How to Transfer Ownership of a Property in the Philippines?

Ever wondered how to transfer property ownership in the Philippines? The process can be complex, especially for foreigners and locals unfamiliar with the laws and procedures.

Learn the steps to transfer property ownership in the Philippines in this blog post. Remember, this information is a general guide, not legal advice. For specific questions, consult a lawyer or real estate agent like HousingInteractive.

What is a transfer of ownership?

The transfer of ownership involves changing the legal owner of a property. It can occur for various reasons, such as selling or inheriting property from someone else.

In the Philippines, property ownership transfer is regulated by the Land Registration Act of 496 and Presidential Decree No. 1529. The Land Registration Authority (LRA) oversees the process through The Registries of Deeds. These laws require property registration to ensure legal status and protect owners’ rights.

What is the Land Registration Authority (LRA)? The Land Registration Authority (LRA) is the government agency responsible for maintaining the land registration system in the Philippines. The LRA issues transfer certificates of title (TCT) and conduct land registration proceedings. What are The Registries of Deeds? The Registries of Deeds are the offices tasked with keeping land transfer documents and maintaining the integrity of property ownership records in the Philippines. To transfer ownership of a property, the seller and buyer must go to the registry of deeds in the province, city, or municipality where the property is located and register the sale.

The LRA also covers other types of properties such as buildings, houses, condominiums, and other improvements made on the land, machinery, and other movable properties affixed to the land.

History of ownership of properties in the Philippines

The Land Registration Act of 496, enacted on November 6, 1902, was the primary law in the Philippines for transferring land ownership. According to the act, registering ownership transfers with the government is necessary for its validity. The act also formalized the Torrens system to register and monitor land ownership in the country.

What is The Torrens system? The Torrens system, which was developed in Australia in 1858 by Sir Robert Torrens, is the first method of registering ownership of land in the Philippines. Under the Torrens system, the Philippine government issues a certificate of title to the owner of a piece of land, which serves as conclusive evidence of ownership.

The Torrens system simplifies land ownership transfer. Buyers can easily register the transfer and get a new title certificate, making the process hassle-free. However, there are some disadvantages to the Torrens system. One is that it can be susceptible to fraud. For example, if someone obtains a fraudulent certificate of title, they may be able to sell the land to an unsuspecting buyer. Another disadvantage is that the system is not always up-to-date. This can create problems when transferring ownership, as the transfer may not be reflected on the certificate of title.

Presidential Decree No. 1529 supplements the Land Registration Act of 496, introducing additional requirements for property ownership transfers in the Philippines. It establishes the Land Registration Commission (now the Land Registration Authority) while mandating the payment of transfer tax on property transfers.

What is PD 1529? Presidential Decree No. 1529, also known as the Registration Decree, is a secondary law that supplements the Land Registration Act of 496. The decree establishes additional requirements and procedures for the transfer of ownership of land in the Philippines.

Transferring of Ownership

The transfer of ownership refers to the legal process in which one person transfers their established right to real property to another person through sale, donation, or inheritance. The transfer of ownership can also take place orally, but it would have to be in the presence of two witnesses, who will both sign the contract.

Transferring ownership of real property in the Philippines is relatively simple. It can be done through public instruments such as deeds. 

What is a deed? A deed is a legal document that proves ownership of real property. It includes the names of the old and new owners and is signed by both parties. The deed is then registered with the Land Registry, which keeps a record of all property owners in the Philippines.

Ways to transfer real estate ownership in the Philippines

There are three main ways to transfer ownership of real property in the Philippines: sale, donation, or inheritance.

1. Sale

Real property ownership transfer in the Philippines follows the Civil Code. To validate a sale, both parties need an offer and acceptance. The price should be exact and reasonable.

The most common way to transfer property ownership is by executing a deed of sale. This document needs to be notarized and registered with the Registry of Deeds. Additionally, transfer tax, capital gains tax, and other registration fees must be paid.

What is the sale of real property? The transfer of ownership of real property through sale is governed by the Civil Code of the Philippines. For a contract of sale to be valid, there must be an offer and an acceptance between two parties, to sell and buy, respectively. The price must also be certain and reasonable.

2. Donation

To transfer ownership through donation, you need to execute a notarized deed of donation. This document must be registered with the Registry of Deeds, and the transfer tax, with other registration fees, must be paid.

What is a donation of real property? A donation is the transfer of ownership of the real property by gratuitous title. For the donation to be valid, it must be accepted by the donee. The acceptance must be in writing and signed by the donee. The donor must also execute a deed of donation which will be registered with the Registry of Deeds. The transfer tax and other registration fees must be paid.

3. Inheritance

The third way to transfer ownership is through inheritance. To inherit property, you’ll need a copy of the deceased’s death certificate and the notarized deed of transfer. Register the deed with the Registry of Deeds and pay the transfer tax and other fees.

What is inheritance? Inheritance is the transfer of ownership of real property by operation of law upon the death of the owner. It can be done through a will or by intestate succession, which is when the ownership is passed on to the next of kin if the previous owner dies without a will. The heirs will need to execute an affidavit of self-adjudication and have it registered with the Registry of Deeds. The transfer tax and other registration fees must be paid.

Legal property transfers require specific documents: transfer certificate of title, registration form, and proof of payment. The certificate acts as evidence of transfer, the form registers it, and the proof of payment shows ownership payment.

Requirements for the transfer of ownership in the Philippines

The three most reliable legal documents establishing ownership of real estate properties in the Philippines include:

1. Transfer Certificate of Title (TCT),
2. Original Certificate of Title (OCT), and
3. Tax Declaration Certificate.

All these documents are proof of entitlement to your property with different certifications that can be used as evidence if there’s any problem or uncertainty related to who owns what type of property.

In addition to the Notarized Deed of Sale, the following documents are required for a property transfer in the Philippines:

• The original TCT or Certificate of Title issued in the name of the Seller
• The latest Tax Declaration of the property
• The Transfer Tax Receipt
• The Documentary Stamp Tax
• The registration fee
• The notarization fee
• The Mortgage Clearance Certificate
• The Certificate of No Adverse Claim
• The Seller’s valid ID and proof of billing
• The Buyer’s valid ID and proof of billing
• Tax Identification Numbers (TIN) of the Seller and Buyer
• Community Tax Certificate (Cedula) of the Seller and Buyer

Ownership transfer of property in the Philippines begins with the execution of a deed between the seller and buyer.

Transfer of Real Estate Deed or Title Transfer

There are procedures involving the transfer of real estate deeds or title transfer for the transfer of ownership to be effective and legal in the Philippines.

1. Secure a certified true copy of the land title from the Registry of Deeds.

To transfer property ownership in the Philippines, the property owner or seller must obtain a Transfer Certificate of Title (TCT) from the government. The TCT is a document that proves your ownership of the land. Before selling the property, check for any encumbrances or easements it may have.

What are encumbrances? An encumbrance can be an assertion of your property by someone who is not even the owner. The three most common types of encumbrances that apply to real estate are mortgages, easements, and property tax liens. What are easements? Easements happen when one’s interest in land requires protection from another’s actions, like construction work or heavy traffic flow patterns. What does this mean for you? This will impact how freely you can use the property until this person’s claim goes away. Like mortgages or other loans, encumbrances may restrict your ability to use the property as collateral.

2. Get a Notary Public to sign off on the Deed of Sale.

This person will be responsible for verifying that all signatures match and that there are no typos or other errors before signing it officially.

What is the difference between Absolute and Conditional Deeds of Sale? A Deed of Sale is a document that is used to transfer ownership of land from one person to another in exchange for payment. This is the most common method of transfer and is typically used when someone sells their property. Registering this will make them valid across all provinces within our country’s borders. A Deed of Absolute Sale is a document that states full payment has been made and the right of ownership is transferred immediately. It typically includes a warranty that the property is free from any legal claims or encumbrances. A Deed of Conditional Sale is a document that states payment will be made in part and transfer of full ownership is subject to the fulfillment of conditions agreed on.

For corporate ownership, to legally transfer property ownership, both the buyer and seller must present a Certified Board Resolution approving the sale as verified by the corporate secretary through the issuance of a duly notarized Secretary’s Certificate (Sec Cert), as required by the Registry of Deeds.

What is a Secretary’s Certificate (Sec Cert)? The Secretary’s Certificate is a written document executed by the Corporate Affairs Officer or Secretary confirming that all resolutions and actions taken by the board have been recorded.

3. Taxes and fees must be paid off to the government

The tax arrears must be paid off by the property owner/seller with the Treasury and acquires a Tax Clearance Certificate. At the same time, an official copy of the latest assessment or Tax Declaration is secured from the municipality where the property is located so that no penalties or fees will be incurred by either party as soon as it is processed. 

What is a Tax Clearance Certificate or Tax Declaration? A Tax Clearance Certificate is a document issued yearly by the Bureau of Internal Revenue (BIR) showing that an individual or corporation has already paid their taxes and how much tax has been paid for each real estate property.

When transferring property ownership, be mindful of tax implications. Transfer tax is paid to the government based on property value. Sellers may owe capital gains tax depending on their profit. Consult a qualified accountant or lawyer to understand all applicable taxes.

4. Capital Gains Tax (CGT) and Documentary Stamp Tax (DST)

The property owner/seller needs to obtain the necessary Capital Gains Tax (CGT) and Documentary Stamp Tax (DST) computations from the BIR Revenue District Office (RDO) where the property is situated. The CGT rate is fixed at 6%, while the DST ranges from 1% to 1.5% of the sale price.

After computing the DST and CGT, payments can be made through the Authorized Agent Banks (AABs) of the BIR Revenue District Office (RDO). The seller is responsible for paying the CGT, while the buyer typically settles the DST unless agreed upon otherwise by the seller.

5. File for a Certificate Authorizing Registration (CAR) with the BIR

Once the taxes have been paid, the buyer or seller can file for a Certificate Authorizing Registration (CAR) with the BIR.

Here are the documents needed when filing for a Certificate Authorizing Registration (CAR):

• Notarized Deed of Absolute Sale (DOAS)
• Certified True Copy (CTC) of Tax Declaration  – (Recent document)
• Original Certificate of Title (COT) or Certified True Copy of the Transfer Certificate of Title (TCT)
• With Improvement Certificate

The BIR issues the CAR, together with the following:

• BIR Stamped Original Deed of Absolute Sale (DOAS)
• BIR Stamped Documentary Stamp Tax (DST)

6. The seller, property owner, donor, transferor, or executor pays for the Transfer Tax

The seller, property owner, donor, transferor, or executor pays for the Transfer Tax at the municipality where the property is located. Transfer Tax is set at 0.5% to 0.75% of the sale price, depending on the property location. Transfer Tax must be paid within two months or sixty (60) days from the date of execution of the deed.

7. Apply for the Transfer of Certificate of Title (TCT) in the Registry of Deeds

After the release of the CAR, the buyer/new owner can proceed with the application for the Transfer of Certificate of Title (TCT) in the Registry of Deeds, which costs 0.25% of the sale price, plus a registration fee and notarization fee.

8. File for a new Tax Declaration Certificate

The buyer/new owner can then file for a new Tax Declaration Certificate or assessment of the sold property once the TCT is secured.

There are some restrictions on who can own property in the Philippines. Foreigners are not allowed to own land, but they can own condominium units and apartments in buildings at least 60% owned by Filipinos. They can also lease land for up to 50 years, with the option to renew for another 25 years.

The Philippine government has a 12% value-added tax (VAT) on property sales. However, this tax may be exempt for properties sold within one year of acquisition, provided the seller is an individual.

Transferring property ownership in the Philippines is generally straightforward. Just ensure you have all the required documents to prevent delays and complications.

Frequently Asked Questions on How to Transfer Ownership of Property in the Philippines?

1. What documents are required for a property transfer in the Philippines?

The following are the documents required for a property transfer in the Philippines:

• Notarized Deed of Sale
• The original TCT or Certificate of Title issued in the name of the Seller
• The latest Tax Declaration of the property
• The Transfer Tax Receipt
• The Documentary Stamp Tax
• The registration fee
• The notarization fee
• The Mortgage Clearance Certificate
• The Certificate of No Adverse Claim
• The Seller’s valid ID and proof of billing
• The Buyer’s valid ID and proof of billing
• Tax Identification Numbers (TIN) of the Seller and Buyer
• Community Tax Certificate (Cedula) of the Seller and Buyer

2. How much is the cost of the Transfer Title?

When transferring property ownership, it’s crucial to consider the tax implications. The transfer title cost varies, as it is determined by the value of the property and payable to the local government unit.

Taxes	Transaction Fees	Who Pays?
Real Property Tax (RPT)	The RPT rate is set by the municipality or city where the property is located and may range from 0.75% to 2% of the property value.	Seller/Owner
Tax Arrears	If applicable, depending on the value of the property as determined by the local assessor.	Seller
Capital Gains Tax (CGT)	CGT rate is set at 6% of the sale price, the zonal value, or the fair market value, whichever is higher.	Seller
Documentary Stamp Tax (DST)	DST rate is set at 1%-1.5% of the sale price, the zonal value, or the fair market value, whichever is higher.	Buyer
Local Transfer Tax	0.5% to 0.75% of 1% of the property’s equivalent value.	Seller
Transfer Tax (BIR)	0.5% to 0.75% of the sale price, and must be paid within two months or sixty (60) days from the date of execution of the deed.	Seller
Registration Fees	1% of the sale price, the zonal value, or the fair market value, whichever is higher.	Buyer
Notary Fees	1% – 2% of the sale price.	Buyer

3. Who pays for the Transfer Title?

The buyer/new owner pays for the application for the Transfer of Certificate of Title (TCT) in the Registry of Deeds, which costs 0.25% of the sale price, plus a registration fee and notarization fee.

4. How long does it take to transfer the property title?

The transfer of title usually takes about two (2) to four (4) months. 

5. Is there anything else I should know about transferring property ownership in the Philippines?

• On Restrictions on foreign ownership,

There are some restrictions on who can own property in the Philippines. Foreigners are not allowed to own land, but they can own condominium units and apartments in buildings at least 60% owned by Filipinos. They can also lease land for up to 50 years, with the option to renew for another 25 years.

• On Value Added Tax,

The government in the Philippines is imposing a 12% value-added tax (VAT) on property sales. However, this tax may be exempt if the property is sold within a year of acquisition and the seller is an individual.

• On late payments, interests, and surcharges,

Property taxes in the Philippines are government-imposed on real estate, including land and buildings. These taxes are paid annually by property owners.

Failure to pay property taxes on time can result in late payment penalties and interest charges. Non-payment may lead to eventual property confiscation by the government.

For a smooth real estate experience, understand the process and requirements when buying or selling property. Contact a licensed real estate professional in your area or HousingInteractive for assistance with title transfers.