This article is a general discussion of Philippine civil and real property law concepts. It is not legal advice.

1) Why these two instruments get confused

In Philippine transactions involving encumbered property (especially properties financed through banks, Pag-IBIG, or in-house developer loans), parties often want the buyer to “take over” the property and the loan. Two common documentation approaches appear:

Deed of Assignment with Assumption of Mortgage (often used when what is being transferred is a right/interest subject to an existing loan); and
Conditional Sale (often used when the parties want a sale, but make completion dependent on a future event like lender approval, full payment, or title transfer readiness).

They can look similar in effect (“buyer pays, buyer moves in, buyer pays the loan”), but they are not the same legally, and the risks are different—especially when the mortgagee/lender is not part of the agreement.

2) Deed of Assignment with Assumption of Mortgage

A. What it is (legal nature)

A Deed of Assignment transfers the assignor’s rights, interests, or claims to the assignee. In real estate settings, this is commonly used where:

the assignor does not yet hold full, free title (e.g., rights under a Contract to Sell with a developer, or equitable rights as buyer-in-possession), or
title exists but the parties choose “assignment” language because the property is subject to a mortgage and lender approval is pending.

“With Assumption of Mortgage” means the assignee agrees to take over the obligation to pay the mortgage/loan secured by the property.

B. What exactly is being transferred

This depends on the assignor’s status:

If the assignor is still under a developer’s Contract to Sell: what’s transferred is typically rights as buyer (the right to possess, to pay remaining balances, to demand eventual conveyance), subject to developer consent and procedures.
If the assignor is the registered owner but the title is mortgaged: the assignment may be drafted to transfer ownership rights, but it often functions like a sale subject to the mortgage (and should be treated carefully because “assignment” cannot erase real property conveyancing rules).

C. Assumption of the loan vs. release of the original borrower (novation issue)

This is the single most important point in practice:

Between assignor and assignee, the assignee’s promise to assume and pay the mortgage can be valid and enforceable.
Against the lender (mortgagee), the original borrower is not automatically released.

Under Civil Code principles on novation (substitution of debtor), replacing the debtor typically requires the creditor’s consent. Without the lender’s express approval, the lender may still treat the original mortgagor/borrower as the liable debtor—even if the assignee has been paying.

Practical result: A private assumption agreement may protect the buyer and seller between themselves, but it may not protect either party from lender action if the loan terms are violated or if default happens.

D. Effect on the mortgage lien

A mortgage is a real right that follows the property. Assignment does not remove the lien. If the loan is unpaid, the lender can foreclose regardless of private arrangements, subject to applicable laws and due process.

E. Possession and control

An assignment often comes with:

immediate transfer of possession to the assignee,
authority to deal with the property (subject to lender/developer restrictions),
and an undertaking that the assignee will pay amortizations and charges.

Possession, however, does not equal legal release of the original debtor from the lender.

F. Typical uses (Philippine practice)

Transfer of rights in pre-selling condo/subdivision purchases (assignment of buyer’s rights).
“Take-over” deals where title is mortgaged and the parties are awaiting lender approval for an assumption/transfer program.
Situations where the seller cannot immediately deliver a clean title because the mortgage is outstanding.

G. Common pitfalls

No lender consent / due-on-sale clause: many loan contracts prohibit sale/assignment without approval and may allow acceleration.
Seller remains on the hook: if the assignee defaults, the lender can pursue the original borrower; the seller then must chase the assignee.
Informal payments: the assignee pays the seller, seller pays the lender—high risk of missed payments and disputes.
Title and registry issues: assignment alone may not protect against third-party claims unless properly documented and, when applicable, registered/annotated.
Developer restrictions: for developer-held titles/CTS arrangements, assignment may be invalid without developer consent.

H. Drafting essentials (high-impact clauses)

Clear description of the rights assigned (and what is not assigned).
Explicit assumption of loan undertaking: amortizations, interests, penalties, insurance, association dues, taxes.
Indemnity in favor of assignor if the assignee fails to pay, plus reimbursement provisions.
Authority mechanics: who deals with the lender; who receives notices; reporting obligations.
Condition precedent or timeline for securing lender/developer consent (and what happens if it’s denied).
Default and remedies: termination, forfeiture, reconveyance/return of rights, damages, attorney’s fees.
Treatment of improvements and occupancy costs upon termination.

3) Conditional Sale (and the related “Contract to Sell” concept)

A. “Conditional Sale” can mean two different structures

In Philippine usage, parties use “conditional sale” loosely. Legally, you usually see either:

Contract of Sale subject to a suspensive condition (a sale where certain obligations—often delivery or transfer—become demandable only when a condition is fulfilled); or
Contract to Sell (a separate and common structure where the seller reserves ownership and merely promises to sell upon full payment or fulfillment of conditions).

They behave differently in disputes, especially regarding ownership transfer and cancellation/rescission.

B. Conditional Contract of Sale (sale with a suspensive condition)

The sale is conceptually perfected when there is meeting of minds on object and price, but the parties make performance dependent on a future uncertain event (e.g., “effective only upon lender approval of loan assumption”).
If the condition is not fulfilled, the obligation to deliver/transfer may not arise.

Common conditions in mortgaged-property deals:

lender approval of loan assumption or refinancing,
release of mortgage upon payment,
issuance of a title in seller’s name (if still in developer name),
completion of documentary requirements.

C. Contract to Sell (very common in installment deals)

A Contract to Sell is typically drafted so that:

the seller retains ownership until the buyer completes payment and conditions, and
the buyer’s failure to pay is treated as failure of a condition to acquire title, rather than breach of an existing obligation to transfer ownership.

This structure is often used to manage the seller’s risk and to avoid complications associated with rescission of a completed sale of immovables.

D. Effect on ownership and title

In many contracts to sell, ownership stays with the seller until full payment/conditions; buyer gets possession (sometimes) but not title.
In a sale (even conditional), if and when the condition is satisfied and delivery occurs, ownership transfer rules become central (and disputes often turn on what was delivered, what conditions were met, and the parties’ intent).

E. Relationship to a mortgage

A conditional sale can be crafted to handle the reality that the property is mortgaged:

Sale subject to mortgage: buyer buys the property encumbered and agrees (internally) to pay; lender is not bound unless it consents to novation.
Sale conditioned on lender approval: parties agree that the sale will not proceed (or will be rescinded/void) if the lender refuses to approve assumption/release.
Sale conditioned on mortgage settlement: purchase price is applied to pay off the loan so the seller can deliver unencumbered title.

F. Consumer protection overlays (often overlooked)

Depending on the property and payment scheme, special rules may materially affect cancellation and refunds, such as:

RA 6552 (Maceda Law) for certain residential realty installment purchases (grace periods, refund/cancellation requirements), and
developer-regulated arrangements (commonly invoked in subdivision/condo contexts) that require adherence to specific procedures and consents.

Whether these apply depends on facts (residential nature, installment structure, status of seller as developer or not, etc.).

G. Drafting essentials for conditional sale/contract to sell

Precise statement of the condition(s) (what must happen, by when, who must do what).
Allocation of risk if the condition fails (refund formula, forfeiture, liquidated damages, return of possession).
Escrow mechanics: where payments go while waiting for approvals.
Clear transition points: when possession is delivered; when transfer taxes/fees are paid; when deed of sale is executed; when title is transferred.
Default provisions aligned with the correct legal structure (sale vs contract to sell), and compliance with any applicable protective laws for buyers.

4) Side-by-side comparison (practical legal differences)

A. Object of the transaction

Assignment with assumption: transfers rights/interest (often equitable rights or contractual rights), plus a promise to pay the loan.
Conditional sale: aims at transfer of ownership (or a promise to transfer ownership) but makes it dependent on conditions.

B. Lender involvement and debtor release

Assignment with assumption: lender is usually not bound unless it consents; original borrower often remains liable.
Conditional sale: can be structured so the “sale” does not proceed unless lender consents—reducing the risk of a buyer paying without getting a workable loan transfer—but lender still isn’t bound unless it participates/approves.

C. Remedy framework when buyer defaults

Assignment with assumption: seller/assignor typically sues based on breach of the assumption and indemnity; may terminate the assignment and recover possession/rights depending on contract terms and circumstances.
Conditional sale / contract to sell: remedies depend on structure:
- contract to sell often uses cancellation mechanisms (subject to applicable protective laws),
- a completed sale disputes often involve rescission standards for immovables and formal demand requirements in certain contexts.

D. Best fit when title is not yet in seller’s name

Assignment is commonly the cleaner fit when the seller doesn’t have transferable title yet (e.g., still under developer CTS).
Conditional sale can work, but must be very clear that what is being transferred now is not full ownership, and conditions must account for developer approval and eventual conveyance.

E. Registration and third-party protection

Both instruments benefit from being in a public instrument and, where appropriate, annotated/registered to protect against later conflicting claims—subject to the property’s titling system and the nature of the right transferred.

5) Choosing the right instrument: decision logic in common Philippine scenarios

Scenario 1: Condo/subdivision still under developer Contract to Sell

Usually appropriate: Deed of Assignment of Rights (and assumption of whatever remaining obligations), with required developer consent and fees. Conditional sale risk: may misrepresent the seller’s ability to convey ownership now.

Scenario 2: Titled property in seller’s name, mortgaged to a lender (bank/Pag-IBIG)

Two safer patterns:

Conditional sale conditioned on lender approval and/or mortgage release, with escrow; or
Sale with structured payoff: part of price directly pays the loan, mortgage is released, then deed/title transfer.

High-risk pattern: assignment/assumption without lender approval while buyer takes possession and pays—because seller remains exposed to the lender.

Scenario 3: Parties want speed; lender approval may take months

A conditional structure is often used so that:

payments are held or staged (earnest money vs full payments),
possession is controlled,
and consequences of lender denial are predetermined.

If parties still choose assignment/assumption, strong indemnities, transparency, and payment controls become critical—but risk remains.

6) High-risk “looks like sale but is really security” problem (equitable mortgage)

Both documents can be attacked if they are used to disguise a loan secured by property. Philippine law recognizes equitable mortgage doctrines where an apparent sale/assignment is treated as a mortgage if circumstances show the real intent was to secure a debt (e.g., inadequate price, continued possession by “seller,” right to repurchase patterns, retention of title documents, or other indicators).

If a court recharacterizes the transaction as a mortgage:

the “buyer” may be treated as a lender,
remedies shift (foreclosure rules instead of ownership transfer),
and cancellation/eviction strategies can fail.

Clarity of intent, fair consideration, and consistent implementation matter.

7) Practical checklist for either instrument (Philippine best practices)

Verify status of title and liens: certified true copy of title, mortgage annotations, tax declaration, real property tax status, association dues.
Check loan documents for restrictions: prohibition on assignment, due-on-sale, required approvals.
Decide the legal path:
- assignment of rights (when seller’s interest is contractual/equitable), or
- conditional sale/contract to sell (when aiming for ownership transfer but needing conditions).
Control the money flow: escrow or direct payment to lender for payoff; avoid informal “buyer pays seller who pays bank” without safeguards.
Plan the turnover: possession date, move-in rules, utilities, insurance, maintenance, and what happens on termination/denial of approval.
Document approvals: developer consent, lender consent, authority letters, assumption approval, release documents.
Align taxes/fees responsibility clearly: transfer taxes, registration, notarial fees, capital gains/withholding issues depending on classification, and loan transfer charges.

8) Bottom line

A Deed of Assignment with Assumption of Mortgage primarily transfers rights/interest and imposes on the assignee a duty to pay the loan, but it does not automatically substitute the debtor in the eyes of the lender; the original borrower often remains liable unless the lender consents to the substitution.
A Conditional Sale (or Contract to Sell) is designed to manage uncertainty by making the transfer of ownership (or the obligation to transfer) depend on defined conditions—often lender approval, mortgage release, or full payment—and is frequently the safer way to prevent a buyer from paying substantial amounts without a clear, enforceable path to title and possession.