In the Philippine real estate market, it is common to encounter attractive properties that are still registered under the name of a deceased owner. While these "estate properties" often come with lower price points, they are fraught with legal complexities. You cannot simply sign a Deed of Sale with the heirs and call it a day; the law requires a specific process to transfer the title from the dead to the living.
Here is a comprehensive guide on the legalities of buying property from a deceased person’s estate.
1. The Core Legal Concept: "Succession"
Under the Civil Code of the Philippines, the rights to the succession are transmitted from the moment of the death of the decedent. However, while the heirs technically own the property the moment the owner passes away, the Transfer Certificate of Title (TCT) does not automatically change.
Before a buyer can validly registered the property in their own name, the heirs must first undergo Estate Settlement.
2. Two Ways to Settle an Estate
The path the heirs must take depends on whether the deceased left a will and whether there are any debts.
A. Extrajudicial Settlement of Estate (EJS)
This is the fastest and most common method. It is used when:
- The deceased left no will (intestate).
- The deceased left no debts.
- All heirs are of legal age (or represented by guardians) and are in unanimous agreement on how to divide the property.
The heirs sign a public instrument called an Extrajudicial Settlement Among Heirs. If there is only one heir, they sign an Affidavit of Self-Adjudication.
B. Judicial Settlement
If the heirs cannot agree on the partition, or if there is a Last Will and Testament, the estate must go through the courts. This involves a petition for probate (if there is a will) or letters of administration. This process can take years, and a buyer should be extremely cautious or prepared for a long wait.
3. The Role of the "Deed of Sale"
A buyer does not usually buy the property directly from the deceased. Instead, a two-step transfer (often processed simultaneously) occurs:
- Transfer from Decedent to Heirs: Documentation showing the heirs are now the owners.
- Transfer from Heirs to Buyer: A Deed of Absolute Sale executed by all the legal heirs in favor of the buyer.
Important: If one heir refuses to sign, you cannot acquire 100% ownership of the property. You would only be buying the "pro-indiviso" share of the heirs who signed, making you a co-owner with the dissenting heir.
4. Taxes and Costs: The "Estate Tax"
The biggest hurdle in these transactions is the Estate Tax. Under the TRAIN Law, the estate tax is a flat rate of 6% of the value of the net estate.
- Who pays? Legally, the estate (the heirs) is responsible. In practice, buyers often negotiate to pay this to expedite the sale.
- The Clearance: The Bureau of Internal Revenue (BIR) must issue a Certificate Authorizing Registration (CAR). Without this, the Register of Deeds will not cancel the old title and issue a new one to you.
- Penalties: If the owner died years ago and the tax was never paid, massive surcharges and interests may have accumulated (unless an Estate Tax Amnesty is currently in effect).
5. Mandatory Requirements for Title Transfer
To successfully transfer the title to your name, the following documents are typically required:
- Death Certificate (PSA Certified) of the registered owner.
- Extrajudicial Settlement (published in a newspaper of general circulation for three consecutive weeks).
- Affidavit of Publication from the newspaper.
- BIR Tax Clearance (CAR) for the Estate Tax.
- Transfer Tax Receipt from the City/Treasurer's Office.
- Certified True Copy of the Title.
6. Red Flags and Due Diligence
When buying property still in a deceased person's name, perform these checks:
- Check the Heirs: Ensure all legitimate children and the surviving spouse are included. "Hidden" heirs (illegitimate children) have legal rights under Philippine law and can contest the sale later.
- Section 4, Rule 74 Encumbrance: Look at the back of the title. If the EJS was recently settled, there is a two-year lien where any excluded heir or creditor can come forward to claim their right to the property. You can still buy it, but you must be aware of this risk.
- The Physical Occupants: Is someone living there? If a relative of the deceased is in possession but is not part of the sale, you may face an ejectment case.
Summary Table
| Step | Action | Key Document |
|---|---|---|
| 1 | Heirs agree to sell and settle. | Extrajudicial Settlement |
| 2 | Public notice of the settlement. | Affidavit of Publication |
| 3 | Pay Estate Tax at the BIR. | CAR (Certificate Authorizing Registration) |
| 4 | Pay Local Transfer Taxes. | Tax Clearance / Official Receipt |
| 5 | Execute the Sale. | Deed of Absolute Sale |
| 6 | Register the transfer. | New TCT in Buyer's Name |
Buying an estate property is a marathon, not a sprint. The legal "paper trail" must be unbroken from the deceased owner to you to ensure your ownership is indefeasible.
Would you like me to draft a checklist of specific questions you should ask the heirs before making a down payment?