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Understand the title deed when buying a property in the Philippines

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Investing in property in the Philippines can be a wise decision. The country offers a variety of options, including beachfront condos, tropical island retreats, and city apartments, making it an attractive market.

For international buyers, navigating the complexities of the Philippine real estate market can be quite challenging, particularly when verifying the authenticity and legality of the "Transfer Certificate of Title (TCT)," which is the official title deed used for land ownership in the Philippines.

We have actually covered this specific document (among others, like the sales contract) in our property pack for the Philippines.

In this article, we will give some insight to ensure a smooth and legally compliant property transaction in the Philippines.

However, please do not forget that this blog post is for informational purposes only and that we are not legal experts. It's always advisable to consult with one. They can indeed thoroughly examine your specific situation and provide you with the most appropriate and tailored advice.

What is the Transfer Certificate of Title in the Philippines?

The Transfer Certificate of Title (TCT) in the Philippines is a critical document in real estate transactions. It's an official record that proves ownership of a property.

Unlike other property documents, such as tax declarations or contracts of sale, the TCT is the definitive legal evidence of ownership. It's issued by the Registry of Deeds, a government agency responsible for maintaining public records of real estate ownership and transactions.

When you hold a TCT, it means you have the legal right to possess, use, and dispose of the property.

This document outlines the property's location, size, and the name of the owner. It's important to understand that the TCT does not guarantee the condition of the property, nor does it show any liens or encumbrances (like mortgages) unless they are specifically annotated on the title.

The TCT is considered a reliable document in the Philippines. However, it doesn't confer rights like the freedom to develop the property in any way you like. Local zoning laws, building codes, and environmental regulations still apply.

For resale and inheritance, the TCT is crucial. To sell the property, you need to transfer the title to the new owner. In case of inheritance, the title needs to be legally transferred to the heirs. This process involves updating the TCT to reflect the new ownership.

Foreign investors should pay special attention. While they can own condominium units or buildings, they can't own land unless they inherit it or acquire it before 1935.

For those investing through a corporation, the TCT will be in the corporation's name, with the foreign investor's participation subject to legal restrictions.

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How to verify a title deed in the Philippines?

The process

Verifying the authenticity of a Transfer Certificate of Title (TCT) in the Philippines is a critical step in real estate transactions.

It's important to approach this process methodically to ensure the legitimacy of the property's title.

Start by contacting the Registry of Deeds, the government body responsible for recording land titles. Request a "Certified True Copy" of the title to confirm the details and authenticity of the TCT. This step is fundamental and should be your first point of action.

Next, consult the Land Registration Authority (LRA). The LRA maintains a comprehensive repository of land records and can provide additional information on the title's history, including any encumbrances or undisclosed issues.

Lawyers are invaluable in this process. They have the expertise to navigate the legal landscape and can identify any legal discrepancies or issues with the title that may not be immediately apparent.

While notaries are essential for document authentication, their role in title verification is limited. They authenticate signatures and legal documents but typically don't verify title details.

However, if they notice inconsistencies in documentation, it might signal a problem.

Real estate agents, especially those with experience and a strong market reputation, can offer practical advice and help identify potential issues. Their knowledge of the local real estate market can be beneficial, but remember, their legal capacity to verify a TCT is limited compared to that of lawyers and government officials.

Identifying red flags is crucial in avoiding scams. Be attentive to discrepancies between the property description on the TCT and the actual property. The owner's name on the TCT must match the seller's identity. Any signs of tampering or alteration on the TCT document are major red flags.

A history of frequent sales in a short period can indicate potential problems. Pressure tactics or an unusual sense of urgency from the seller should be treated with suspicion. Ensure there are no unresolved liens, encumbrances, or annotations on the title.

Transactions where the seller avoids legal procedures or the involvement of legal professionals should be approached with caution.

What to check

Understanding a property's history and ensuring accurate information in the Transfer Certificate of Title (TCT) are critical aspects of real estate transactions in the Philippines.

To access and trace the property's history records, you start at the Registry of Deeds where the property is located. Requesting a "Certified True Copy" of the title will give you the current details, but for a full history, you'll need to ask for a "chain of title."

This shows all previous transactions and ownership changes. You can also check with the Land Registration Authority (LRA), which maintains a comprehensive database of land records.

Knowing the property's past ownerships and transactions is important for several reasons. It helps to confirm the legitimacy of the title, reveals any patterns of disputes, and provides insight into the property's market value trends.

To check for outstanding debts or liens against the property, examine the "Encumbrances" section of the TCT. This section lists any legal claims or debts attached to the property, such as mortgages, tax liabilities, or court judgments.

It's crucial to address these before proceeding with a transaction, as they can transfer to the new owner upon purchase.

The implications of these encumbrances for a new owner are significant. If not resolved, you could be legally responsible for settling these debts. In some cases, this might lead to legal disputes or financial burdens that could affect your ownership rights.

Verifying the accuracy of the property’s measurements and boundaries as stated in the title deed involves comparing the title's description with physical surveys and local government records.

You can hire a licensed geodetic engineer to conduct a land survey. This survey can then be compared with the description in the TCT and any discrepancies can be a cause for concern.

Resolving potential discrepancies usually requires legal and surveying interventions. It may involve rectifying errors with the Registry of Deeds, resolving boundary disputes with neighbors, or updating the title with correct information.

Finally, understanding zoning laws and land use restrictions is essential. This information is typically available from the local city or municipal planning and development office.

Zoning laws dictate how a property can be used, whether it’s for residential, commercial, industrial, or agricultural purposes. These restrictions can greatly affect your plans for the property, such as building a new structure or modifying an existing one.

After our research and the feedback collected from our local real estate partners, we have written an article about the risks and pitfalls when buying a property in the Philippines, you might want to check it out.

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How to update the title deed after the property transaction in the Philippines?

After purchasing a property in the Philippines, updating the Transfer Certificate of Title (TCT) is a crucial step. This process ensures that the title reflects your ownership and protects your legal rights.

The process begins with obtaining the Deed of Absolute Sale (DOAS), which must be notarized. The notarized DOAS and the seller's original TCT are then submitted to the Bureau of Internal Revenue (BIR) for tax assessment.

You'll need to pay the Capital Gains Tax (CGT) and Documentary Stamp Tax (DST) based on this assessment. Once paid, the BIR issues a Certificate Authorizing Registration (CAR).

With the CAR, you then proceed to the local Registry of Deeds. Here, you submit the CAR, the notarized DOAS, the original TCT, and proof of payment of the Transfer Tax (paid at the local Treasurer's Office). The Registry of Deeds will then process the transfer and issue a new TCT in your name.

For foreign owners, understanding inheritance laws in the Philippines is essential. Foreign nationals cannot own land, but they can inherit it. If you're a foreign owner, your heirs might face legal challenges inheriting the land, especially if they're also foreigners.

It's advisable to consult a lawyer to understand how Philippine inheritance laws affect your specific situation and to make appropriate estate planning arrangements.

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This article is for informational purposes only and should not be considered financial advice. Readers are advised to consult with a qualified professional before making any investment decisions. We do not assume any liability for actions taken based on the information provided.