Guide: Buying Land in Cebu Philippines

Why another guide to buying land in Cebu, Philippines? I plan to approach this topic from the buyer's perspective, rather than the seller's. This guide will cover the entire buying process, including verifying the certificate of title, checking the seller's authority, and transferring the title to the buyer's name.

I. BEFORE BUYING THE PROPERTY

1. Verify the Authority of the Seller. Before you buy a piece of land, verify first the authority of the seller. How to do it?

   1. Is the seller the registered owner of the property?

      1. Ask for the owner's copy of the title.

      2. Ask for the valid ID of the owner

      3. Compare if the seller's name is the same as the registered owner.

   2. If the seller is not the registered owner, ask for the following:

      1. Special Power of Attorney (SPA) issued by the registered owner to the seller

      2. Authority to Sell issued by the registered owner to the seller

      3. If the seller cannot provide you either of this two document, don't proceed in buying the land.
         

2. Verify the Certificate of Title. This is a very important step that is often neglected by the buyer. The seller presents his "owner's copy" of the certificate of title. Now, it is your duty as a buyer to verify the authenticity of the land title. How?

   1. Visual examination of the certificate of title. (See our discussion here) If you find it difficult to identify the fake and the authentic title, you can actually skip this step.

   2. Get a certified true copy of the certificate of title.

      1. Get the title number and the name of the registered owner

      2. Visit the Registry of Deeds and get a certified copy of the certificate of title

      3. Compare the two documents (this is called the mirror test) to verify if the two documents are similar in everything.
         

3. Verify if the title is clean. In this step, your concern is to verify if the land you are planning to buy is free from liens, encumbrances, mortgage, adverse claims, etc.

   1. Check the back of the title (certified true copy) where the annotations are found.

   2. Make sure that you get the latest certified true copy.

   3. Don't rely on the copy supplied by the seller or his agent.
      

4. Check the Tax Declaration.

   1. Ask the seller of the Tax Declaration Certificate.

   2. Tax Declaration Certificate is not a conclusive proof of ownership but it can support the claim of land owner over the property.

   3. Examine the details of the tax declaration: (a) owner, (b) classification, (c) actual use, (d) market value, and (e) assessed value.

   4. Get the Tax Declaration Certificate from the Assessor's Office.
      

5. Check the Real Property Tax Clearance

   1. A Real Property Tax Clearance ensures that the seller has paid all real property taxes.

   2. Unpaid real property taxes constitute a lien on property, which you have the duty to pay.

   3. Get the Real Property Tax Clearance from the Treasurer's Office
      

6. Check that the land describe in the title is the land you buy

   1. Verify the correctness of the boundaries and exact location of the property.

   2. You can hire a Land Surveyor or Geodetic Engineer to verify the exact location and size of the land.

   3. Know the local zoning laws which may limit the uses of the property.

   4. Know the government plans for expropriation, road expansion, community development, and other projects.

   5. Get the information from Tax Mapping Office, Tourism Office, and other pertinent offices.

ADVICE FROM THE SUPREME COURT IN THE ACTUAL LAND DESPUTE

The Supreme Court, in Domingo Realty vs Court of Appeal (2007), offers land buyers to consider before buying a titled land.

1. Verify the origin, history, authenticity, and validity of the title with the Office of the Register of Deeds and the Land Registration Authority;

2. Engage the services of a competent and reliable geodetic engineer to verify the boundary, metes, and bounds of the lot subject of said title based on the technical description in the said title and the approved survey plan in the Land Management Bureau;

3. Conduct an actual ocular inspection of the lot;

4. Inquire from the owners and possessors of adjoining lots with respect to the true and legal ownership of the lot in question;

5. Put up signs that said lot is being purchased, leased, or encumbered; and

6. Undertake such other measures to make the general public aware that said lot will be subject to alienation, lease, or encumbrance by the parties.

II. BUYING THE PROPERTY

After verifying the ownership of the property, the authority of the seller, the existence of the property, and other possible issues related to the property, you can proceed in the sale.

1. Secure the signed and notarized Deed of Absolute Sale.

   1. Ask legal assistance from a lawyer.

   2. Crafting of the Deed of Absolute Sale.

   3. Signing of the Deed of Absolute Sale.

   4. Notary of the Dees of Absolute Sale.

2. Get the "owner's copy" of the Transfer Certificate of Title from the seller.

3. Get the Tax Declaration Certificate and Real Property tax Clearance

4. Get other pertinent document such as "Road Right of Way" if any.

5. Note: In the Deed of Absolute Sale, it is important to include the party (usually the seller) who will pay for the Capital Gains Tax and Documentary Stamp Tax.

III. AFTER BUYING THE PROPERTY

This section discusses the process of transferring of title, starting with settling BIR Fees until the issuance of the new title and tax declaration to the buyer (new owner)

1. Steps in Transfer of Title.

STEP 1: File and secure the required documents at the Office of the Bureau of Internal Revenue Regional District (BIR RDO)

Requirements:

1. Deed of Absolute Sale (DOAS) - original copy + 2 photocopy

2. Transfer Certificate of Title (TCT) - Owner's Duplicate Copy + 2 photocopy

3. Tax Declaration for land and improvements, if any - Certified True Copy + 2 photocopy

4. Sworn Declaration of No Improvement by at least one of the transferees or Certificate of No Improvement issued by the city or municipal assessor is required for Vacant lots, if applicable.

5. Tax Identification Numbers (TIN) of the Seller and Buyer

In some instances, the BIR requires a Special Power of Attorney (SPA), if the person processing the transfer is not the signatory in the deed of sale; a Certification of the Philippine Consulate, if the SPA is executed abroad; a vicinity map or location plan if the zonal value cannot be determined.

STEP 2: Secure assessment of transfer taxes at the BIR and Authorized Agent Bank (AAB) OR Municipal OR City Treasurer’s Office

A BIR representative will calculate your Capital Gains Tax (CGT) and Documentary Stamp Tax (DTS).

Notes: The buyer and the seller must agree during the negotiation who shall pay for the CGT and the DTS; the CGT is 6% of the properties property's selling price, zonal value, or fair market value, whichever one is higher; the DTS is 1.5% of the property’s selling price, zonal value, or fair market value, whichever is higher.

The BIR representative requires you to complete three (3) copies each of the following:

-BIR Form 1706 for the Capital Gain Tax (CGT) -BIR Form 2000 for the Documentary Stamp Tax (DST)

These documents will be filed and paid at the Authorized Agent Bank (AAB). For areas where there are no AABs, they will be filed with the Authorized City or Municipal Treasurer.

STEP 3: File documents at the BIR for the issuance of Certificate Authorizing Registration (CAR) or BIR Clearance

You will receive a claim slip with the claim date of the CAR, which will be released along with the following documents:

1. Original copy of the Deed of Absolute Sale, stamped as received by the BIR

2. Owner’s Duplicate Copy of the Transfer Certificate of Title

3. Original copies of the BIR Form 1706 and Form 2000, stamped as received by the BIR

4. Copies of the Tax Declaration for land and improvement

STEP 4: Pay the Transfer Taxes and secure the Tax Clearance at the Local Treasurer’s Office

4. Pay the Transfer Taxes and secure the Tax Clearance at the Local Treasurer’s Office

Requirements:

1. Original and one photocopy of the Deed of Absolute Sale

2. Photocopy of the Tax Declaration

3. Official Receipt of Payment of Real Property Tax and Special Education Fund Tax for the current year

STEP 5. Acquire the new land title with the new owner’s name on it at the Registry of Deeds

The Registry of Deeds will release the new Transfer Certificate of Title under your name after paying the registration fee.

1. (1) Original Copy and (3) photocopies of the Deed of Absolute Sale, stamped as received by the BIR

2. Seller’s or Owner’s Duplicate Copy of the TCT or CCT

3. (1) Original Copy of the CAR

4. (1) Original Copy of the Tax Clearance

5. Original Copies of Official Receipts of Payments of CGT, DST, Tax Clearance Certificate, and Transfer Fee

6. Original Copies of the Current Tax Declaration for land and improvement issued by the local assessor’s office

Note: If the seller or buyer is a corporation, submit the following requirements:

• Secretary’s Certificate authorizing the sale of the real property

• Certified True Copy of the Articles of Incorporation and By-Laws of the seller or buyer corporation

2. Secure a New Tax Declaration This is important. Request for a new Tax Declaration at the Local/Municipal or Provincial Assessor’s Office.

Requirements:

1. Deed of Absolute Sale 2. Transfer Certificate of Title

3. Transfer Tax Receipt

4. Tax Clearance

This step is usually neglected. You must ask for the new Tax Declaration after you transfer the title in your name as the registered owner of the property.

IV. TRANSACTION COSTS OF BUYING A PROPERTY (LAND)

1. Transfer Tax is equivalent to 0.5% of the actual sale price.

2. Capital Gains is 6% of the actual sale price.

3. Documentary Stamp accounts for 1.5% of the actual sale price.

4. The registration fee for the new land title is equivalent to 0.25% of the actual sale price.

5. Notarial fee is 1-2% of the property cost; it is negotiable.

6. Real estate agent's fee is 3-5% of the property cost; it is negotiable.

Who will pay? It depends on the negotiations. Normally, the notarial fee, transfer tax, and registration fee shall be shouldered by the buyer. Capital Gains Tax, Documentary Stamp tax, and Real Estate Agent's Fee shall be paid by the seller. Costs paid by buyer - 1.50% - 3.75%

Costs paid by seller - 3.00% - 12.50%

Total Transaction Costs - 4.50% - 16.25%

This discussion is for educational purposes only. Consult your lawyer for advice on your specific case. For any questions, contact us.

If you’re planning to buy a residential lot, house-and-lot, or condo unit, get in touch with us at 0920 207 5035 or email cebuhousefinder@yahoo.com for free assistance.