This was first published back in January 2008. I’ve made some corrections and updates, but the basic facts remain the same … owning land in the Philippines, even when you follow the rules … is fraught with many risks. Americans tend to grumble and complain about the restrictions against foreigners buying land here … but compared with buying land in the USA, it’s just not at all what you think it might be. As a foreigner, not only are your rights limited, but your knowledge and understanding of the system is flawed as well. You can’t come here and do business as you would in the US. Caveat emptor.
Title Insurance Philippines
From time to time the question of buying property, with or without a home on it comes up in most of the Philippines-related blogs and discussion groups. It often becomes contentious. Many get quite emphatic about how much safer they feel ‘owning’ their own land, even when, in point of fact, they don’t own anything at all. those of us who attempt to illustrate the fallacy of their ‘position of security’ often take some flak, but if I prevent just one person from losing their life savings due to fraud or misunderstanding, I’ll happily take the flak.
I originally expected to cover a lot of ground regarding alternatives to land ownership in this particular post, but when I started digging into one of my main objections … or at least cautions … regarding land purchases in the Philippines, I came across this work by a distinguished Filipino lawyer, legislator and defender of property rights which basically outlines the state of land titles and the rights of property buyers in the Philippines a lot better than I ever could.
Remember that these words were written by the then senate minority leader, Senator Aquilino Q. Pimentel Jr. and they represent true findings of official government investigations. We aren’t talking ancient history here, and these are the words of a lawyer of more than 20 years experience who is well aware of the legal dangers of putting words in print which aren’t true.
In the Philippines, the vast majority of land is owned under so-called ‘tax certificates’. This form of ownership is also used in the US, but typically only by speculators who buy land at sales for delinquent taxes with the hope that in the future the investor will actually be able to ‘perfect’ the title, that is obtain a real and valid title to the property.
The vast majority of tax certificates never get to that stage … the original owner or his/her heirs make up the deficiency, pay the holder of the certificate a state-controlled fee for his time and trouble and go back to being in legal possession of the property.
The Philippines has in place an excellent ‘real’ title system the “Torrens” title, named after it’s Australian inventor and deemed one of the best title systems ever invented. Them why does a majority of the land lack current Torrens titles?
Here are just a few of the agencies and bureaucracies a prospective land owner will deal with in trying to get a Torrens’ title to a piece of Philippine land:
- Bureau of Internal Revenue (BIR) – collection of capital gains and other related taxes
- Local Government Units (LGU’s) – collection of real property and transfer taxes
- Department of Agrarian Reform (DAR) – issuance of patents for land under the Comprehensive Agrarian Reform Program (CARP)
- Department of Environment and Natural Resources (DENR) CENRO, PENRO RED – issuance of patents (title to land) Regional Land Management Service (DENR-LMS) – examination and approval of survey plans
- Regional Trial Courts (RTC) and Municipal Trial Courts (MTC) – determination of validity of ownership claims in applications for original registration, judicial reconstitution of titles, and amendments to certificates
- Office of the Solicitor General (OSG) – identification and investigation of fraudulent titles
- Philippine National Police (PNP) – apprehension and prosecution of persons or syndicates caught in possession of or transacting in fake or spurious certificates of land title
Notice a couple of these hurdles in particular:
- The DAR can issue ‘land patents’ to land they determine is subject to the CARP. In crude but honest American terms the CARP allows land owned by families for generations to be taken and given to farmers who have worked the land … the existing title documents may, in fact, be worthless.
- The various levels of courts. basically the Torrens system as it is currently implemented in the Philippines depends solely upon how hard the prospective owner wants to pursue the process through the court system. there are at least seven major legal steps each Torrens title perfection process must go through and the process takes years with no guarantee of the final outcomes.
Many of these same cautions would apply in the US and other Westernized countries, except for one piece of paper that is almost always present at the closing or escrow table … a Title Insurance policy. Title insurance, for a fixed, relatively small premium, protects the buyer of the property from most of the legal ‘traps’ that property in almost any country may run afoul of.
But guess what isn’t available in the Philippines? Yep, that’s right, title insurance. The Torrens title system actually began in the Philippines in 1902 or 03, but more than 100 years later a very key ingredient to protecting buyers is still missing.
Senator Pimentel’s forward-thinking bill to implement such a system is a great step forward, but it’s just a proposal, not yet voted, sent to the Houses, signed by the President or implemented.
So when you ‘take title’ to land in the Philippines, what you are really buying is a license to defend your own rights, in court, for as long as you and/or your heirs shall live. It is not at all unheard of for an American to ‘buy’ a piece of property through his wife, build something valuable on it and then be served with court papers by former or alleged former owners … long, costly and unpredictable court cases then become the only alternative to walking away from the investment.
Don’t take my word for this at all, read senator Pimentel’s introductory words to the bill and then ask me if this is really the environment you wish to sink your life savings into?
S. B. No. 116
Introduced by Senator Aquilino Q. Pimentel Jr.
One of the investigations conducted by the committee on Accountability of Public Officers and Investigations, otherwise known as the Blue Ribbon Committee was the modus operandi of syndicates specializing in fraudulent registration and titling of land.
At the end of the investigation, the Committee concluded that the whole system of the land registration and titling of land is institutionally and intrinsically flawed. The syndicates, in cahoots with some government agencies, engage in this revolting scheme. This could be traced, among other things, from the fact that the records’ management of the Land Registration Authority is seriously defective in that some people there had allowed the switching or tampering of important land documents, including land titles.
This bill seeks to create a land title insurance system that will protect owners of real estate against defects in their land titles and help maintain the integrity of the Torrens Title system, which is the foundation of ownership to real property. …. Hence the passage of this bill is earnestly requested. (my emphasis)
Full text is available here:
SBN-116: Land Title Insurance
An Act Creating the Field of Land Title Insurance Amending for the Purpose Presidential Decree No. 612, Otherwise Known as the Insurance Code of 1978, as Amended by Presidential Decrees… Filed on June 30, 2007 by Pimentel Jr., Aquilino Q.
Are you really so sure you want to buy land in the Philippines? How many years are you willing to spend in court if things go wrong? And remember, you may be lucky and have the most competent lawyer available, but even the best lawyer can only research and protect against flaws and defects in the title that are known. S/he can’t predict the future when someone not known today may crawl out of the woodwork and raise a claim. Think about your dreams seriously, not romantically … or so Dave opines.