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What Are The Fundamentals Of Property Ownership?


What is the General Rule of Holding or owning a Real Estate?

1. General Rule – only Filipino citizens and corporations at least sixty percent of the capital of which is owned by Filipino are entitled to acquire and own land in the Philippines.


2. Exceptions to General Rule – Alien acquisition of real estate in the Philippines is allowed in the following cases:


a) Acquisition before the 1935 Constitution;


b) Acquisition thru hereditary succession if the alien acquires is a legal heir.


c) Purchase of not more than forty percent interest in a condominium project.


d) Purchase by former natural-born Filipino citizens subject to the limitations prescribed by law (Batas Pambansa 185 and R.A. 8179).


3. A Filipino who marries an alien retains her Philippine citizenship (unless by her act or omission she is deemed to have renounced Philippine citizenship), and may therefore acquire real estate in the Philippines.


Acquisition By Former Natural-Born Filipino Citizens


1. Mode of acquisition is not limited to voluntary deeds (such as sale or donation) but includes involuntary deeds (such as tax sale, foreclosure sale, or execution sale).


2. Maximum area that may be acquired is as follows :

a) For residential purpose – 1,000 square meters of urban land or one hectare of rural land.


b) For business purpose – 5,000 square meters of urban land or three hectares of rural land.


“Business purpose” refers to the use of the land primarily, directly, and actually in the conduct of business or commercial activities in the broad areas of agriculture, industry and services, including the lease of land, but excluding the buying and selling thereof.


3. In case of married couple where both spouses are former natural-born Filipino citizens, one or both of them may avail of the privilege, provided that the total acquisition shall not exceed the maximum area allowed.


4. A transferee who already owns urban or rural land for residential purpose acquired while still a Filipino citizen, may acquire additional urban or rural land for residential purpose which, when added to that already owned by him, shall not exceed the maximum area allowed by law.


The same privilege applies to a transferee who already owns urban or rural land for business purpose.


5. A transferee who already acquired urban land for residential purpose shall be disqualified to acquire rural for residential purpose, and vice-versa. The same rule applies to a transferee of land for business purpose.


However, a transferee of residential land under B.P. 185 may still avail of the privilege to acquire land for business purpose under R.A. 8179.


6. For registration of a conveyance in favor of the transferee, he must submit to the


Register of Deeds a sworn statement on the following: date and place of birth;


name of parents, brothers, sisters, and spouse; location, area and mode of acquisition of present landholding; date when he lost his Philippine citizenship; and his present citizenship.


For transferees of land for residential purpose, the sworn statement shall include his intention to reside permanently in the Philippines.


For transferees of land for business purpose , the sworn statement shall include a declaration to use the land for business purpose. Furthermore, the transferee shall submit a certification of business name registration with the Bureau of Trade


Regulation and Consumer Protection. And in case the land is agriculture, he shall likewise submit a certification from the Department of Agrarian Reform that the land is a retained area of the transferor and an affidavit of the transferee that the total landholding inclusive of the land to be acquired does not exceed five hectares.


Lands Of The Public Domain


1. Under the Constitution, lands of the public domain are classified into agricultural, forest or timber, mineral, and national parks.


2. Alienable lands of the public domain shall be limited to agricultural lands.


3. Filipino citizens may acquire alienable lands of the public domain not more than twelve hectares by purchase , homestead , or patent ; or lease not more than 500 hectares.


Private corporations cannot acquire, but may only lease alienable lands of the public domain for a period not exceeding twenty-five years, renewable for the same term, and not to exceed 1,000 hectares.

Stewardship Concept Of Ownership

Ownership carries with it a social obligation. As stewards of their land, owners are obliged to use their property to promote not only their interest but also the general welfare. When a person’s landholding exceeds the requirement of his needs, or his utilization is not conducive to general welfare, the State may exercise its power to regulate and control ownership.


Fee Simple


This refers to the “bundle of rights” or attributes which are inherent or appurtenant to ownership, without any limitation or restriction other than those imposed by law or contract. The bundle of rights includes the right to use, to possess, to the fruits, to dispose, and to vindicate or recover.


Rights Of Accession


1. In General – The ownership of property gives the right by accession to everything which is produced thereby, or which is incorporated or attached thereto, whether naturally or artificially.


2. With Respect to Produce of Property – To the owner belongs the:

a) Natural fruits – the spontaneous product of the soil.


b) Industrial fruits – those produced by land cultivation or labor.


c) Civil fruits – the rental income of buildings and/or lands.


3. With Respect to Immovable Property :


a) The owner of land on which anything has been built, sown or planted in good faith shall have the right :


aa) To appropriate as his own the works, sowing or planting after payment of indemnity provided by law.


bb) To oblige the builder or planter to pay the price of the land. However, the builder or planter cannot be obliged to pay for the if its value is considerably more than that of the building or planting. In such case, he shall pay reasonable rent if the owner does not choose to appropriate the building after proper indemnity. The parties shall agree on the terms of the lease and in case of disagreement, the court shall fix the terms thereof.


b) The owner of the land on which anything has been built , planted or sown in bad faith may :


aa) Demand and demolition of the work or removal of the planting or sowing at the expense of the builder or planter, or


bb) Compel the builder or planter to pay the price of the land and the sower, the proper rent.


The landowner is also entitled to damages from the builder, planter or sower.

c) If there was bad faith on the part of the landowner and the builder/planter/sower, the rights of the parties shall be the same as if both had acted in good faith.


d) To the owners of land adjoining the banks of rivers belong the accretion which they gradually receive from the effects of the current of the water.


e) The owners of estates adjoining ponds or lagoons do not acquire the land left dry by the natural decrease of the waters, or lose that inundated by them in extraordinary floods.


f) River beds which are abandoned through the natural change in the course of the waters belong to the owners whose lands are occupied by the new bed in proportion to the are lost. However, the owner’s of the land adjoining the old bed shall have the right to acquire the same by paying the value of the area occupied by the new bed.


g) Whenever a river, changing its course by natural causes, opens a new bed through a private estate, the bed shall become a public dominion.


Limitations To Bundle Of Rights


Legal or Governmental Limitations:


a) Zoning – refers to land use classifications and the allowable utilization under each classification.


b) Taxation – the power of the government or any of its political subdivisions to impose charge or burden upon persons, property or property rights for the use and support of the government.


c) Eminent Domain – the power of the State or any of its instrumentalities to take private property for public use and payment of just compensation.


d) Other provisions of law such as legal easement, the requirement of legitime in succession, prohibition against sale and encumbrance of property acquired by patent, rent control, laws on subdivision development, urban and agrarian reform, etc.


2. Contractual or Voluntary Limitations – Those imposed by the grantor of the property to the grantee, either by contract (e.g. donation), or by last will; or those imposed by the owner, himself such as voluntary easement, mortgage, lease, use restrictions in subdivision contracts, etc.


Hidden Treasure


1. Hidden treasure belongs to the owner of the land, building, other property on which it is found.


2. When the discovery is made on the property of another, or of the State or any of its subdivisions, and by chance, one-half of the treasure, shall be allowed to the finder. If the finder is a trespasser, he shall not be entitled to any share of the treasure.


3. If the things found be of interest to science or arts, the State may acquire them at their just price, which shall be divided in conformity with the rule above stated.


4. Hidden treasure, for legal purpose is understood to be any hidden and unknown deposit of money, jewelry, or other precious objects, the lawful ownership of which does not appear.


Meaning Of “Title”


“Title” is not synonymous with Torrens Certificate of Title. Rather, it is a generic word which means proof, evidence, or monument of ownership, such as tax declaration, realty tax receipts, deed of sale, and Torrens Certificate of Title. But, of course, the best title or best evidence of ownership is the Torrens Title because it is indefeasible, imprescriptibly, and binding against the whole world.


Modes Of Acquiring Title


1. Private Grant - voluntary transfer or conveyance of private property by a private owner, such as sale or donation.


2. Public Grant – acquisition of alienable lands of the public domain by homestead patent, free patent, sales patent, or other government awards.


3. Involuntary Grant – acquisition of private party against the consent of the former owner, such as foreclosure sale, execution sale, or tax sale.


4. Inheritance – acquisition of private property through hereditary succession.


5. Reclamation – filling of submerged land, subject to existing laws and government regulations.


6. Accretion – acquisition of more lands adjoining the banks of rivers due to the gradual deposit of soil as a result of the river current.


7. Prescription – acquisition of title by actual, open, continuous, and uninterrupted possession in the concept of owner for the period required by law.

Sale of Real Property Used in Business Exempt from VAT

The sale of a mall building used by a company engaged in wholesale and retail for its department store/dry goods section and grocery store operations, with less than five percent of the total mall building space rented out to tenants, is exempt from value-added tax (VAT) in accordance with BIR Ruling DA 130-A-03, April 25, 2003.


Pursuant to the VAT law and regulations, the sale of real properties not primarily held for sale to customers or held for lease in the ordinary course of trade or business is exempt. To be “held” primarily for sale or lease,” the property must be held with the chief intention of being sold or leased. Since the main line of business of the seller is wholesale and retail of goods, wares, merchandise and other commodities, the subject real properties cannot be considered as being held primarily for sale to customers.


On the other hand, while a small portion of the mall building is being rented out, this only constitutes less than five percent of the total mall building spaces. Thus, it cannot be said that the subject properties are held primarily for lease.


Furthermore, the sale was not made in the ordinary course of the regular trade or business, but was merely an isolated transaction. The properties are likewise not among the stock in the trade of the company since it is not primarily engaged in the buying and selling of real properties, nor in the leasing of properties.

Tax and other Incentives for locators in IT Parks and Zones


To encourage and support the development of world-class eco-zones in the country, the Philippine government established the Philippine Economic Zone Authority (PEZA). PEZA, a part of the Department of Trade and Industry, has taken an aggressive and direct role in attracting investments into the Philippines.


Under Rule XV of the Rules and Regulations to Implement Republic Act No. 7916, PEZA registered locators within Philippine IT Parks and Zones can be granted the following tax incentives:

1. Exemption from the payment of all national internal revenue taxes, such as gross receipts tax, value-added tax, ad valorem tax, excise tax, income tax, documentary stamp tax, percentage taxes, and all other taxes found in the National Internal Revenue Code.


2. Exemption from the payment of all local government impost, fees, licenses or taxes including local business tax, transfer tax on the sale of real property, real estate taxes, community tax, mayor’s permit fee, sanitary fee, other regulatory fees and other taxes and fees found in the Local Government Code and particularly in the Tax Ordinance of the local government unit where the economic zone is located.


3. In lieu of the exemption from national and local taxes, the ECOZONE enterprise shall pay a 5% final tax on gross income. For an ECOZONE export enterprise, the following are considered to be allowable deductions from net sales:


Direct salaries, wages or labor expenses

Service or production supervision salaries

Raw materials

Goods in process

Finished goods

Supplies and fuels used in production

Depreciation of machinery, equipment and buildings owned and/or constructed

Financing charges associated with fixed assets

Rent and utility charges for buildings, equipment, and warehouses, or handling good


4. One-half of the value of training exercises incurred in developing skilled or unskilled labor or for managerial or other management development expenses incurred may be deducted from the 5% final tax (chargeable against the share of the national government).


5. Exemption from duties and taxes on imported capital equipment, spare parts, raw materials, and supplies.


6. Exemption from wharfage dues, export tax, impost or fee.


7. For the first five years of operation, additional deduction equivalent to one-half of the wages paid corresponding to the increment in the number of direct labor for skilled and unskilled workers.


PEZA* Registrable Activities


1. Software development for business, e-commerce, education and entertainment;


2. Content development for multimedia or Internet purposes;


3. Hardware design, prototype production and related activities;


4. Knowledge and computer-based support service activities such as but not limited to the following:

• Regional/worldwide software support

• Data encoding and conversion

• Systems integration

• Project implementation

• IT consultancy

• Call center

• Shared service centers / Backroom support

5. Research and development services;


6. Other related IT and computer-based services/activities as may be identified and approved by the PEZA Board.


*Philippine Economic Zones Authority


Philippine banks and financial institutions for real estate loans





Philippine National Bank Philippine National Bank


Land Bank of the Philippines


Bank of the Philippine Islands




Hong Kong and Shanghai Banking Corp.


Metro Bank


Philippine Savings Bank


United Coconut Planters Bank


Equitable-PCI Bank


Union Bank


How to Eliminate Risk in Real Estate Investment!


Avoid 12 Common Mistakes Made by Novice Investors and Ensure High Rates of Return!


Real estate investment has provided many investors with positive cash flow, tax benefits and satisfaction of making an impact in others lives. Like any investment however, real estate has intricate nuances and market trends that when ignored can cause an investor tremendous heart ache.


Unbelievably many first time investors are willing to part with their hard earned cash without taking the time to study their investment. They rely on traditional trends and gut feelings. Before you risk your investment take the time to learn all you can about your market. By aligning yourself with the right professional you can avoid these 12 common mistakes and you’ll ensure an excellent return on your investment.


Failure to Determine Your Time Need - Cash flow, capital appreciation, tax benefits, loss of management, equity paydown and pride of ownership are just some of the things that need to be addressed before you make that investment. A service minded real estate professional can be a tremendous asset by taking the time to evaluate your needs and making sure you’ve got all your bases covered.

Not Checking out the Seller or Sellers Agents Numbers - Claims of extremely high rates of return run rampant in real estate investment. Don’t get caught up in the excitement - check everything: rents, payment history, taxes, expenses, deposits, future modifications... everything. Make sure you have the right agent...it’s like having a good insurance policy against overlooking all the seemingly insignificant but very important details.


Forgetting You Are Buying a Business - Owning investment property carries with it a great potential for creating wealth and... some potentially difficult decisions. Evictions, re-investment into the property and time management all need careful consideration. Remember this is not a ‘hands off’ business.


Avoid Negative Cash Flow - Property that eats cash every month can drain your working capital. This can create stress, frustration and become quite painful. Predicting constant appreciation is extremely difficult if not impossible for the unseasoned investor. A strain on your cash flow may cause you to sell the investment before the benefits of ownership are ever realized.


Failure to do a Thorough Inspection - Look under every rock! Hire a professional inspector. Ask the tenants about pest problems, structural damage or reoccurring problems. Don’t overlook anything! A value driven real estate professional will help you find the right inspector and can help you avoid costly mistakes. When investing your hard earned money be sure and use sound business judgment!

Failing to Have Adequate Insurance - Investment property brings liability. Tenants, cars, parking lots, cleaning facilities, property liability - the list is quite extensive. Adequate insurance coverage is an absolute must! Be sure to consult with an insurance professional and protect your hard earned assets.


Inspect, Approve, and Confirm All Documents - The list of documents that need to be proofed can be overwhelming to the first time investor. Building permits, zoning laws, rental and lease applications, health licenses, laundry leases, underlying loan documents, CC&R’s, by-laws, title policies, mineral leases, inspection reports, purchase contracts, insurance.. don’t attempt to do it alone. The right professional can remove most of the stress and bring the transaction to a conclusion smoothly.


Get a Bill of Sale For All Property Involved - Many types of personal property (appliances, furniture, fixtures, etc.) can be involved in an investment sale. Be very detailed -know who owns what!


Charge Fair Rents - Vacancies, turnovers and lease terminators are your biggest expense. Charge fair rents, treat your tenants with respect and respond as quickly as possible to their needs. It’s a lot less costly in the long run to take care of the little problems before they become big problems. Vacant property is your Achilles heel.


Select Qualified, Good Tenants From the Start - Take the time to check references. Previous landlords, employers, financial references, credit and judgments are all vitally important. If there are any questions do a thorough investigation. Drive by their previous residence. A little work up front can save tremendous problems later.

Make Sure You Get Estoppel Letters - Get letters from tenants confirming the status of tenancy. Make sure their version of the rental or lease agreement corresponds with the sellers interpretation.


Don’t Spend Positive Cash Flow - Most of successful investors have free and clear properties. Be sure to re-invest your cash flow back into the property payment and speed up the amortization schedule. This decreases your debt load and increases your equity which builds your net worth.


Investment property can be one of the most rewarding aspects of your financial portfolio. Be certain to have all your ducks in a row before you invest. Do your homework! Consult with a professional real estate agent and protect yourself from the hidden troubles that can plague first time investors.

5 Secrets to Buying the Best House for Your Money


1. Get "Pre-Approved" - Not "Pre-Qualified!"

Do you want to get the best property you can for the least amount of money? Then make sure you are in the strongest negotiating position possible. Price is only one element in the negotiations, and not necessarily the most important one. Often other terms, such as the strength of the buyer or the length of escrow, are critical to a seller.


In years past, I always recommended that buyers get "pre-qualified" by a lender. This means that you spend a few minutes on the phone with a lender who asks you a few questions. Based on the answers, the lender pronounces you "pre-qualified" and issues a certificate that you can show to a seller. Sellers are aware that such certificates are WORTHLESS, and here's why! None of the information has been verified!


Many times unknown problems can come to the surface! Some of the problems I've seen include recorded judgments, alimony payments due, glitches on the credit report due to any number of reasons both accurately and inaccurately, down payments that have not been in the clients' bank account long enough, etc.


So the way to make the strongest offer today is to get "pre-approved". This happens AFTER all information has been checked and verified. You are actually APPROVED for the loan and the only loose end is the appraisal on the property. This process takes anywhere from a few days to a few weeks depending on your situation. It's VERY POWERFUL and a weapon I recommend all my clients have in their negotiating arsenal.


2. Sell Your Property First, Then Buy the House


If you have a house to sell, sell it before selecting a house to buy! Contingency sales aren't nearly as strong as one that comes in with a ready, willing and able buyer. Consider this scenario: You've found the perfect house - now you have to go make an offer to the seller. You want the seller to reduce the price and wait until you sell your house. The seller figures that this is a risky deal, since he might pass up a buyer who DOESN'T have to sell a house while he's waiting for you. So he says OK, he'll do the contingency but it has to be a full price offer! You have now paid more for the house than you could have because of the contingency, and you have to sell your existing house in a hurry! Otherwise you lose the house! So to sell quickly you might take an offer that's lower than if you had more time. The bottom line is that buying before selling might cost you THOUSANDS of dollars.


If you're concerned that there is not a house on the market for you, then go on a window-shopping trip. You can identify possible houses and locations without falling in love with a specific house. If you feel confident after that then put your house on the market.


Another tactic is to make the sale ''subject to seller finding suitable housing''. Adding this phrase to the listing means that WHEN YOU DO FIND A BUYER, you will have some time to find the new place. If you don't find anything to your liking, you don't have to sell your present home.


3. Play the Game of Nines


Before house hunting, make a list of things you want in the new place. Then make a list of the things you don't want. You can use this list as a guide to rate each property that you see. The one with the biggest score wins! This helps avoid confusion and keeps things in perspective when you're comparing dozens of homes.


When house hunting, keep in mind the difference between ''STYLE AND SUBSTANCE''. The SUBSTANCE are things that cannot be changed such as the location, view, size of lot, noise in the area, school district, and floor plan. The STYLE represents easily changed surface finishes like carpet, wallpaper, color, and window coverings. Buy the house with good SUBSTANCE, because the STYLE can always be changed to match your tastes. I always recommend that you imagine each house as if it were vacant.


Consider each house on its underlying merits, not the seller's decorating skills.

4. Don't Be Pushed Into Any House

Your agent should show you everything available that meets your requirements. Don't make a decision on a house until you feel that you've seen enough to pick the best one.


A decade ago, homes were selling quickly, usually a few days after listing. In that kind of market, agents advised their clients to make an offer ON THE SPOT if they liked the house. That was good advice at the time. Today there isn't always this urgency, unless a home is drastically underpriced, and you'll know if it is.


Don't forget to check into the SCHOOL DISTRICTS of the area you're considering. Information is available on every school; such as class sizes, % of students that go on to college, SAT scores, etc. You can get this information from this web site.


5. Stop Calling Ads!


Please note - ads are sometimes created to make the phone ring! Many of the homes have some drawback that's not mentioned in the ad, such as traffic noise, power lines, or litigation in the community. What's not mentioned in the ad is usually more important than what is.


For this reason, I want you to be very careful when reading ads. Remember that the person writing the ad is representing the seller and not you! The most important thing you can do is have someone on your side looking out for your best interests. Your own agent will critique the property with an eye towards how well it meets your needs and will point out any drawbacks you should know about. So whether you decide to work with me or not, pick an agent you feel comfortable with and enlist the services of that agent as a buyer's broker. Then you become a client with all the rights, benefits, and privileges created by this agency relationship, and you're no longer just a shopper. Did you know that many homes are sold WITHOUT A SIGN ever going up or an AD EVER BEING PUT IN THE PAPER? These "great deals" go to those people who are committed to working with one agent. When an agent hears of a great buy, who do you think he's going to call? His client, who he has a legal obligation to work hard for you, or someone who just called on the phone and said "keep your eyes open"? So to get the best buy on a property, I always recommend that you hire your own agent and stick with him or her.