Buying Property with Business Partners in the Philippines: Joint Ownership & Contract Essentials

Entering Philippine real estate with business partners can unlock bigger deals and diversify risk—but it also raises complex legal, tax, and governance questions. This article gives a practitioner-level overview of structures, due diligence, contracts, taxes, and ongoing management—so you can choose, paper, and operate a co-owned property the right way.

1) The legal ground rules (Philippine context)

Nationality limits

Land may be owned only by Filipino citizens or by corporations/partnerships that are at least 60% Filipino-owned. The Anti-Dummy Law penalizes schemes that circumvent this.
Condominium units: foreign ownership allowed up to 40% of the project’s total saleable area, with the condo corp likewise max 40% foreign.
Long-term leases: where foreigners cannot own land, consider a 50-year lease renewable for 25 years (Investor’s Lease Act), coupled with strong contractual protections.

Torrens system & registries

Titles are TCTs (land) and CCTs (condo) under the Property Registration Decree. Ownership (and most real rights like mortgages, leases over one year, easements) is effective against third parties only upon registration with the Registry of Deeds (RD).

Co-ownership default rules (Civil Code)

Each co-owner has an ideal/undivided share.
Administration decisions: by majority of shares; alterations require unanimity.
Expenses and taxes: borne pro rata to shares.
A co-owner may sell or encumber their undivided share, but not a specific portion of the property without partition.
Right to demand partition is imprescriptible, but parties may validly agree to keep the co-ownership indivisible for up to 10 years (renewable by agreement or extendable by the court for good cause).

Family & marital property overlays

If any individual co-owner is married, note the governing property regime (absolute community, conjugal partnership, or separation). Spousal consent is generally required for the sale/mortgage of the family home or property under community regimes.

2) Choosing the vehicle: pros, cons, and when to use which

A) Simple Co-Ownership (Natural or Juridical Persons)

When to use: Small group, long-term hold, minimal financing, low operational complexity. Pros: Fast to set up; direct title entry lists the co-owners and shares; minimal regulatory overhead. Cons: Defaults can be rigid (unanimity for alterations), exit is messy, buyers/lenders may be wary, and personal liability for operations unless ring-fenced by contracts/insurance.

Contract must-haves: Co-Ownership Agreement (see §4).

B) Partnership (General or Limited)

When to use: Active development/operations where partners share profits and management. Pros: Clear allocation of profits/losses, defined management roles; may appear on title as the partnership. Cons: In a general partnership, partners may be personally liable; limited partnership reduces liability but needs strict compliance and clear disclosure of limited partners.

Contract must-haves: Partnership Agreement, registration (SEC for partnerships), governance, withdrawal/expulsion, capital calls.

C) Corporation (incl. “One Person Corporation” for single investor)

When to use: Larger or debt-financed projects; need for limited liability, investor rotation, clear governance, bankability. Pros: Limited liability, shares are more easily transferred, corporate governance under the Revised Corporation Code, and better fit for mortgage/project finance. Cons: Higher admin cost and compliance; for land ownership, must meet 60% Filipino equity threshold.

Contract must-haves: Articles/By-laws, Shareholders’ Agreement (SHA), Board charters, finance/security docs.

D) Joint Venture (Contractual or Incorporated)

When to use: Two or more businesses combining assets/know-how for a specific project. Pros: Flexibility; can be purely contractual (treated as a partnership for many legal/tax purposes) or incorporated (a JV company). Cons: Bankers prefer incorporated JVs; contractual JVs still face partnership-type liabilities unless carefully allocated.

Contract must-haves: JV Agreement (or incorporate and use SHA), scope, contributions, profit waterfall, deadlock, exit, IP/brand use, non-compete.

3) Due diligence checklist before you buy (no shortcuts)

Title & encumbrances

Latest Certified True Copy of TCT/CCT; verify technical description and boundaries.
Check annotations: mortgages, liens, adverse claims, lis pendens, easements, tenancy or long leases.
Confirm tax declaration and real property tax (RPT) status; request Tax Clearance.

Zoning & land use

LGU zoning certification and locational clearance; if needed, ECC from DENR; check if within protected areas, foreshore, or no-build zones.

Project-specific

For condos/subdivisions: confirm developer licenses (PD 957) and compliance; review condo Master Deed/By-Laws and house rules.
For agricultural land: confirm retention/tenancy issues; conversion permits if for non-agri use.
Right-of-way access and utility connections.
Survey and, where relevant, geotechnical/flood/soil assessments.

Counterparty & capacity

KYC partners, board/shareholder approvals, spousal consents if needed, special powers of attorney (apostilled if executed abroad).

Financing

Term sheets, lender’s due diligence requirements, mortgageability, DSCR projections, and collateral coverage.

4) Essential contract suite (and the clauses that do the heavy lifting)

4.1 Co-Ownership or JV/Partnership Agreement

Include, at minimum:

Capitalization & Contributions
- Cash, land, development rights, services; valuation method; timing; failure-to-fund remedies (interest, dilution, buy-down).
- Capital call mechanics and default cures.
Title & Security
- Who holds title (names on TCT/CCT vs. special purpose vehicle (SPV)); escrow for closing funds and documents; restriction on transfer until post-closing conditions are satisfied.
Purpose & Business Plan
- Clear scope: buy-and-hold, build-to-sell, lease, hospitality, mixed use. Tie capex and drawdowns to an agreed budget.
Governance
- Decision matrix: items needing Board/unanimous consent (dispositions, debt, pledges, alterations, related-party deals, budget changes), and items delegated to a Manager or Property Administrator.
- Voting mechanics based on equity (not headcount); meeting quorum; written consents; tie to capital call rights.
- Deadlock resolution: escalating negotiation → mediation → arbitration; or corporate tools like buy-sell, Russian roulette, Texas shoot-out, chairperson’s casting vote.
Distributions & Waterfall
- Priority returns: return of capital → preferred return (IRR or coupon) → catch-up → residual split.
- Tax distributions to cover owners’ tax liabilities from pass-through profits, if applicable.
Transfers & Exits
- Lock-up period; right of first refusal/pre-emption; tag-along/drag-along; permitted transfers (affiliates, estate planning).
- Exit triggers: time-bound sale, change in law, material breach, financing default, key person loss.
- Valuation: independent appraiser or agreed formula; earn-outs for development milestones.
Operations
- Property management (in-house vs. third party), leasing authority and approval thresholds, bank mandates, procurement policy, insurance (property, casualty, business interruption, D&O if corporate).
- Books & records, audit rights, budget and variance approvals.
- Environmental and regulatory compliance warranties.
Restrictions & Use
- Zoning-consistent uses, brand standards, changes of use, nuisance prohibitions.
Default & Remedies
- Funding default (dilution, suspension of voting/distributions, penalty interest); performance default; step-in rights; security enforcement.
Dispute Resolution, Law & Venue

Philippine law; venue; arbitration (e.g., PDRCI) under the ADR Act; interim relief in courts; language; confidentiality.

Duration & Partition

Express waiver of partition for up to 10 years (renewable) to preserve project integrity.

4.2 Purchase Documentation (Acquisition Phase)

Letter of Intent/Term Sheet (non-binding economics; binding exclusivity, confidentiality).
Deed of Absolute Sale (or Deed of Assignment), with representations & warranties (title, authority, taxes, no tenants/lis pendens), conditions precedent (clearances, consents), and indemnities.
Special Power of Attorney where signatories act by proxy; apostille if executed abroad.
Escrow Agreement (release against RD proof of registration, tax clearances).
Closing deliverables checklist and risk allocation for hidden defects.

4.3 If using a Corporation or Incorporated JV

Articles of Incorporation & By-Laws tailored to real estate operations.
Shareholders’ Agreement (trumps by-laws on economics/control): board composition, veto list, funding, transfer restrictions, drag/tag, confidentiality, non-compete, non-solicit, information rights, ESG/sustainability undertakings.
Management Agreement (if an affiliate manages).
Finance Documents: loan, mortgage (REM), real estate mortgage registration, assignments of leases/rents, deed of undertaking from major shareholders, inter-creditor agreements.

5) Taxes, fees, and ongoing charges (high-level)

Always model taxes early; they affect deal structure, pricing, and exit.

On acquisition/sale

Capital Gains Tax (CGT): generally 6% of the higher of gross selling price or zonal/fair market value when a capital asset owned by a non-dealer is sold.
Creditable Withholding/Income Tax: if the seller is engaged in real estate (ordinary asset), expect creditable withholding and regular income tax instead of CGT; sale may also be VATable depending on the seller’s status/thresholds.
Documentary Stamp Tax (DST) on the deed of sale (percentage of consideration or FMV).
Local Transfer Tax: imposed by LGUs (commonly around 0.5% in provinces; up to ~0.75% in cities/MM).
Registration Fees: payable to RD per schedule; notarial fees.

Holding period

Real Property Tax (RPT) annually (basic tax is commonly up to 1% of assessed value in provinces; up to 2% in Metro Manila), plus SEF levy and other charges.
Income tax on rents and other operating income; withholding obligations on payments to vendors; VAT if registered/required.

Exit/Transfers among partners

Transfers of shares (if using a corporation) have their own tax regime (e.g., stock transaction tax for listed shares; capital gains tax on unlisted shares), which can be more efficient than asset transfers. Model both share deal vs. asset deal.

(Rates and thresholds vary by status and law/regulation; confirm current rates for the specific deal.)

6) Financing & security

Mortgages (REM) over the land/condo; assignment of leases and rents; chattel mortgage over movable assets; pledge over shares/partnership interests.
Negative pledge and change-of-control covenants to align with JV/SHA.
Inter-creditor and standstill mechanics if multiple lenders.
Post-closing registrations (mortgage, assignments) must be annotated on the title to perfect against third parties.

7) Special situations

Condominiums

Review Master Deed, Amendments, By-Laws, house rules; confirm 40% foreign cap not breached; check common area cost allocation; board control; special assessments; parking & storage rights; short-term rental rules.

Agricultural/foreshore/forest lands

Extra caution on alienability/classification; confirm land is A&D (alienable and disposable); consider agrarian reform impacts and tenancy risks.

Pre-selling/Development

For subdivisions/condos, ensure developer permits; protect buyers under PD 957 and buyers on installment under Maceda Law; align sale timelines with DHSUD requirements.

Leasing instead of owning

For foreign-heavy partnerships, consider long-term lease + building ownership; register lease and building ownership; protect with step-in and mortgage of leasehold rights.

Estate/continuity planning

Buy-sell agreements funded by insurance; key man insurance; veto protections against transfers to competitors; tag/drag for orderly exits.

8) Governance & operations: running the asset like a business

Annual plan & budget with variance thresholds.
Bank signatories and payment policies; procurement rules; related-party transaction policy.
Insurance program (property, liability, engineering, BI, D&O if corporate).
Leasing playbook: approval levels for rent, concessions, lease term; broker engagement letters.
Reporting: monthly management accounts; KPI dashboards (occupancy, WALE, DSCR, arrears, capex burn, IRR vs. plan).
Compliance calendar: RPT due dates; SEC/ BIR/ LGU filings; permit renewals.

9) Practical structuring tips

Match the vehicle to the endgame. If you plan to flip within 2–3 years or bring in mezz/PE, form a corporation or incorporated JV early.
Hard-wire exits. Lock-up, ROFR, and deadlock mechanics avert value-destroying stalemates.
Ring-fence liabilities. Prefer an SPV; require partners to contract through the SPV; maintain arm’s-length related-party contracts.
Pre-agree capital cures. Missed funding should trigger dilution or forced sale/auction—document the math.
Register everything. Unregistered interests (leases over one year, mortgages, easements) are vulnerable against third parties.
Mind the 60/40 at every layer (ultimate beneficial ownership, voting, board control, and “beneficial ownership” optics) to avoid Anti-Dummy pitfalls.
Tax-model both routes. Compare asset deal vs. share deal; consider condo vs. land; CGT vs. ordinary income; VAT effects.

10) Templates & clause ideas (outline)

Co-Ownership Agreement (outline)

Parties; Recitals; Definitions
Formation; Purpose
Capital Contributions; Capital Calls; Default & Cures
Title; Waiver of Partition; Use Restrictions
Governance & Voting; Decision Matrix; Meetings; Quorum
Manager/Administrator Appointment; Authority Limits
Budgeting; Reporting; Bank Mandates
Insurance; Compliance; Records & Audit
Distributions; Tax Matters; Withholding
Transfers (ROFR, tag/drag, permitted transfers)
Events of Default; Remedies; Buy-Out Formula
Confidentiality; Non-Compete (if applicable)
Term; Dissolution; Winding-Up
Dispute Resolution; Governing Law; Venue
Notices; Miscellaneous (assignment, amendments, counterparts)

Shareholders’ Agreement (extra focus)

Board structure; Reserved Matters; Information Rights
Anti-dilution (if future rounds); Pre-emptive rights
Drag/tag; Call/Put options; Deadlock
Related-party policy; Exclusivity/non-compete
Exit plan (sale after X years; target IRR)

11) Closing & registration roadmap (typical)

Sign main agreement (Co-Ownership/JV/SHA), LOI/TS, confidentiality.
Complete legal, technical, and tax due diligence.
Execute Deed of Sale/Assignment; pay CGT or CWT, DST, transfer tax.
Register deed with RD; secure new TCT/CCT in buyer/SPV’s name; annotate mortgages/leases.
Update tax declaration with the Assessor; RPT billing to new owner.
Post-closing corporate/SEC/BIR/LGU registrations (if SPV).
Hand-over of original documents, keys, plans, as-built drawings; transition to operations.

12) Common pitfalls (and quick fixes)

No partition waiver → partner forces sale/partition at a bad time. Fix: include 10-year (renewable) waiver.
Vague funding terms → stalemate at capex time. Fix: clear capital call process and dilution/penalty.
Unregistered lease or mortgage → third party trumps your right. Fix: annotate promptly.
Ignoring condo 40% cap → void risk. Fix: monitor sales mix; require certifications from the condo corp.
Anti-Dummy exposure → nominee arrangements/side letters. Fix: maintain real Filipino control and benefits; avoid dummy structures.
No drag/tag → frozen cap table. Fix: robust transfer regime.
Tax mismatches → CGT vs. ordinary asset confusion. Fix: pre-closing tax ruling/advice where needed.

Final word

Real estate partnerships in the Philippines live or die by structure, paper, and compliance. Pick the right vehicle (co-ownership, partnership, corporation, or JV), do thorough title and regulatory diligence, and lock in the contractual mechanics—capital calls, governance, exits, and dispute resolution. Register your rights, respect nationality rules, and model taxes early. With those disciplines in place, joint property acquisitions can be both compliant and highly investable.

(This article is general information for the Philippine setting and not a substitute for tailored legal advice on your specific facts.)