Buying Property in the Philippines

Philippine Real Estate Definition of Terms

• Acquisition is the act of procuring or getting 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. The Philippines uses the " Torrens " system of real estate ownership.

The Torrens System of Real Estate Ownership

• An adapted form of the "Torrens" system of land registration is used in the
  Philippines. This 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 imprescriptible. The registered owner will never lose his ownership to squatters no matter how long such land was illegally occupied.

Taking Title to Philippine Real Estate

• The Deed of Sale is the document showing legal transfer of real estate property ownership.

• The Deed of Sale is taken to the Registry of Deeds to be officially recorded.

• Always purchase property with a proper Deed of Sale if possible, and if there is not one, a Tax Declaration is your last choice.

• Tax Declarations are sometimes used but are not very enforceable in court because there may be many others with a Tax Declaration claiming ownership of the same property. A property may be Titled by taking the Tax Declaration to the Registry of Deeds.

• Owners must be active in enforcing their property rights. Possession is 90% 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. As such, 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.

Typical Transaction Costs - Purchases from Individuals

• 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%

• Document stamp tax - 1.5% of the actual sale price. This is paid by the seller but in some cases it might be expected that the buyer pays.

• Transfer tax - 0.5% of the actual sale price.

• Registration fee - 0.25% of the actual sale price. 

Typical Transaction Costs - Purchases from Developers

• Capital gains tax - 10% of actual sale price. This value might be expressed as part of the sale price.

• Document stamp tax - 1.5% of the actual sale price.

• Transfer tax - 0.5% of the actual sale price.

• Registration fee - 0.25% of the actual sale price.

Note: This document is for information purposes only. The user assumes all risks for its use. Philippine-Real-Estate.info assumes no responsibility for such use.

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