Builder in Good Faith on Another’s Land: Legal Remedies and Ownership Transfer in the Philippines

1) Why this topic matters

Disputes over structures built on someone else’s land are common—boundary mistakes, erroneous surveys, double sales, or reliance on void titles. Philippine civil law has a complete playbook for these situations under the rules of accession industrial (buildings, plantings, and sowings) and the special regime on builders in good faith. The remedies determine whether the land changes hands or the building does—and who pays whom, how much, and when.

2) Core legal framework

Accession industrial and “builder in good faith”

Accession: Whatever is built, planted, or sown on land belongs, by default, to the landowner.
Good faith: The builder honestly (and reasonably) believes they own the land or are authorized to build—no knowledge of defects in their title or boundaries, and no negligence in checking.

The pivotal rule (when both are in good faith)

When a person builds in good faith on land owned by another who is also in good faith, the landowner must choose between two statutory options (the law gives the choice to the landowner, not the builder):

Appropriate the building (keep it) by paying the builder an indemnity tied to the builder’s necessary and useful expenses (and, for useful improvements, typically limited to the lesser of cost or increase in value).
Compel the builder to buy the land on which the construction stands at a fair price.
- Exception: If the land is considerably more valuable than the building, the builder cannot be forced to buy it. In that event, if the landowner does not appropriate the building, the builder must pay reasonable rent for the use of the land.

Right of retention: A good-faith builder can retain possession of the improvement (and, practically, the portion of land it sits on) until fully paid the proper indemnity—this prevents unjust eviction before compensation.

3) Bad faith scenarios (who was in bad faith?)

A) Builder in bad faith, landowner in good faith

The landowner may (i) keep the building without paying any indemnity or (ii) demand demolition at the builder’s expense, with damages either way.
Purpose: deter willful encroachment.

B) Builder in good faith, landowner in bad faith

The law favors the good-faith party. The builder gains the upper hand: remedies align to prevent the landowner from exploiting their own bad faith, and the builder obtains compensation and retention rights similar to the “both in good faith” regime—often effectively allowing the builder to keep the building and compel a sale of the land portion upon payment of a fair price.

C) Both in bad faith

Courts generally neutralize the bad faith—neither side profits. The framework roughly reverts to the “both good faith” mechanics for allocation, while damages may be set off because both misbehaved.

4) What counts as “good faith”?

Honest mistake about ownership or boundaries, backed by reasonable diligence: e.g., reliance on a Torrens title, recent approved survey, or authoritative permission.
No knowledge of a superior, adverse title and no willful ignoring of red flags (e.g., a demand letter, visible boundary markers, or annotation disputes).
Registered land warning: Torrens registration is powerful. If a builder actually knows (or should have known) the land is registered to someone else, claiming good faith is difficult.

5) The money side: indemnities, rents, and damages

Indemnity when the landowner keeps the building

Necessary expenses (preservation, essential repairs): fully reimbursable.
Useful expenses (increase value/productivity): reimbursable, usually up to the resulting increase in value of the improvement.
Luxurious expenses (purely for pleasure/status): no reimbursement, but a good-faith builder may remove them if removal is possible without substantial injury to the principal structure.

If the builder must buy the land

Fair price of the land portion actually occupied (and reasonably necessary for the structure’s normal use), determined as of valuation date the court deems equitable, with legal interest when appropriate.

If the land is far more valuable than the building

The builder cannot be compelled to buy; instead, if the owner refuses to appropriate the building, the builder pays reasonable rent for the occupied land.

Damages

Bad-faith party pays damages (lost fruits, rentals, demolition costs, attorney’s fees when warranted).
Good-faith builder’s retention can suspend owner’s recovery of fruits until indemnity is paid.

6) Partial encroachments and boundary mistakes

Real-world problems often involve only a strip of the structure crossing into the neighbor’s lot.

Courts apply the same Article 448 logic by analogy:
- If both in good faith: the landowner can (i) appropriate the encroaching part of the building (with indemnity) or (ii) compel the builder to buy the encroached strip at fair value—unless the strip is considerably more valuable than the encroaching works, in which case rent becomes the fallback if the owner won’t appropriate.
- If the builder is in bad faith: the owner may demand removal of the encroaching portion at builder’s expense, and claim damages.
Proportionality: Valuation focuses on the encroached area and the part of the work situated there, while also considering whether demolition would be grossly wasteful relative to the injury to the landowner.

7) What exactly can transfer—and when?

Transfer of the building

If the owner appropriates the building: ownership of the building merges into the land (accession), after paying the builder the legally required indemnity.
The builder’s retention lasts until payment, preventing premature transfer without compensation.

Transfer (or compelled sale) of the land portion

If the owner compels a sale to the builder (or the builder, being the good-faith party, can force a sale to stop abuse by a bad-faith owner), title to the affected portion (including necessary appurtenances like setbacks or easements for normal use) passes upon payment and execution of conveyance (or by judgment that serves as conveyance).
Segregation: A technical survey is required to subdivide and issue a new title for the portion transferred.

8) Procedure and litigation roadmap

Cause of action
- Landowner: accion reivindicatoria (recovery of possession/title), ejectment (if possession only), damages, plus the Article 448 election of remedies.
- Builder: claim good faith, seek indemnity, retention, or compulsory sale of the necessary land portion when justified; oppose demolition if the law bars it.
Provisional measures
- Injunctions to halt ongoing construction when good faith is doubtful; notices and demand letters to negate builder’s claim of good faith if ignored.
Evidence
- Titles and surveys; relocation/verification surveys; building permits; tax declarations; correspondence; demand letters; boundary monuments; expert appraisal for land and improvement values; evidence of expenses (receipts, contracts); rental comparables.
Valuation & accounting
- Court appoints commissioners/appraisers as needed to fix fair price, indemnity, and reasonable rent, and to compute fruits/mesne profits and interest.
Judgment structure
- The court typically directs the landowner to make the Article 448 choice within a set period (e.g., 15–30 days).
- If the owner appropriates: pay indemnity; upon payment, the builder must vacate and turn over the building.
- If the owner compels a sale: builder pays the price; upon payment, the owner executes a deed (or judgment stands in lieu), followed by title segregation.
- If land is much more valuable: owner either appropriates with indemnity or the builder pays reasonable rent; demolition is off the table when the builder is in good faith.
Enforcement
- Right of retention shields the builder until full payment of indemnity (or, conversely, payment of land price if the builder is buyer).
- Demolition writs issue only in bad-faith builder cases or where the statutory framework allows it.

9) Special contexts and limits

Public land / government property: Builders cannot acquire public domain by accession. Even a sincere mistake won’t defeat the State’s title; remedies shift to removal and damages/compensation as allowed by public law.
Condominium/HLURB contexts: Shared areas, setbacks, and easements complicate what counts as the “land portion necessary for normal use.”
Good-faith reliance on void titles: A builder can still be in good faith if defects weren’t apparent and due diligence was reasonable; but notice (annotations, adverse claims, lis pendens, demand letters) can defeat good faith.
Encroachments underground/overhangs: Eaves, footings, or beams crossing boundaries are treated under the same principles, adjusted for proportional harm and feasibility of removal.
Third-party contractors and mortgagees: Contractual claims run between owner–builder and builder–contractor; mortgage rights on the building follow whoever ultimately owns it after the Article 448 process.

10) Practical strategies

For landowners

Act quickly: Send formal demand on first discovery; commission a relocation survey. Delay can bolster a builder’s claim of good faith.
Document your choice under Article 448 and be ready to pay or receive (indemnity vs. land price).
If land value dwarfs the building’s value, consider rent rather than a forced sale.

For builders

Paper your good faith: secure and keep permits, surveys, geo-tags, and title verifications; respond to any notices.
Track expenses meticulously to support indemnity.
Assert retention until paid the proper indemnity or until the land conveyance in your favor is perfected.

Settlement instincts

Market-based buyout of the encroached strip or an easement can be faster and cheaper than litigation. Use independent appraisal and survey-based lot plans.

11) Quick decision tree

Was the builder in good faith?
- No → Owner may keep without paying or demand demolition + damages.
- Yes → Go to 2.
Was the landowner in good faith?
- Yes → Owner must choose: (a) appropriate with indemnity; or (b) compel sale of land portion unless land is much more valuable (then rent if owner won’t appropriate).
- No → Remedies tilt to protect the builder (compensation/compulsory sale; retention until paid).
Is the land far more valuable than the structure?
- Yes → No compelled sale to builder; choose appropriation (pay) or rent.
- No → Compelled land sale is viable.

12) Key takeaways

The law tries to save useful constructions and equalize equities rather than destroy value.
Landowner chooses when both parties are in good faith—but must pay if keeping the building, or accept a sale of the land portion (subject to the “considerably more valuable land” exception).
Good faith unlocks retention and indemnity; bad faith invites demolition and damages.
Partial encroachments use the same logic, with proportional valuation and practicality in mind.
Early surveys, notices, and documentation often decide who is in good faith—and therefore who wins the crucial remedies.

This article provides a practitioner-style overview for Philippine disputes involving builders on another’s land. For any live controversy, align strategy with current jurisprudence, commission proper surveys and appraisals, and tailor pleadings to the specific facts and valuations involved.