Philippine Real Estate Laws

The Philippines follows the Torrens system of land registration, wherein ownership and title to land are registered with the government. It is important for buyers and sellers to verify the ownership and title of the property they are dealing with to avoid any disputes or issues in the future. Liens, encumbrances, and disputes related to the property should also be carefully examined to ensure a clean and marketable title.
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The contract of sale is a critical document in real estate transactions as it outlines the terms and conditions of the sale. It is important to include key terms such as the purchase price, mode of payment, and timeline for completion. Thorough review and legal advice should be sought before signing the contract to ensure that the rights and interests of both parties are protected.
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Zoning and land use classification in the Philippines can significantly impact the permitted uses, development potential, and restrictions of a property. Buyers and sellers should understand the zoning and land use regulations in the area where the property is located and verify the permits and clearances required from the local government.
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Understanding mortgage terms and conditions is important for buyers who may require financing to purchase a property. Factors such as interest rates, repayment terms, and consequences of default should be carefully considered. If the property has existing mortgages or liens, it is important to properly discharge or settle them to ensure a clear title.
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The Philippines uses the Torrens system of land registration. Under this system, a Torrens title is conclusive against third parties, including the government. A holder of a Torrens title in good faith is guaranteed that his/her title is indefeasible, unassailable and imprescriptible.

In the Philippines, the sale of real property must be in writing and notarized to be considered legally binding. Additionally, the seller must have the legal capacity to sell the property, and the buyer must have the capacity to acquire it. Moreover, certain formalities such as registration with the Register of Deeds are required to ensure the validity of the sale.
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When selling real property in the Philippines, the seller is generally responsible for paying the capital gains tax (6%) addtional 12% for company owned, broker fee (3 % to 5%) which is a percentage of the property`s selling price. The buyer, on the other hand, is responsible for paying the documentary stamp tax, transfer tax, and new title registration fees.

Upon full payment of the purchase price and compliance with other obligations under the contract, the seller is required to execute a deed of absolute sale in favor of the buyer. This formalizes the transfer of ownership from the seller to the buyer.
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For the sale of real property to be valid, the deed of sale must be notarized and registered with the appropriate government office, such as the Register of Deeds. This process provides public notice of the transaction and protects the buyer`s ownership rights.
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The Maceda Law, also called as “The Realty Installment Buyer Act or Republic Act 6552,” is initiated by lawmaker Ernesto Maceda and has been in place since 1972. This law concerns potential homebuyers who are planning to buy a property from a real estate developer or contractor that offers installment scheme for the equity payment. Pre-selling units is one of the most popular real estate offerings in the Philippines that are being availed mostly by the working class or Overseas Filipino Workers (OFWs) who are dreaming of becoming a homeowner. Typically, pre-selling units—may it be a house and lot or condominium—work by paying an equity payment that is stretched out to 12 months or longer straight to the developer or contractor. Afterwards, the rest of the property price will be paid through a loan with a bank or other financial institutions that offer housing loans. In case the buyer can no longer keep up with the equity payment because of financial or any other personal concern, naturally, a buyer would ask if it is possible to refund at least a part of the payment. The Maceda Law is now to be applied in this scenario as a protection to the buyer. Basically, once the buyer has paid at least two years with the real estate developer or contractor, the law indicates that the buyer has a right to grace periods without additional interest or even a refund. For buyers who paid less than two years, only a grace period of 60 days without additional interest applies. To the buyers who are concerned about contract cancellation, there is also a section in the Maceda Law that emphasizes its overriding power against the contract made by the developer and the buyer. It protects the buyers from the fine prints of the contract imposed to them that most often than not, they failed to review thoroughly during the contract signing.
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The Presidential Decree No. 957 (P.D. 957), also called as the “The Subdivision and Condominium Buyers’ Protective Decree,” was initiated and signed during the regime of late President Ferdinand Marcos Sr. in 1976. This law was passed to immediately address the fraudulent transactions happening in the the real estate business at the time. The main purpose of Presidential Decree No. 957 (P.D. 957) is to protect the buyers’ interests from any type of misrepresentation in real estate, especially if the property seller or developer seem to be suspiciously involved in fraudulent activities. Purchasing a real estate property almost always involves a huge amount of money so it is not surprising that the industry became a target for illegal schemes aimed to deceive buyers. P.D. 975 contains rules and regulations that govern the entire process of buying and selling a home, in addition to preventing fraudulent transactions. This protects the buyers from developers who fail to deliver to their contract—starting from the point of sale to turnover of unit, even to the processing of property title of ownership. It also includes the other laws about the buyers’ rights after the sale and the developer’s obligations. P.D. 957 also states the policies in dealing with real estate professionals such as developers, dealers, brokers, and agents. This gives the buyer the right to file a complaint when a business practice that is against the law has been observed. In line with that, this decree includes the sanctions and penalties for the real estate professionals if they violated any of the governing laws of real estate.
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The Condominium Act, also called as the Republic Act No. 4726 (RA 4726), has been enacted as early as 1966. It governs the ownership, rights, and obligations of condominium owners, and enumerates the rules and requirements for the creation of condominiums. A condominium is an interest in real property that consists of a separate interest in a unit in a building, as defined by law (whether residential, industrial or commercial). The interest also includes an undivided common interest in the land on which the building is constructed, as well as the building’s common areas.In the act’s provisions of this Philippine Real Estate Law, there are inclusions regarding the regulations on common areas and the exclusive rights of a condominium unit owner. Guidelines on refinishing or decorating the unit, selling, or disposal are also included in the Condominium Act. Basically, this allows people the right to land co-ownership aside from their unit in which they have absolute ownership. It also explains the extent of the unit owners’ influence when it comes to the property. This protects the buyers from being misled by the condominium developers regarding the management of their unit.
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Accordion Content

The Presidential Decree No. 464 has been enacted in 1974 to implement a real estate tax code starting from the regime of the late President Ferdinand Marcos Sr. P.D. 464 is the code that provides the guidelines of how real properties should be assessed and appraised for tax purposes. Some of the factors that affect the assessment includes the current market value, uniformity in each location, and the specific purpose of the property. This assessment aims to equally distribute the burden on real estate properties’ taxes. This process is done by the government which means that there is no private entity that can assess, appraise, or collect real property taxes.Real property tax is different from the taxes involved upon the sale of a real estate property. When purchasing a new house and lot, condominium, or any other real estate property, there are more taxes involved that need to be settled to proceed with the transaction.
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