Transfer Requirements, Risks, and Best Practices (Philippines)

Buying real property that has passed to heirs and was “settled” through an Extra-Judicial Settlement (EJS) can be perfectly lawful—but it carries unique transfer requirements and time-bound risks that do not usually appear in ordinary sales. This article explains (1) when EJS is valid, (2) what must be paid and processed before title can be transferred, (3) what a buyer must check, and (4) safer deal structures in Philippine practice.

1) What “Extra-Judicial Settlement” means in Philippine law

An Extra-Judicial Settlement of Estate is a written settlement and partition of a deceased person’s estate without court proceedings, allowed when legal conditions are met. The core legal framework is found in Rule 74 of the Rules of Court (Settlement of Estate of Deceased Persons).

EJS is commonly used to:

identify the heirs,
describe the estate (e.g., land, house, condo),
divide/partition shares among heirs (or adjudicate to one heir), and
serve as a basis for transfer of title or tax declaration.

Important: EJS is not the sale itself. It is the settlement/partition among heirs. A later Deed of Absolute Sale (or assignment) is typically needed if the property will be sold to a buyer.

2) When an Extra-Judicial Settlement is allowed (and when it isn’t)

A. Basic conditions for a valid EJS

In general, EJS is used when:

The decedent left no will (intestate succession), or at least no will is being probated; and
There are no outstanding debts of the estate (or they are settled/assumed properly); and
All heirs participate (or are properly represented); and
The document complies with formal requirements, especially publication (discussed below).

If these conditions are not met, the settlement may be vulnerable to attack by:

omitted heirs,
creditors,
persons with better rights (e.g., a surviving spouse asserting correct shares), or
parties claiming the deed was executed through fraud, mistake, or lack of authority.

B. Common situations where EJS is inappropriate or risky

EJS becomes problematic when:

there is a dispute among heirs,
there are minor heirs or heirs under legal disability without proper representation/authority,
the estate has unsettled debts,
an heir is missing/unknown or intentionally excluded,
there is a later-discovered will, or
there are complex property issues (e.g., conjugal/community property, prior marriages, legitimacy questions, multiple titles, encumbrances).

In these cases, a judicial settlement (or at least more robust documentation and safeguards) may be more appropriate.

3) Publication and the “two-year” exposure under Rule 74: why buyers must care

A. Publication requirement

Rule 74 requires that the EJS be published in a newspaper of general circulation once a week for three (3) consecutive weeks. This is meant to notify creditors and other interested parties.

If publication is skipped or defective, the EJS may not bind third parties and can be challenged—especially by those who were not informed (e.g., creditors, omitted heirs).

B. The two-year period (Rule 74 protection for creditors/omitted heirs)

Even if an EJS is executed and registered, Rule 74 provides a period—commonly treated in practice as two (2) years from settlement/registration—during which:

creditors and
heirs who were left out may pursue claims and seek relief affecting the property.

In registry practice, this risk is often reflected as an annotation (a “two-year lien” type notice) on the title after registration of an EJS.

What this means for buyers: Buying during this window can expose the buyer to litigation or adverse claims (even if the buyer paid in full), depending on the facts and the buyer’s good faith and the completeness/regularity of the settlement.

4) Two ways property gets sold after death—and why it matters

Option 1: Settlement first, then sale (most straightforward)

Heirs execute EJS / Deed of Partition (or Affidavit of Self-Adjudication if only one heir).
Taxes are paid, EJS registered, and title is transferred to heirs.
Heirs execute a Deed of Absolute Sale to the buyer.
Buyer registers sale and obtains new title in buyer’s name.

Pros: Clean paper trail; easier for registries and banks. Cons: Takes longer; heirs must cooperate through multiple steps.

Option 2: Sale of hereditary rights / assignment before transfer (common but riskier)

Heirs sign a Deed of Assignment/Sale of Hereditary Rights in favor of the buyer (the buyer buys the “rights” rather than a titled parcel), then later completes settlement/transfer.

Pros: Can be faster upfront; used when title transfer to heirs is pending. Cons: Buyer steps into heirs’ shoes; higher risk if heirs are incomplete/incorrect, if shares are disputed, or if later claims arise. Financing is harder.

5) Transfer requirements in the Philippines: end-to-end checklist

Below is the typical documentary/tax/registry path when buying inherited titled property (TCT/CCT). Local practice varies by Register of Deeds (RD), Assessor, and BIR RDO, but the sequence is generally consistent.

Stage A — Establish heirs and estate facts

Key documents commonly required:

Death Certificate of the registered owner.
Marriage Certificate (if relevant to determine conjugal/community property and spouse’s share).
Birth Certificates of heirs (to prove filiation).
Government IDs and TIN of heirs.
If an heir is abroad: Special Power of Attorney (SPA), typically notarized and consularized/apostilled as applicable.
If a representative signs: proof of authority (guardianship documents, etc., when applicable).
Property papers: Owner’s Duplicate Certificate of Title (TCT/CCT), tax declaration, and recent tax receipts.

Why buyers care: If heirs are wrongly identified, the entire chain of transfer can be attacked.

Stage B — Execute the settlement instrument correctly

Depending on the family situation:

Extra-Judicial Settlement and Partition (multiple heirs), or
Affidavit of Self-Adjudication (single heir), sometimes with Deed of Sale if selling immediately (but many registries still prefer settlement/transfer first).

Core contents should include:

full identification of decedent and heirs,
statement that the decedent died intestate and left no debts (or how debts are handled),
complete property description (title number, technical description),
partition/shares, and
signatures of all heirs (and proper notarization).

Publication: once a week for 3 consecutive weeks in a newspaper of general circulation (keep publisher’s affidavit and newspaper issues).

Stage C — Settle estate tax and secure BIR clearance (critical)

Before the RD transfers title from the decedent to heirs (and often before subsequent sale can be registered), the RD typically requires BIR authority, commonly known as CAR / eCAR (Certificate Authorizing Registration / electronic CAR).

Key points:

The estate is generally subject to estate tax under the National Internal Revenue Code (as amended; the TRAIN law introduced a flat rate framework widely applied in current practice).
The BIR process requires compiling supporting documents, valuations, and proof of payment.
Practical reality: without the BIR clearance, most RDs will not process the transfer.

Buyer takeaway: A buyer should treat BIR clearance as non-negotiable for title transfer.

Stage D — Register the EJS and transfer title to heirs (Registry of Deeds)

Once BIR requirements are satisfied, the heirs (or their representative) register the EJS with the RD.

Typical RD outputs:

Cancellation of old title in decedent’s name, and
Issuance of new title(s) in the name of the heir(s), reflecting partitioned shares; and/or
Annotation of settlement notices (often including the two-year exposure under Rule 74).

Local government requirements may include payment of:

local transfer tax (rates vary by locality), and
documentary requirements from the Treasurer/Assessor.

Stage E — Sell to the buyer and transfer title to buyer

After the heirs are on title, execute:

Deed of Absolute Sale (or other conveyance instrument) from heirs to buyer.

Then process:

BIR taxes on sale (often capital gains tax or creditable withholding tax depending on classification, plus documentary stamp tax), and
local transfer tax, and
RD registration fees.

Finally, RD issues:

New TCT/CCT in buyer’s name, and the buyer updates:
Tax declaration with the City/Municipal Assessor and pays real property tax under the buyer’s name.

6) Buyer due diligence: what to verify before paying

A. Title and registry checks

Certified True Copy (CTC) of Title from the RD (not just a photocopy).
Check for encumbrances: mortgages, lis pendens, adverse claims, annotations, levies.
Confirm whether an EJS annotation exists and whether the two-year period is still running.
Confirm the title is not a reconstituted title with red flags (requires deeper diligence).
Verify the seller-heirs on the deed match the heirs on title (or are properly authorized).

B. Heirship and family-law checks (often where deals fail)

Confirm all compulsory heirs are accounted for (spouse, children; and in their absence, parents, etc.).
Watch for:
- children from prior relationships,
- prior marriages,
- deaths among heirs (creating “heirs of heirs”),
- illegitimacy/paternity disputes,
- missing heirs.
If any heir is represented by SPA, confirm scope and validity of the SPA.

C. Tax and BIR checks

Confirm the estate tax has been properly processed and paid (or properly covered by BIR clearance).
Confirm CAR/eCAR authenticity and that it covers the correct property and transaction type.
Validate official receipts and filing references (avoid “shortcut” arrangements that later block transfer).

D. Possession and practical checks

Who is in possession? Are there tenants/occupants?
Check barangay/city records if there are known disputes.
Verify real property taxes are current; obtain tax clearance where available.

7) Risk points unique to buying after EJS (and how they show up)

Risk 1: Omitted heir appears later

If a compulsory heir was excluded (intentionally or by mistake), they can sue to recover their legitime/share, potentially affecting the property. This is one reason buyers prefer transfer to heirs first and to ensure completeness of heirs.

Risk 2: Estate debts and creditor claims

Even with an EJS, creditors may assert claims—particularly within the Rule 74 window—if debts existed and were not settled. Buyers should be cautious when the family states “no debts” without documentation.

Risk 3: Defective publication or defective notarization

Failure to meet publication requirements or defects in execution can undermine the enforceability of the settlement against third parties.

Risk 4: Spousal property regime issues

If the titled property was acquired during marriage, part of it may be conjugal/community. The surviving spouse’s share must be handled correctly before the decedent’s share is distributed. Errors here commonly cause BIR and RD rejection—or lawsuits later.

Risk 5: “Rights-only” purchase

Buying hereditary rights can work, but it is structurally riskier: the buyer inherits the heirs’ problems (missing heirs, disputed shares, unsettled taxes) and may have limited remedies if signatures were incomplete or authority was defective.

8) Safer deal structures buyers use in practice

A. Conditioned payment with escrow-like controls

Pay a small earnest money; release balance only upon:
- verified eCAR, and/or
- title transferred to heirs, and/or
- title transferred to buyer.

B. Sell only after title is in heirs’ names

This is the cleanest path for buyers and banks.

C. Warranties and indemnities in the deed (with real enforceability)

Include clauses that:

all heirs are complete,
no debts/claims exist,
sellers will defend title and indemnify buyer,
sellers will cooperate in future claims. But remember: indemnities are only as good as the sellers’ ability to pay.

D. If buying within the Rule 74 period: stronger protections

Require proof of full publication and proper registration,
require all heirs’ participation,
require additional security arrangements (e.g., retention/holdback), because the two-year exposure is a real practical risk.

9) Special note: untitled land and tax-declaration-only properties

For property that is not covered by a Torrens title (tax declaration only), the “transfer” happens mainly through:

EJS/partition documents,
payment of taxes,
issuance/transfer of tax declarations,
and possibly separate processes for titling or confirmation of ownership.

Buyer risk is generally higher with untitled land because possession, boundaries, and competing claims are harder to control than in titled property.

10) Practical “must-have” document list for buyers (summary)

Before full payment, a careful buyer typically secures copies of:

Certified True Copy of Title (from RD) + owner’s duplicate for eventual transfer
Death certificate of registered owner
Proof of heirship (birth/marriage certificates) and IDs/TINs
Notarized EJS / Deed of Partition (or Self-Adjudication)
Proof of publication (newspaper issues + affidavit of publication)
BIR estate tax filing/payment documents and eCAR/CAR
Local transfer tax receipts; tax clearance where applicable
If already transferred: new title in heirs’ names
Deed of Absolute Sale + BIR sale-tax clearances for buyer’s transfer

11) Key takeaways

An EJS can be a valid basis for transferring inherited property—but it carries formal requirements (especially publication) and a time-bound vulnerability for creditor/omitted-heir claims.
For buyers, the safest path is usually: EJS → estate tax clearance (eCAR) → title to heirs → sale → title to buyer.
The biggest deal risks are almost always heirship completeness, spousal/share errors, defective publication, and unsettled tax/registry steps.