Saturday, October 01, 2011

Precautions in buying real estate

(Note: This post is part of my August 2009 article Guidelines and precautions in buying church property in another blog. You can download a free PDF of that article. The shortened version below is for the benefit of individuals buying real property.)

LRA website[1] Verify the title’s authenticity with the Register of Deeds; verify the seller’s identity

Get a certified true xerox copy of the land title. Do not depend on the copy provided by the landowner, even if it is certified. According to one media report, there are more than 100,000 fake land titles circulating in the Philippines.

If possible, check also if the person saying that he is the landowner is really the person mentioned as the registered owner. Meaning, the person saying that he is the landowner may just be posing as the real landowner. Ask for a valid ID.

If the title says that the registered owners are the parents of the person saying he is the landowner, that is a problem. There might be other heirs to that property. If there are several heirs claiming ownership of the land, and some heirs want to sell while others do not, that is a problem. The majority of the heirs cannot simply outvote those who do not want to sell. The heirs who want to sell must file a petition in court under Rule 69 of the 1997 Rules of Civil procedure.

If the landowner is married, then marital conformity is needed for the sale of the land.

If the person selling the land to you is merely an agent and not the registered owner, that is a problem. Ask to meet and deal with the real owner.

[2] Check the title for liens or encumbrances (adverse claim, notice of lis pendens, mortgage)

Check the back portion of the title to see if there are annotations for liens or encumbrances like adverse claim, notice of lis pendens, mortgage, etc. If there are liens or encumbrances on the title, then do not buy the property.

[3] Verify the title’s authenticity with the Land Registration Authority

If the copy of the title on file with the Register of Deeds is clean of any lien or encumbrance, then bring the certified copy of the title to the Land Registration Authority (LRA) in Quezon City, opposite the Land Transportation Office. Ask the LRA Task Force on Spurious Land Titles to verify if the title is genuine.

[4] Verify with the Assessor’s Office if the real estate taxes are paid up

If the LRA says that the title is genuine, then check with the Assessor’s Office if the “amilyar” or real estate taxes are paid up (no arrears or back taxes). If there are arrears, then talk to the landowner. You can propose for example to pay for the arrears but this should be part of the purchase price already. You need a written notarized document for this agreement on the payment of back taxes.

[5] Ask a geodetic engineer to survey the land and check the title’s technical description

Ask the landowner permission to have the land surveyed. The purpose is to determine the actual land area. If the title says that the land area is 2,000 square meters but the survey only shows that the area is 1,500 then you can ask for a proportional reduction in the price.

[6] Conduct an ocular inspection of the land

Check the land for potential problems (for examples, if the area is prone to floods, if the property has access roads or right of way, etc).

[7] Clarify with the seller who will pay the transfer taxes and notarial fee

Clarify with the landowner as to who will shoulder the payment of the taxes (transfer, capital gains, etc).

You have to clarify also with the landowner as to who will pay the notarial fee for the deed of sale. The notary public usually charges one percent of whatever the price mentioned in the deed is. For example, if the price mentioned in the deed of sale is two million pesos, the notary public will charge Php 20,000.00 as notarial fee.

[8] Have a paper trail of your payment

In the actual payment, paying in cash is not recommended. You must have a paper trail of your payment. You can ask your bank to issue a manager’s check or cashier’s check. Before signing the deed of sale, the landowner can verify from the bank if the check is genuine or is funded, etc.

“Dapat kaliwaan”, as we say in the vernacular. When you present the check for payment, the landowner must at the same time give you the title. After you receive the title, “dapat malinis na”. Meaning, all you have to do after paying and receiving the title, is to work on the transfer of the title to your name.

[9] Submit required documents with the Register of Deeds

In transferring the title to your name, you will have to submit all the documents to the Register of Deeds (RD). Beforehand, you need to get the confirmation receipts from the BIR and the Assessor’s office. If the documents are complete and the BIR and Assessor’s office issue the proper documents saying that the taxes have been paid, then the RD will now transfer the title to the church’s name.

[10] What to do if the land is donated to you

There is no such thing as “verbal donation” when it comes to lands. The New Civil Code of the Philippines requires donations worth more than five thousand pesos and the acceptance of such donation to be made in a notarized document. In a donation, the donor’s tax (20% of the value of the property) must be paid within 30 days from the time the deed of donation is executed.

[11] What to do if the landowner refuses to hand over the title despite your full payment

If you have fully paid for a property but the landowner refuses to hand over the title, you should file immediately an “affidavit of adverse claim with the Register of Deeds. Within 30 days from the time the adverse claim was annotated, you must file a case in court either for:

  • specific performance (for the landowner to hand over the title), or
  • rescission (cancellation of the contract).
With either case, you can ask for attorneys fees and damages.

[12] Paying by installment

In a contract of sale by installments, there is sometimes a part of the contract that provides for an “acceleration clause.” This means that failure to pay one or more installments will make the whole amount due and demandable. For example, you are bound to pay two million pesos in 24 monthly installments for the land. You paid the January and February installments, failed to pay the March installment, and then continued paying again. If there is an acceleration clause in the contract, then that failure to pay the March installment, for example, gives the landowner the right to demand that you pay the total sale price at once.

[13] Make sure the real estate developer complies with government regulations

If you are buying a subdivision lot, make sure that the developer has all the necessary government permits. Keep all receipts for payment.

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