After Extrajudicial Settlement and eCAR: How to Transfer Title to the Buyer (Philippines)

Introduction

In the Philippines, the process of transferring real property titles following the death of an owner often begins with an extrajudicial settlement of estate (EJS) among heirs, provided there is no will, no debts left by the decedent, and all heirs agree. Once the EJS is executed and published, and the electronic Certificate Authorizing Registration (eCAR) is obtained from the Bureau of Internal Revenue (BIR) to confirm payment of estate taxes, the property title can be transferred to the heirs' names. However, if the heirs subsequently decide to sell the property to a third-party buyer, a separate title transfer process is required.

This article provides a comprehensive guide on transferring the title from the heirs (as sellers) to the buyer after the EJS and eCAR stages. It covers the legal framework under Philippine laws, including the Civil Code, Tax Code, and relevant administrative orders from agencies like the BIR and the Land Registration Authority (LRA). The process ensures compliance with tax obligations and proper registration to vest full ownership in the buyer. Note that while this outlines general procedures, consulting a licensed attorney or notary public is advisable for case-specific advice, as variations may occur based on location, property type, or special circumstances.

Legal Framework and Prerequisites

The transfer of title in this context is governed by:

• Republic Act No. 11213 (Tax Amnesty Act) and Revenue Regulations from the BIR, which handle tax aspects.
• Presidential Decree No. 1529 (Property Registration Decree), administered by the Register of Deeds (RD).
• Local Government Code (Republic Act No. 7160), for local transfer taxes.
• Civil Code of the Philippines (Republic Act No. 386), particularly Articles 1458-1623 on sales and obligations.

Prerequisites before initiating the transfer to the buyer:

• The EJS must have been properly executed, notarized, published in a newspaper of general circulation for three consecutive weeks, and registered with the RD to annotate the heirs' ownership on the title.
• Estate taxes must have been paid, evidenced by the eCAR issued by the BIR for the EJS.
• The property title must already be in the heirs' names (or at least annotated via the EJS), free from liens or encumbrances unless disclosed.
• All heirs must consent to the sale; if any heir is a minor or incapacitated, court approval via guardianship proceedings may be needed.
• The buyer must be qualified to own land under Philippine laws (e.g., Filipino citizens or corporations with at least 60% Filipino ownership for private lands).

If the property was agricultural, additional clearances from the Department of Agrarian Reform (DAR) may be required under Republic Act No. 6657 (Comprehensive Agrarian Reform Law).

Step-by-Step Process for Title Transfer

The transfer process typically takes 1-3 months, depending on agency processing times and completeness of documents. Here's a detailed breakdown:

1. Execution of the Deed of Absolute Sale (DOAS):

   • The heirs (sellers) and buyer draft and sign a DOAS, which is a notarized contract detailing the property description, selling price, payment terms, and warranties (e.g., free from liens).
   • Include clauses on who bears taxes and fees (usually the seller for capital gains tax, buyer for transfer tax).
   • Notarization by a licensed notary public is mandatory for validity and registration purposes.

2. Payment of National Taxes to the BIR:

   • Capital Gains Tax (CGT): 6% of the gross selling price, fair market value (zonal value from BIR), or assessed value (from the local assessor), whichever is highest. If the property is the principal residence or qualifies under certain exemptions (e.g., sale below PHP 5 million for residential lots under Revenue Regulations No. 16-2003), it may be exempt.
   • Documentary Stamp Tax (DST): 1.5% of the same base as CGT.
   • File BIR Form 1706 (for CGT) and BIR Form 2000 (for DST) at the Revenue District Office (RDO) where the property is located.
   • Submit supporting documents (e.g., DOAS, tax declarations, EJS, original title).
   • Obtain the eCAR from the BIR, which certifies tax payment and authorizes registration. Processing may take 5-15 days.

3. Payment of Local Transfer Tax:

   • Pay to the Provincial, City, or Municipal Treasurer's Office.
   • Rate: 0.5% for properties in cities/municipalities within Metro Manila or highly urbanized areas; up to 0.75% elsewhere, based on the selling price or fair market value, whichever is higher.
   • Secure a Tax Clearance Certificate confirming no outstanding real property taxes.

4. Registration with the Register of Deeds (RD):

   • Submit all documents to the RD in the province or city where the property is situated.
   • The RD examines documents for compliance, computes registration fees, and issues a new Transfer Certificate of Title (TCT) or Original Certificate of Title (OCT) in the buyer's name.
   • If the original title is a TCT, the process cancels the old title and issues a new one; for OCTs, annotations are made.
   • Processing time: 10-30 days, extendable if issues arise.

5. Update Tax Declaration with the Local Assessor's Office:

   • After RD registration, apply for a new tax declaration in the buyer's name at the City or Municipal Assessor's Office.
   • This updates the property's assessed value for real property tax (RPT) purposes.

6. Final Steps and Possession:

   • The buyer receives the new title from the RD.
   • Transfer physical possession, including keys and documents.
   • If financed via bank loan, the mortgage must be annotated on the title.

Required Documents

Compile originals and photocopies (at least 3 sets) for submission:

• Original TCT/OCT in heirs' names (post-EJS).
• Notarized DOAS (multiple originals).
• EJS deed and publication affidavit.
• eCAR from BIR for the EJS (and new eCAR for the sale).
• BIR tax returns and payment receipts (CGT, DST).
• Tax Clearance from local treasurer.
• Current tax declaration and RPT receipts.
• Valid IDs of sellers and buyer (e.g., passport, driver's license).
• If applicable: Marriage certificate (if sellers are married), SPA if represented by attorney-in-fact, DAR clearance for agricultural land, or court orders for minors.
• For corporate buyers: SEC registration, board resolution authorizing purchase.

Taxes, Fees, and Costs

• Taxes:

  • CGT: 6% (seller's responsibility).
  • DST: 1.5% (usually seller).
  • Local Transfer Tax: 0.5-0.75% (usually buyer).
  • Withholding Tax: If buyer is engaged in trade/business, 1-2% creditable withholding tax on selling price.

• Fees:

  • Notarial fees: PHP 500-2,000.
  • BIR processing: Minimal administrative fees.
  • RD registration: 0.25% of selling price + entry fees (PHP 30-100) + IT fees.
  • Local assessor: Nominal for new tax declaration.
  • Total estimated cost: 8-10% of selling price, split between parties.

Exemptions may apply for sales to government, low-cost housing, or under tax amnesty programs.

Potential Issues and Remedies

• Disputes Among Heirs: If not all heirs agree, judicial partition via court is needed before sale.
• Liens or Encumbrances: Clear any mortgages, lis pendens, or adverse claims; obtain cancellations from creditors.
• Incomplete EJS: If the prior EJS lacked publication or tax payment, the RD may reject registration—rectify via supplemental affidavits or court affirmation.
• BIR Delays: Incomplete submissions cause delays; ensure zonal values are current via BIR website or RDO.
• Buyer's Due Diligence: Verify title authenticity via RD verification to avoid forged titles.
• Special Cases:
  • Condominium units: Additional Homeowners' Association clearance.
  • Foreclosed properties: Ensure redemption period has lapsed.
  • Foreign buyers: Limited to condominiums or via lease; full ownership restricted under the Constitution.
• Penalties for Non-Compliance: Fines up to 200% of tax due, plus interest; criminal liability for tax evasion under the Tax Code.

Conclusion

Transferring title to a buyer after an extrajudicial settlement and obtaining the eCAR is a structured process emphasizing tax compliance and proper registration to protect all parties' interests. By following these steps diligently, sellers can ensure a smooth conveyance, while buyers gain secure ownership. Always engage professionals like lawyers, accountants, or real estate brokers to navigate complexities, as laws and regulations may evolve through new BIR issuances or LRA circulars. Proper execution not only avoids legal pitfalls but also upholds the integrity of property transactions in the Philippines.