proper authority
and the necessary proof to bring the action (Art. 578, NCC)

c. In a usufruct of part of a Common property, to exercise all the


rights pertaining to the co-owner with respect to the
administration and collection of fruits or interests.
EXTINCTION/TERMINATIO
N OF USUFRUCT

How is usufruct extinguished?

1. Acquisitive Prescription

Note: the use by a third person and not the non-use by the
usufructuary

2. Total Loss of the thing Note: if the loss is only partial, the
usufruct continues with the remaining part.

3. Death of the usufructuary; unless a contrary intention appears.


Reason: Usufruct is constituted essentially as a lifetime benefit
for the usufructuary or in consideration of his person.

4. Termination of right of the person constituting the usufruct

5. Expiration of the period or fulfillment of the resolutory


condition

6. Renunciation by the usufructuary. Note: it partakes the nature


of a condonation or donation, it must comply with the forms of
donation.

7. Merger of the usufruct and ownership in the same person who


becomes the absolute owner thereof. (Art. 1275, NCC)
What happens when a co-
owner sells the whole
property as his?
The sale will affect only his own share but not those of the other
co-owners who did not consent to the sale.

Note: A sale of the entire property by one co-owner without the


consent of the other co-owners is not null and void but affects
only his undivided share and the transferee gets only what would
correspond to his grantor in the partition of the thing owned in
common (Paulmitan vs. CA, GR No. 51584, Nov. 25, 1992.)

RIGHT TO
CONTRIBUTIONS FOR
EXPENSES

What are the expenses which the co-


owners can be compelled to
contribute?
Only necessary expenses. Useful expenses and those for pure
luxury are not included.

What are those acts which require


the majority consent of the co-
owners?

a. Management

b. Enjoyment

c. Improvement or embellishment

What is the remedy in case the


minority opposes the decision of
the majority in co-ownership?

Minority may appeal to the court against the majoritys decision


if the same is seriously prejudicial.

What is easement of light (jus


luminum)?
The right to admit light from neighboring estate by virtue of the
opening of a window or the making of certain openings.

What is easement of view (jus


prospectus)?

The right to make openings or windows to enjoy the view thru the
estate of another and the power to prevent all constructions or
works which could obstruct such view or make the same
difficult.

Note: It necessarily includes easement of light.

What is the prescriptive period for


acquisition of easement of light
and view?

10 years.

From when does the prescriptive


period start to run?
The reckoning point depends on whether the easement is
positive or negative which, in turn, is dependent on where the
opening is made if it is made:

1. On ones own wall and the wall does not extend over the
property of another The easement is negative. Commencement
of Period of prescription-starts from the time formal prohibition is
made.

Reason: The owner merely exercises his right of dominion and


not of an easement. Negative easement is not automatically
vested as formal prohibition is a pre-requisite.

2. Thru a party wall or on ones own wall which extends over the
neighboring estate The easement is positive. Commencment of
Period of prescription starts from the time the window is
opened.

Reason: owner of the neighboring estate who has a right to close


it up allows an encumbrance on his property.

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