Land Hunt Series: # 2 Tax Declaration Property

To start off, I didn't have any knowledge of how things work in real estate when I got there. I learned everything as much as I could on the spot. I hope that the information below can help out people like me, who had  absolutely no idea what they were getting into.

Along National Highway. This is the kind of landscape the island has overall.

We arrived on a Sunday afternoon, the day before the local election. The broker we were supposed to meet was unreachable, while the other agent was preoccupied with a campaign. The inn keepers of the place we were staying at introduced us to a broker whom I will call Lady Gugu.

Lady Gugu showed us interesting sites that same day. 

Unfortunately the lots she showed us were beyond our budget.  They were along the National Highway with great potential. The one that caught my attention on the first day was a property on a hill with a great view. It was within the town proper at the bottom of Mt. Tapyas.

The owner's son arrived at the site. He was welcoming and I sensed his sincerity. I wanted that land very badly despite the  + 30 degree  incline. What made us decide not to take it was the shape of the land. It was triangular. 

First lot that we liked. View from the triangular lot.

This could be great for a house though, with this view every morning. There are already guest houses and resorts along this road.  I heard once that a triangle shape for business is not good. Yes, I'm quite superstitious.

I happily reported to my husband after an hour or two with a complete site report. Thanks to Skype, we were able to make decisions very easily after much detailed discussions.

We have noticed that most of the land do not have titles or (what my Surveying professor in college used to call), TCT (Transfer Certificate Title). Majority of the land for sale are under Tax Declaration which people refer to as "tax dec."

Buying a "Tax Dec" property means you're buying the rights to that property, which has not been released yet for Titling. 

There are two types of Tax Dec property:
  • The A & D type, Alienable & Disposable lands. Properties under public domain but are not required for forest purposes.  
  • Timberland, forest protected areas e.g. National Parks etc. - quite difficult to apply for a title and it will take a longer period.  There's a way to go around it, by applying for a special government tenure, Special Forest Land Use Agreement (FLAG). 
Once the alienable disposal is released by Congress covering the zone of your property, you can immediately apply for a title at the Registry of Deeds Office. To avoid complication, the A& D type of lands are the ones to go for because they're easier to apply for titling. 

How do I find out if the property I like is an A&D type?  
DENR - Department of Environment and Natural Resources Office will be able to tell you if the property you're interested in is an A& D Type or if it's a forest protected land.  The DENR office can also help in surveying the property and in providing information and guidelines. 

If it's a tax dec property, what do I need to do?
By interviewing lots of people and meeting different agents, we were able to find out the market prices for properties in each area.
  • Look into the Real Estate Tax History.  Once we find "the One" after meeting the owner, check the real estate tax office in the municipal hall whether the taxes of that property are updated and paid off every year. The office will issue a copy of the Tax declaration form to show the latest real estate tax settlements for  Php 50. You will need this form as a reference when transferring the real estate tax to your name later.
  • Check whose name is on the Tax Declaration of the property. Is the mentioned name, the person you are dealing with? If they're the ones you're directly dealing with, do they have children? Are they married?  It's important to ensure that claimant's heirs or spouse have no objection stated in the waiver.
  • We went to a lawyer's office/ Notary Public to draft a Waiver of Rights and Acknowledgement Receipt of our Advance Payment, duly notarized.  In standard practice, the lawyer's fees are taken care of by the seller. (In our situation, we offered to pay the lawyer's fee during our negotiation with the owners). The lawyer's fee was equivalent to 1% of the total amount of the property
  • Survey the property if you're just buying a small parcel from a big piece. Or if the entire Tax Dec property has not been surveyed yet.   We requested assistance from DENR and they recommended a surveyor to help us with a lot plan. 
  • A Geodetic Engineer can help a lot in this matter because they can give an accurate data in AutoCAD and exact measurements based on the agreed coordinates with the use of their equipment which the LGU surveyors may not have. They have a tariff according to the area and size of  land. With their transit, they can easily map out the area and install concrete survey markers. It is important to get the accurate land description / bearings stated on your Waiver of Rights.  The surveying fee is paid by the buyer. 
          **A geodetic engineer may charge a minimum of Php 15K for less than a hectare. There is an additional charge in obtaining the topography (slope of the land).  We were charged by a DENR surveyor  Php 8K for a 1,000 sq. meter lot without the proper equipment.  

I suggest obtaining a geodetic engineer to ensure the land is properly marked and measured.
and please ensure that the site plan is certified and signed by DENR! 
  • Once all of the above are settled and the Waiver of Rights are under your name and notarized, proceed to the Municipal Hall Assessment Office for the Transfer of Tax Declaration to your name. A Transfer Tax of 0.5% of the selling price or zonal value or fair market value is required to be paid by the buyer.  Please note that you will need photocopies of the Waiver of Rights and an original copy of your CEDULA or Community Tax Certificate from the place where you reside in the Philippines to prove you are a resident.
**Only residents of the Philippines or Philippine citizens can buy real estate properties in the country. Foreign investors usually lease lands for business.  Foreign nationals, however, can buy properties through a corporation formed in the Philippines complying with the rules of ownership. Foreigners can own or build a house, buy a condo unit but sadly, not  land as an individual.



Tax Dec Properties were also new to my Mom since lots in the city have titles. In the national capital, only brokers with licenses are allowed to practice. It is punishable by law otherwise.

In the province, forget it! It seems anyone can become a broker. It's insane.  Most of them acquire knowledge by practice and more often than not, fail to take care of the relationship between buyers and sellers just to make a profit. I'll tell you more about this as we go. 

I did meet one or two exceptions, agents who are trustworthy. There are always exceptions, but they're quite tricky to find and I owe it to serendipity.

The brokers / agents receive a 5% commission based on the amount of the total sale. For buyers, this is not going to be an issue at all. This commission is going to be paid by the seller to them and will be taken from the agreed property amount.

What could be a valid challenge and turn off  is when a greedy agent hikes up the original seller's price. 

In the provinces, there's no regulatory committee monitoring these. A lot of land sales are happening left and right. What a tempted agent fails to understand is that buyers can find out. The buyers will do their research and other honest agents will definitely disclose the true selling price of a property.  The greedy agent risks their reputation in the process of a one-time big sale. 


Update: Aug 2016

It would be best if you do have a good lawyer who can assist you during the process.  Someone who can review the deed of sale and any other agreement before buying a property.  It would also help if you have a licensed real estate agent on your side. I did have a second consult with another lawyer apart from the one who executed the deed of sale before and after signing anything.  I was told that if you can avoid Tax Declaration, please do so and go for a TCT - Titled Land instead.  Tax declaration could be quite gullible to double sale since you're just buying the rights to the land by paying the taxes and improvements but not really owning it 100%. 


Love and light,
Arni


P.S.  The above information pertains only to Philippine real estate. Other countries will of course have a different system and approach to things.

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16 comments

  1. hi Arni!!!

    thannk you so much for this post and from the previous one.. can't wait wait for the next post!
    i'm learning so much with your deals... honestly i'm ignorant when it comes to our rules so this helps me alot!!!
    i just told to hubby that it is really better to see the land or place by ourselves before going into paying and etc.. there are so many thngs I need to know hay sigh.

    anyway, wish you a lovely weekend!!!
    xoxo,Meg of Sweet Gala's

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    1. Thanks Meg, I would love to share more in the next few days. Hope you had a great weekend :)

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  2. I can see why you fell for the view in the first property, I just took a minute to imagine waking up there in the morning and I was sold. Gosh, I had no idea that buying property in the Philippines was such a minefield - or that only citizens could buy land :(

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    1. Hi Meghan, I was really disappointed when we saw the lot plan of that one with the view and when we decided not to go for it. It is possible for foreign nationals to buy land in the Philippines --through a corporation formed in the country though. Thanks for mentioning it..I'm updating and inserting this info in there too.

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  3. your posts are always so informative and adventurous!

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    1. Thanks Jane. Please bear with me and I'll get back to regular travel posts after this series.

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  4. hello arni'

    favor please can you please send me the continuation of your blog..at milesmarvin22@yahoo.com


    thanks a lot.

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    1. Hello, I just created a link here to the next post.

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  5. Hi. It's a great post! So interesting and a big help for a property owner. Looking forward for more interesting post from this blog. Have a nice day!

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  6. Picturesque view! Wew! I think this would be a good property but the triangular shape would be difficult to build houses. By the way, do you know any manila property for sale?

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    1. Hi James, Where in Manila? North or South. I'm not really a real estate agent but do send me a message and I could forward you to friends who have some listings.

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  7. thanks for those informations.
    i m looking for a lot, and as you said, majority are taxe dec, especially in palawan.
    i hate gambling, and i will simply avoid those lots then, even if they re 4 to 5 times cheaper.

    I wouldn t regret for not buying that first land. the land was surely not rocks, one deforrested, the land would slide more or less fast...ur house would be meters away, maybe out of ur property lol, or worse.

    fantastic work.

    Thanks

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    1. Thank you for your message. It is indeed wise to go for titled lands instead.

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  8. http://news.abs-cbn.com/nation/10/09/08/boracay-ruling-lesson-tax-declaration-not-sufficient-proof-land-ownership
    this shows tax dec means Nothing, own Nothing, has rights on Nothing, ...the philippines governement are extremly Moody, all other the years,...one day they could decidde to reclaim all the lands with tax dec...
    they have already expropriated rich owners from their land in the past.2.6 millions hectares have been redistributed to farmers.

    so...even title is not protecting anyone in Phils.
    https://en.wikipedia.org/wiki/Land_reform_in_the_Philippines
    Under the law, a landowner can only retain 5 hectares; how many times i saw dozens hectares for sale, with title.

    philippines is relatively free country...in every way, and buying lands is wild wide west

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    1. This is a very good point. Yes, that is true, any land exceeding the hectares of land stated under the law can be redistributed for agrarian use.

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