Deed of Absolute Sale between Grandparent & Grandchild in the Philippines
A practitioner-style reference
1. Nature & Legal Basis
| Concept | Key statutes |
|---|---|
| Sale of real property | Civil Code arts. 1458-1637; Titles II & VI, Book IV |
| Formalities for real-estate deeds | Art. 1358 (must be in a public instrument); Notarial Law (Rule XVI, 2004 Rules on Notarial Practice) |
| Registration & land titling | Property Registration Decree (PD 1529); Land Registration Authority rules |
| Taxes & fees | NIRC 1997 (as amended), particularly §§24(D), 196, 199; Local Government Code (LGC) §§135-138 |
| Family relations & succession | Civil Code arts. 960-1105; Family Code arts. 88-92 (spousal consent) |
A deed of absolute sale (DOAS) is a bilateral contract conveying ownership for a fixed price. Between a grandparent (ascendant) and a grandchild (descendant), it is generally valid—no article in the Civil Code prohibits it per se. The sale, however, must respect:
Capacity and consent
- Minors (below 18) cannot give consent. A legal guardian must petition the proper RTC (Special Proceedings) for approval to sell or buy on the minor’s behalf (Rule 96 ROC).
- Incapacitated seniors may need a judicial guardian or an SPA with medical proof of competence.
Spousal participation If the property is conjugal or community, both spouses of the seller must sign (Fam. Code art. 124) or obtain RTC approval if one refuses/unable.
Forced-heir legitimes Even a full-price sale can later be attacked by compulsory heirs (children, parents, spouse) as a simulated donation if the price was grossly inadequate (art. 1470) or not actually paid (art. 1390). Upon the grandparent’s death, the transaction is collatable (arts. 1061-1062): the value is added back pro-forma in partition to protect legitimes.
2. Documentary Requirements
| Stage | Core documents |
|---|---|
| Execution | • DOAS in triplicate, complete property description, agreed price, identities, marital data, tax numbers, signature over printed name, competent evidence of identity (CEI) • Notarial acknowledgment, not just jurat |
| Pre-BIR | • Latest Original/Transfer Certificate of Title (OCT/TCT) • Certified true copy (CTC) from Registry of Deeds (RD) • Tax declaration for land & improvements • Latest Real Property Tax Clearance & Barangay tax clearance |
| BIR One-Time Transaction | • BIR Form 1706 (Capital Gains Tax) plus proof of payment—6 % of the higher of zonal value or consideration • BIR Form 2000 OT (Documentary Stamp Tax)—1.5 % of same base • eCAR (electronic Certificate Authorizing Registration) |
| LGU Transfer Tax | Municipal/City Assessor: 0.5-0.75 % of selling price or FMV |
| Registry of Deeds | • Original DOAS with eCAR, RPT Clearance, Transfer Tax Receipt, DAR clearance (if agricultural & CARP-covered) • Pay registration fee under PD 1529 schedule (~0.25-0.5 % + ₱ 100-200 entry fee) |
Upon issuance of a new TCT/OCT in the grandchild’s name, deliver owner’s copy, annotate liens (if any), and update the tax declaration.
3. Pricing, Valuation & Possible Re-Characterisation
Fair market value (FMV) BIR compares the zonal value or Provincial/City Assessor’s FMV and the stated selling price. The highest figure (the “fairer” of the two) is the taxable base.
Under-valuation risk An unusually low stated price (relative to zonal) raises a presumption of a donation. BIR may impose donor’s tax:
- 6 % on net gifts above ₱ 250 k per year (TRAIN Law).
- Penalties and 25 % surcharge for wrong tax type.
Simulation & rescission Compulsory heirs may file:
- Action to rescind for lesion > ¼ of just price (art. 1381[3]) within 4 yrs.
- Action to annul simulated or fictitious sale (art. 1391) if consent vitiated.
Anti-money-laundering (AML) thresholds Cash payments ≥ ₱ 7.5 M trigger covered transaction reporting by notary or lawyer under AMLA (RA 9160, as amended).
4. Comparatives: Sale vs. Donation vs. Early Inheritance
| Feature | Sale | Donation | Partition-in-advance |
|---|---|---|---|
| Taxes | 6 % CGT + 1.5 % DST (seller) | 6 % donor’s tax (donor) | No CGT/DST; 6 % donor’s if unequal shares |
| Immediate ownership transfer | Yes, upon delivery & RD registration | Yes, upon donor’s acceptance & RD registration | Yes |
| Collation on death | Possibly if simulated | Mandatory | N/A (already partitioned) |
| Need to show actual price | Yes | No | N/A |
Practical take-away: If the parties truly intend a gratuitous transfer, execute a Deed of Donation to avoid later litigation—even if donor’s tax equals CGT, the act is clearer.
5. Jurisprudence Highlights
| Case | G.R. No. / Date | Holding relevant to grandparent-grandchild deals |
|---|---|---|
| Spouses Abalos v. CA | G.R. 103756, Sept 16 1992 | Price grossly inadequate ≠ automatic nullity; but can support rescission for lesion |
| Heirs of Malate v. Gamboa | G.R. 170065, Apr 23 2008 | Intra-family deeds scrutinised for simulation; burden on claimant |
| Baltazar v. Laxa | G.R. 81956, Aug 13 1990 | Sale to minor through guardian requires court approval; otherwise voidable |
| Castillo v. Heirs of Vicente Daoang | G.R. 199761, Apr 27 2022 | RD registration perfects ownership; unregistered deed binds only the parties |
6. Step-by-Step Workflow
Due diligence • Secure CTC of title, check for liens, CARP notices, RROW. • Verify seller’s marital status; obtain spousal consent.
Drafting & notarization • Use precise technical description (Lot-Blk-Survey No., area). • State full consideration; attach proof of earnest money if any. • Attach acceptable IDs (PRC/Passport/UMID).
Tax payment window • 30 days from notarization to pay CGT & DST to avoid 25 % surcharge + 12 % interest p.a.
Registry & Assessor • Present eCAR, pay transfer tax, register deed, get new title. • Update tax declaration within 60 days (LGC).
Post-transfer notices • Provide copies to HOA, utility companies, and update RPT billing records.
7. Common Pitfalls & How to Avoid Them
| Pitfall | Prevention |
|---|---|
| Undisclosed heirs contesting sale-as-donation | Ensure price ≥ zonal value; keep evidence of payment (bank transfers, receipts). |
| Minor grandchild buying property | Court-approved guardianship sale; funds traceable to child’s own assets (e.g., trust fund). |
| Missed tax deadlines | Diarize BIR 30-day clock; file CGT/DST even if relying on “BIR adjustment” process. |
| CARP restrictions | Secure DAR Clearance (Form 1) for rural land; confirm retention limits. |
| Seller lacks spousal consent | Either notarize with both spouses or get judicial approval if refusal is unjustified. |
| Property subject to estate tax lien | Settle estate first via EJS or probate before sale. |
8. Ethical & Estate-Planning Considerations
- Transparency to other heirs reduces later rescission suits.
- Selling rather than donating may help the grandparent realise liquidity without attracting donor’s tax, but CGT is still due.
- For gradual wealth transfer, consider “Deed of Conditional Donation” (becomes effective upon donor’s death) or living trusts to avoid repeated taxes.
- All lifetime transfers within 10 years before death are brought into the estate for legitime computation (RA 11550, 2021 amendment).
9. Checklist (Practitioner’s Quick Reference)
- Title & Tax Decl’n verified, lien-free
- IDs & marital status confirmed
- Draft DOAS with full consideration & “free from all liens” warranty
- Witnesses/Thumbprints for senior seller
- Notarization (page initialled, margin rubricated)
- CGT & DST paid within 30 days
- eCAR issued
- Transfer Tax paid, DAR clearance secured
- Deed & docs registered with RD
- New TCT/OCT released; tax decl’n updated
- Advise parties on safekeeping & estate collation effects
10. Final Notes & Disclaimer
This article synthesises Philippine statutes, regulations, and case law up to July 18 2025. It is general information, not legal advice. Facts of each transaction—property status, heirs, tax profile—may change outcomes. Always consult a Philippine lawyer or licensed real-estate consultant for tailored guidance and to keep abreast of fresh BIR or LRA circulars.