Owning Your Own Home in the Philippines.
(Last Update 11 May, 2017)
- 0.1 Yes, No or Maybe.
- 0.2 Practicality Versus Legality
- 0.3 I’ll Keep Control Of The Cash And Thus The Deal
- 0.4 Philippine Corporate Laws DO Matter
- 0.5 You Won’t Be Classed As a Hero
- 0.6 Think It Can’t Happen?
- 0.7 What Happened? Did You Get The License Of That Truck That Hit Us?
- 0.8 The “Chairman” Had A Vote, But So Did The Other 9
- 0.9 Who Cheated This Man? Look In The Mirror
- 1 Related Posts
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This article was first published back in 2008. Apparently it didn’t get my point across very well, because I still hear people asking questions and “dreaming and scheming” about how they alone are smart enough to “beat the system” and find their own loophole that will let them do, in the Philippines, what the Philippine Constitution and laws prohibit.
So, like the preacher every Sunday, even though some of the congregation is sleeping, I’ll keep on preaching. If I keep just one of you out of jail, it will be worth my time.
Here’s the Question in a nutshell:
Can corporations own Philippine property, even if the corporate investors are foreigners?
That’s a question I have been asked here on PhilFAQS frequently. And I have a definitive answer … ready?
Yes, No or Maybe.
In most countries a corporation, under the law is treated in some ways as a natural person. Under the laws of the Philippines, corporations enjoy the rights of land ownership … subject, of course to the provisions of that same Philippine law.
It’s very common … I’ve been approached on this myself … for a real estate agent or other party interested in the sale of a property to bring up the idea to a foreign investor that a corporation be formed to buy the property.
The selling point would be the foreign investor would thus enjoy the ownership of the property, somehow bypassing the strict Philippine laws against foreign land ownership.
I’m not a lawyer, and I am not giving legal advice … if you are thinking about buying property, by any means, you need a lawyer. Ideally, I would pick one admitted to practice in both the US and the Philippines … they exist.
Practicality Versus Legality
But I do have a lot of experience in this area and I have seen a number of foreigners lose their investments with these sort of schemes. I’ve even seen a few wind up in Philippine prisons … not a place you want to be, trust me.
The laws state a corporation that is 60% or more owned by Filipino stockholders may take title to land exactly as a natural Filipino born person may. And it is done, all the time.
The part you need to ask yourself, in advance, is are you sure this method is for you? Do you really feel you actually own something in which your interest is only 40%? It takes 51% to assuredly control a corporation. You may feel confident in having Filipinos on the board whom you feel you can trust … but these deals frequently go sour … very sour.
I’ll Keep Control Of The Cash And Thus The Deal
Ah, but Dave, you say, I have a way around that … I’ll put up the money for the whole corporation and I’ll really be the only owner and controller … only my vote will count … I’ll just pay the others a fee to act like owners/investors.
Does that sound a little dumb to you? It does to me. In fact it does to the law as well.
Sham corporations like this are known in the business as “Dummy Corporations” and they fall under many laws, especially Commonwealth Act 108 and Republic Act 1130, part of a potent package of Anti-Dummy laws. You can Google all this and read for yourself, I’m not making this up.
It may sound like a harmless charade to you … and after all, a number of Filipinos would be making money out of the deal, so where’s the harm?
The harm is, the “Dummy Corporation” laws are well-defined, and they tend to be stringently enforced. There are perhaps hundreds of laws on the books in the Philippines (and heck, in the USA for that matter) that are just not enforced very often … so, while it’s not morally right to avoid them, in the long run, nobody seems to care.
Corporate and property ownership laws here in the Philippines do not fall into that category of laws that don’t really matter. really. They do matter.
Philippine Corporate Laws DO Matter
What typically happens is our well-meaning but devious American friend brings, say $100,000 USD to the Philippines with the intention to buy property, regardless of the law.
He then collects, say, 9 other people, at least 6 of whom are Filipino citizens and gives each of them some papers to sign certifying that they are each contributing $10,000 USD to the corporation.
They will all serve on the corporate board of directors and, just like that, a brand new Philippine corporation gets formed, 60% owned by Filipinos. (On paper, that is).
The board meets, resolves to buy the property and the new owner moves in. Or doesn’t.
In addition to putting himself in a very precarious financial position, the foreigner has just committed a criminal act … circumventing the law.
There are government agencies who do nothing but investigate these issues and they have gone so far as to deport and/or jail violators. There is also the well-known “Crab mentality” issue, or even out-and-out jealousy.
You Won’t Be Classed As a Hero
Someone sees the American moving into the 4 or 5 million Pesos house while he, himself is living in a hovel. It rankles him and he talks (tsimis, or rumor is a really big thing here).
Perhaps his words reach the ear of an official who wants to become known for standing up against the arrogant foreigners ignoring the laws of the Philippines.
You can easily extrapolate what follows. Filipinos just love teleseri style soap opera shows.
Think It Can’t Happen?
But maybe if the government won’t find out, Dave. Aren’t you being over-cautious about this?
Well here’s what happened to a friend of mine. He came to a small island in the south, formed a corporation like the one I described with “trusted” local friends, politicians and even an attorney or two, sad to say.
The corporation invested a large portion of the corporate money in buying building materials to refurbish the property in question, a small resort with a nice owner’s home on the property.
My friend wasn’t even greedy, just ill-advised, because if this scheme had gone forward, he intended to operate the resort and give a lot of Filipinos work … and, of course pay whatever taxes he was required to.
Only one step away from the label of philanthropist, at least in his own mind.
The materials purchased began slowly arriving (when you live out in the provinces, you don’t just go fill your truck at the local Lowes Building Supply store, you realize). Meanwhile, a lot of demolition and preparation work was going on with the resort property. Blowing out walls to make better use of the floorspace, ripping off roof in preparation for new, expensive Colorsteel Systems factory-finished roof panels, etc.
One night all the building materials disappeared and the property itself was stripped of existing wiring and pipes as well. “Holy Sh*t, Batman, how did that happen”?
What Happened? Did You Get The License Of That Truck That Hit Us?
Now the money was mainly spent, the building materials were gone, the buildings were in worse shape than when the project started and the project seemed to be in deep trouble. What to do? Well, what any reasonable corporation would do … call a board meeting.
A special meeting of the board was called to discuss the now serious situation. Board meetings are matters of record and documented. official minutes must be kept.
One board member made a motion, duly seconded that, since there now seemed no possibility of proceeding with the project, that the corporation sell the now much devalued property to a local investor … at a huge loss, and then divide up the money remaining equally among the 10 board members. Motion carried and adopted. Motion to dissolve the corporation also made, seconded and carried. Done and dusted.
The “Chairman” Had A Vote, But So Did The Other 9
I think when all was done my friend came away with about $7,000 USD of his initial $100,000+ USD investment … and he had absolutely no legal leg to stand on. After all, to protest his fellow board member’s actions would have brought the matter into court and the flawed, illegal basis of the corporation would have been exposed.
My friend had acted illegally in who knows how many ways, so complaining about “his” board’s rather abrupt corporate termination and thus adding possible prison time to his woes wouldn’t serve much purpose … nothing to do but bite the bullet … like piling all the chips on Red and the wheel comes up Black. He gambled, he lost.
Who Cheated This Man? Look In The Mirror
My view is, for every foreigner who comes to the Philippines and gets cheated by a Filipino, 10 more “cheat themselves” by insisting on putting their money into schemes that are ill-advised, and often, illegal.
No need to worry about a Filipino cheating you if you are willing and eager to cheat yourself … or so Dave opines.
If you are really into roulette or craps, go ahead and invest in this way … I even know of a few lawyers who might be interested in sitting on your board. Safest bet? Follow the law.
There’s a lot of ins and out to Owning Your Own Home in the Philippines.