Below is an extensive discussion on the assumption of property taxes for foreclosed Pag-IBIG (Home Development Mutual Fund) properties in the Philippines, covering legal bases, customary practices, and practical considerations. Please note that this article does not constitute legal advice; it is a general reference based on existing laws, regulations, and standard practice. For any specific concerns, consult a qualified attorney or the relevant government agency.

1. Overview of Pag-IBIG Foreclosed Properties

1.1. The Pag-IBIG Fund (HDMF)

The Home Development Mutual Fund (commonly referred to as Pag-IBIG) is a government-owned and -controlled corporation (GOCC) in the Philippines. It primarily provides affordable home financing for Filipino workers. When a member-borrower fails to meet mortgage obligations under a Pag-IBIG loan, the property can be foreclosed and eventually sold by Pag-IBIG through public auctions or negotiated sales. These foreclosed assets are commonly referred to as Pag-IBIG acquired assets.

1.2. The Foreclosure Process

Default: The borrower (mortgagor) falls behind in monthly amortization payments.
Notice of Foreclosure: Pag-IBIG initiates foreclosure proceedings in compliance with the required notice and publication under applicable laws.
Auction Sale: After due notice, the property is sold at a public auction. If no bidder offers a sufficient amount, or if Pag-IBIG decides to bid, the property is “adjudicated” to Pag-IBIG.
Redemption Period (if applicable): Under certain circumstances, the borrower may redeem the property within a statutory period, although Pag-IBIG mortgages often have specific contractual redemption rules.
Acquisition by Pag-IBIG: Once final, Pag-IBIG obtains title or consolidates ownership. It then lists these acquired assets for sale.

2. Real Property Taxes in the Philippines

2.1. Legal Basis

Real property taxes (RPT) in the Philippines are primarily governed by:

Republic Act No. 7160 (the Local Government Code of 1991), which empowers local government units (LGUs) to impose real property taxes within their jurisdiction.
Additional local ordinances of the city or municipality where the property is located.

2.2. General Obligation for Payment

Under the Local Government Code, real property taxes are due annually and become a legal lien on the property. This means:

Unpaid real property taxes “run with the land.” The property itself is burdened by the tax liability.
The local government may enforce collection by levying or auctioning off the property if taxes remain unpaid.

3. Responsibility for Property Taxes in Foreclosure

3.1. “Lien Follows the Property”

Because property taxes are a lien on the property rather than a mere personal debt of the original owner, any unpaid real property taxes survive ownership transfers, including transfers due to foreclosure. In other words:

Whether the property is sold voluntarily or through foreclosure, the outstanding property taxes remain attached to the property itself.

3.2. Common Practice on Foreclosed Properties

In many foreclosure scenarios (not just with Pag-IBIG):

Mortgagee’s Responsibility Prior to Auction: The mortgagee (Pag-IBIG, in this case) may, under certain terms, pay real property taxes if it finds doing so necessary to protect its interest. However, this is often addressed in the loan or mortgage contract, which may allow the mortgagee to “advance” payment for taxes.
Post-Foreclosure (Acquired Asset Stage): Once a property has been foreclosed and title consolidated in Pag-IBIG’s name, Pag-IBIG may settle some or all outstanding real property taxes before offering the property for public bidding—but this is not guaranteed. Pag-IBIG often sells its acquired assets on an “as-is, where-is” basis, which may leave unsettled taxes to the responsibility of the winning bidder.

3.3. “As-Is, Where-Is” Stipulation

Foreclosed or acquired assets from Pag-IBIG are frequently offered on an “as-is, where-is” basis. This typically includes the following clauses in the notice of sale or contract to sell:

No Warranties: Pag-IBIG does not guarantee the condition of the property.
No Clearing of Encumbrances: The buyer assumes any duties to clear liens, encumbrances, or unpaid taxes unless explicitly stated otherwise.

As such, buyers of Pag-IBIG foreclosed properties must exercise due diligence by verifying:

How much (if any) outstanding real property taxes are due.
Whether Pag-IBIG has settled or partially settled any delinquent taxes before listing the property for sale.

4. Pag-IBIG Guidelines and Instructions

4.1. Checking the Terms of the Auction/Negotiated Sale

Pag-IBIG frequently issues instructions in the “Invitation to Bid” or “Offer to Sell” documents. These documents may specify if Pag-IBIG will shoulder all or part of the property tax arrears, or if the prospective buyer is expected to cover everything. You will often find disclaimers stating:

“Properties shall be sold on an ‘as-is, where-is’ basis. The bidder/buyer is responsible for the payment of any and all taxes, fees, and expenses incurred for the transfer of title and the necessary clearances of the property.”

4.2. Due Diligence and Inspection

Pag-IBIG commonly encourages or even requires prospective buyers to:

Inspect the Property: Physically check the condition and occupancy status.
Verify Status with the LGU: Inquire with the local Assessor’s Office regarding the assessed value and any unpaid real property taxes.
Check for Other Liens: Verify with the Registry of Deeds and other offices if there are additional liens or encumbrances.

4.3. Sale Documents

If Pag-IBIG chooses to cover delinquent taxes—or a portion of them—this should be reflected in:

The Deed of Conditional Sale or the Deed of Absolute Sale (depending on the terms).
The Reservation Agreement or the Contract to Sell, where any mention of shared responsibilities might appear.

However, the default stance is usually that the buyer shoulders future taxes and possibly outstanding taxes unless a special arrangement is included.

5. Practical Considerations

5.1. Confirming Unpaid Tax Amounts

Buyers must confirm the real property tax dues before signing any contract:

Request a Tax Clearance from the local Treasurer’s Office or Assessor’s Office.
Verify Delinquent Amounts by asking for a statement of account.
This ensures you know exactly how much is owed and who is contractually responsible for settling these dues.

5.2. Negotiating for a Settlement

While typically governed by Pag-IBIG’s standard policy, a buyer may try to negotiate:

Split of Tax Liabilities: In some rare cases, Pag-IBIG might agree to shoulder certain arrears in property taxes or compromise part of it.
Adjustment of Purchase Price: If large delinquent taxes exist, the buyer can factor this cost into the offer or bid, effectively reducing the net offer price to account for back taxes.

5.3. Timing of Payment and Legal Consequences

Under RA 7160, property taxes are generally due on or before March 31 of each year (or in quarterly installments). If the buyer acquires the property mid-year, some confusion can arise as to who pays the portion of that year’s taxes. In practice:

Contractual Allocation: Some sale documents specify that the buyer pays taxes starting from the date of purchase, while the seller (in this case, Pag-IBIG) settles taxes for any period before that date. However, absent a clear stipulation, the property remains burdened by any unpaid taxes—ultimately the new owner is responsible.

6. Legal Framework on Tax Liens and Enforcement

6.1. Real Property Tax Lien

Section 257 of the Local Government Code (RA 7160) establishes that the real property tax “constitutes a lien on the property subject to taxation, superior to all other liens, mortgages, or encumbrances.” This means local government units (LGUs) maintain the power to enforce the tax lien regardless of changes in property ownership.

6.2. Remedies for LGUs

If the new buyer fails to pay delinquent taxes, the LGU can:

Seize the property (whether or not it changed hands after foreclosure).
Institute administrative or judicial proceedings to recover the unpaid real property taxes.
This legal structure underscores why a diligent buyer must clarify and, if necessary, settle back taxes upon purchase.

7. Summary and Key Points

Real Property Taxes “Attach” to the Land
Under Philippine law, unpaid property taxes remain a lien on the property even after foreclosure.
Buyer Beware on Foreclosed Properties
Pag-IBIG typically sells foreclosed properties on an “as-is, where-is” basis. The burden to check and settle outstanding property taxes often falls on the buyer.
Check Pag-IBIG’s Terms
Always read the specific documents (Invitation to Bid, Deed of Conditional Sale, etc.) to confirm if Pag-IBIG is covering any past-due taxes.
Local Government Code (RA 7160)
Real property tax enforcement powers are broad. LGUs can levy or auction off properties if taxes remain unpaid—regardless of the change in ownership via foreclosure.
Perform Due Diligence
- Verify the property’s tax status and exact arrears.
- Secure a tax clearance or a statement of account from the local Treasurer’s Office.
- Factor in any unpaid taxes when making an offer to Pag-IBIG.
Legal Consultation is Important
Specific circumstances (e.g., partial payments, installment sales, or local ordinances) can alter responsibilities. Seek professional advice for a complete risk assessment.

8. Conclusion

When acquiring a foreclosed Pag-IBIG property in the Philippines, prospective buyers must pay close attention to outstanding real property taxes. While Pag-IBIG might settle some or all delinquent taxes in certain cases, the default assumption—especially under an “as-is, where-is” sale—is that the buyer will inherit any unpaid real property taxes. Because these taxes are a superior lien on the property, any failure to settle them can result in further legal consequences, including potential re-foreclosure by the local government.

Thorough diligence—verifying tax dues with the LGU, checking Pag-IBIG’s specific sale terms, and factoring these costs into the bidding or purchase price—is essential. Given that each property and transaction may involve unique circumstances, it is highly advisable to consult a competent lawyer or real estate professional to avoid unexpected financial liabilities and ensure a smooth transfer of ownership.