Typical Contents and Legal Effect (Philippine Context)

1) Concept and where it fits in Philippine succession law

When a person dies, ownership of the estate (the property, rights, and obligations not extinguished by death) passes to heirs by operation of law. However, who owns what specific asset usually remains unsettled until there is a partition (division and allocation) and the titles/records are updated.

An Extrajudicial Settlement of Estate (EJS) is a written agreement (or affidavit form, depending on the situation) by which heirs settle and partition an estate without going to court, when the law allows it. It is commonly used to transfer real property titles, close bank accounts, and formalize each heir’s share.

An EJS “with Authority to Construct” is an EJS that includes an added covenant authorizing one (or some) of the heirs (or a representative) to construct improvements on a specified estate/co-owned property under defined terms.

2) Legal bases (the core rules you must know)

A. Rule 74 of the Rules of Court (Extrajudicial Settlement)

Extrajudicial settlement is allowed only if:

The decedent left no will, and
The decedent left no outstanding debts (or debts have been fully paid/settled), and
All heirs are of age (or minors/incapacitated heirs are duly represented), and
The settlement is made in a public instrument (notarized) or by affidavit of self-adjudication when there is only one heir, and
It is published as required (commonly once a week for three consecutive weeks in a newspaper of general circulation).

Also central: the two-year protection period for creditors and heirs who were left out or prejudiced, tied to the rule’s safeguards (publication, and, in many cases, a bond).

B. Civil Code rules on succession and co-ownership (practical consequences)

Upon death, heirs may become co-owners of undivided estate property until partition.
Acts over co-owned property and improvements implicate co-ownership rules: management requires proper authority; extraordinary acts generally require broader consent; improvements raise reimbursement/accession issues.

C. Land registration, titling, and local permit realities

Even if heirs “own” by succession, third parties (Registry of Deeds, banks, LGUs for building permits) often require:

A duly notarized EJS (or court order),
Proof of tax compliance (estate tax clearance / eCAR and transfer taxes), and
Supporting documents (death certificate, titles/tax declarations, proof of publication, IDs, etc.).

3) What “Authority to Construct” is trying to accomplish

Heirs often want to build (a house, apartment, warehouse, boundary wall, renovations) on property that is:

Still titled in the decedent’s name, or
Still under co-ownership among heirs, or
Not yet fully partitioned, or
Needing a clear signatory/representative for permits, contractors, utilities, and financing.

The “Authority to Construct” clause is essentially a private-law allocation of decision-making power and risk:

Who is allowed to build,
Where,
At whose expense,
Under what ownership and reimbursement arrangement, and
What happens if there is later partition, dispute, sale, or a claim by an omitted heir/creditor.

4) Threshold requirements before you even draft an EJS

A careful EJS begins with confirming these realities (because they directly affect validity and risk):

Intestacy: No will governs the estate. (If a will exists, the usual track is probate; “extrajudicial” settlement is generally improper.)
Heirship: Identify all compulsory and other heirs under law (spouse, legitimate/illegitimate children, parents, etc., depending on who survived).
Debts: Confirm the decedent left no unpaid debts or that these were settled. (This is commonly stated as a sworn declaration.)
Capacity: All heirs must sign; if minors/incapacitated heirs exist, they must be represented (and additional safeguards may apply).
Nature of property: Distinguish:
- Exclusive property of decedent
- Conjugal/absolute community property (only the decedent’s share is in the estate; the surviving spouse’s share is not “inherited”)
Tax posture: Estate tax filing/payment and clearances are often the gating item for title transfer.
Partition choice: Decide whether the heirs are:
- Partitioning now (allocating specific lots/shares), or
- Remaining in co-ownership while authorizing construction.

5) Typical contents of an Extrajudicial Settlement of Estate (standard structure)

While formats vary, a robust Philippine EJS commonly contains the following components:

A. Title / Caption

“DEED OF EXTRAJUDICIAL SETTLEMENT OF ESTATE” Sometimes: “...WITH SALE,” “...WITH WAIVER,” or “...WITH AUTHORITY TO CONSTRUCT.”

B. Appearance clause / Parties

Names, citizenship, civil status, addresses, and IDs of all heirs (and, if needed, representative capacity).

C. Recitals (Whereas clauses)

Typical recitals include:

The decedent’s name, date of death, place of death
That the decedent died intestate
That the decedent left certain properties
That the decedent left no outstanding obligations (or all have been fully paid)
That the parties are the sole and compulsory heirs (state the relationship)
That the heirs desire to settle and partition amicably without judicial proceedings

D. Declaration of heirs and their shares

A statement identifying the heirs and their legal shares, sometimes referencing:

Surviving spouse share in community/conjugal property
Children’s shares, including legitime considerations
Special situations (illegitimate children, representation, etc.)

E. Inventory / description of estate properties

For real property:

Title number (TCT/OCT), registry details, technical description (or reference to title)
Tax declaration number
Location and area For personal property:
Bank accounts, vehicles, shares, receivables, etc. (often attached as schedules)

F. Mode of settlement and partition

Common options:

Partition by allotment: each heir receives specific property/portion
Undivided co-ownership: heirs remain co-owners with rules for management
Adjudication with waivers: some heirs waive/assign shares to others (must be carefully drafted to avoid ambiguity)

G. Undertakings and warranties

Truth of declarations
Indemnity among heirs
Agreement to execute further documents required by RD/BIR/LGU/banks

H. Publication compliance clause

Undertaking to cause publication and shoulder costs, or statement that publication has been/will be made as required.

I. Signatures and notarial acknowledgment

Notarization is key (public instrument). Attach IDs and notarial requirements.

J. Attachments (common)

Death certificate
Marriage certificate (if relevant)
Birth certificates or proof of relationship
Copy of titles/tax declarations
SPA/authority documents for representatives
Proof/affidavit of publication
Tax clearances when available

6) The “Authority to Construct” section: typical clauses (what usually appears)

This section can be brief or very detailed. The more money and risk involved, the more detailed it should be. Common provisions include:

A. Grant of authority (who is authorized)

Authorization to a named heir (“Authorized Heir”) or a designated representative to:
- Apply for building permits and clearances
- Engage contractors, architects/engineers
- Sign construction contracts and utility applications
- Enter the property and manage the project

Often paired with a statement that other heirs consent to these acts.

B. Scope and location (what can be built and where)

Specific improvements permitted (house/building, renovations, fence, drainage, etc.)
Exact area/portion of the property affected (attach a sketch plan if possible)
Whether construction is temporary or permanent
Whether demolition of existing structures is allowed

C. Cost allocation and funding source

Construction at the sole expense of the Authorized Heir, or
Shared contribution percentages, or
Reimbursement mechanism from future sale proceeds or partition accounting

This is crucial to avoid later disputes.

D. Ownership of improvements and reimbursement / accounting

A well-drafted clause addresses what happens to the improvement:

Will it belong exclusively to the builder?
Will it be treated as an advance on the builder’s share?
Will it be reimbursed at cost, appraised value, or agreed formula?
Will depreciation be recognized?
What if the project increases property value—how is that recognized at partition?

A common structure is:

“Builder pays,” then at final partition either:
1. allocate the improved portion to the builder (with equalization payment if needed), or
2. reimburse builder from common funds/sale proceeds, or
3. treat cost as a chargeable improvement subject to agreed valuation.

E. Risk allocation and liability

Builder bears risks (construction defects, accidents, compliance failures)
Indemnity of non-building heirs from contractor claims
Insurance requirements
Compliance with building code/LGU ordinances/subdivision rules

F. Non-prejudice to other heirs / creditors / omitted heirs

Given Rule 74 risks, many instruments include:

A statement that authority is subject to rights of creditors and any lawful claimants
Agreement that if an omitted heir appears, parties will adjust shares and allocations per law

G. Duration and termination

When the authority starts (upon signing / upon issuance of permits)
When it ends (completion; partition; sale; revocation by unanimous consent; court order)

H. Dispute resolution and interim measures

Mediation/arbitration clause (optional)
How to handle stoppage, cost overruns, or objections by a co-heir

I. Link to separate SPA (often recommended in practice)

Even if embedded in the EJS, offices and counterparties sometimes prefer a standalone Special Power of Attorney that mirrors the construction authority for day-to-day transactions.

7) Legal effect of a valid Extrajudicial Settlement (what it does—and doesn’t do)

A. Between the heirs: binding contract and partition instrument

A duly executed EJS is generally binding among the signatory heirs as their agreement on partition and adjudication. It can:

Convert vague co-ownership claims into definite allocations (if partitioned), and
Serve as the basis for transferring titles and updating records.

B. As to ownership: succession happens by law; EJS clarifies and allocates

Heirs acquire rights by operation of succession, but the EJS:

Identifies heirs,
Allocates specific properties/shares, and
Provides a documentary basis for registries and agencies.

C. As to third parties: not absolute; subject to legal safeguards

An EJS is not a magic shield against:

Creditors of the decedent,
Omitted heirs,
Fraud/forgery/defective consent,
Invalid declarations (e.g., “no debts” when there were debts),
Capacity issues (minors not properly represented).

The Rule 74 system is designed to allow extrajudicial settlement while preserving remedies for those prejudiced.

D. Two-year protective window (major practical consequence)

Rule 74 provides special protection for claims of creditors and others prejudiced by the settlement, often discussed as a two-year period where recourse remains robust, particularly where statutory safeguards (publication; bond where applicable) are implicated. Practically:

Title may be transferred, but the settlement remains vulnerable to attack if it prejudices lawful claimants.
Buyers, banks, and registries sometimes treat recently extrajudicially-settled properties as higher risk during this window.

(The details of remedies vary by facts: whether there was fraud, omission, bad faith, and what property has changed hands.)

8) Legal effect of the “Authority to Construct” clause specifically

A. Among the heirs: it is an enforceable allocation of consent and management

As between heirs who signed, the authority clause functions like:

An advance consent to improvements, and
A management arrangement over a co-owned or soon-to-be-partitioned asset, plus
A pre-agreed accounting framework.

If later one heir objects after signing, the agreement can be enforced—subject to standard contract defenses (fraud, mistake, duress, incapacity).

B. As to co-ownership principles: consent matters; authority reduces later disputes

Absent authority, an heir building on co-owned property risks disputes over:

Whether the act exceeded permitted administration,
Whether the builder acted without consent, and
Whether reimbursement is due and how much.

The authority clause is essentially a preventive settlement of these issues.

C. As to third parties and permitting offices: helpful but not always sufficient

LGUs and professional signatories may still require:

Proof of ownership/authority acceptable to the Building Official,
Signatures/consent of all co-owners, or a clear representative authority, and
Updated tax documents and title/tax declarations.

The authority clause strengthens the paper trail, but agencies may still impose their own documentary checklist.

D. It does not defeat rights of omitted heirs or creditors

If an heir was left out or a creditor exists, construction does not immunize the situation. The improvement may complicate remedies, but it does not eliminate lawful claims. This is why many authority-to-construct provisions include:

Indemnities, and
A clear rule on what happens if the settlement is set aside or adjusted.

9) Common variants and add-ons (and their legal implications)

A. Affidavit of Self-Adjudication (only one heir)

If there is only one heir, settlement can be done by affidavit of self-adjudication. An “authority to construct” clause is less relevant (no co-heirs), but it can still help where agencies want a document showing authority and intent—though the main issues become tax/title compliance and third-party requirements.

B. EJS with Sale / Transfer to one heir

Sometimes heirs settle then immediately sell to a buyer or consolidate ownership in one heir. Construction authority may be included to:

Allow the consolidating heir to build immediately, or
Allow a buyer to proceed pending full transfer formalities (more risk; this must be drafted carefully).

C. EJS with Waiver of Rights

Waivers must be explicit:

Who waives, in favor of whom, for what consideration (or gratuitous)
Whether the waiver is total or partial Ambiguity here is a frequent source of litigation.

10) Typical pitfalls (the things that most often blow up)

Missing an heir (common with second families, illegitimate children, or overlooked descendants).
Incorrect property regime assumptions (treating community/conjugal property as entirely inherited).
“No debts” statement is wrong (unpaid loans, taxes, obligations).
Minors/incapacitated heirs not properly represented.
Vague property descriptions (title numbers wrong; technical description omitted; boundaries unclear).
Construction authority is vague (no boundaries, no cost rules, no reimbursement mechanism).
No plan for what happens at final partition (especially if construction is on a portion later allocated to another heir).
No indemnity against contractor claims or injuries.
Tax noncompliance delays everything; EJS exists but titles cannot be transferred.
Signing/identity issues (forged signatures, expired IDs, improper notarization) undermine the instrument.

11) Remedies and how disputes usually surface

Disputes commonly arise through:

An omitted heir filing an action to assert hereditary rights and seek reconveyance/partition/accounting
A creditor pursuing estate assets despite the settlement
One heir suing another for accounting/reimbursement over improvements
Nullity/annulment claims due to defective consent or falsity of key declarations
Boundary/encroachment disputes once construction starts

A carefully drafted authority-to-construct framework reduces (not eliminates) the improvement-related fights by pre-agreeing valuation and allocation rules.

12) Practical drafting checklist (Philippine practice-oriented)

A robust “EJS with Authority to Construct” typically ensures:

For the settlement itself

Complete heir list and proof of relationship
Correct property regime treatment (community/conjugal vs exclusive)
Clear inventory with title/tax declaration identifiers
Clear partition/allocation (or clear co-ownership management rules)
Publication undertaking and documentation
Undertaking for tax compliance and documentary requirements
Proper notarization and ID compliance

For the construction authority

Named authorized person(s) and exact powers (permits, contracts, utilities)
Exact location/portion, with sketch plan if possible
Funding and reimbursement/crediting rules
Valuation method for improvements at partition (cost vs appraisal, timing)
Indemnity for third-party claims; insurance; safety compliance
What happens if settlement is challenged or adjusted (omitted heir/creditor scenario)
Duration, termination, dispute resolution mechanism
Optional mirror SPA for operational convenience

13) Bottom line: the legal “effect” in one integrated view

The EJS is a lawful non-court mechanism to partition and document estate distribution only when Rule 74 conditions are satisfied, and it is binding among the participating heirs, but not invulnerable to claims of creditors or omitted heirs and defects in consent/capacity.
The Authority to Construct clause is primarily a contractual consent-and-risk framework among heirs that:
- Authorizes construction-related acts,
- Reduces co-ownership friction, and
- Pre-arranges accounting for improvements, while remaining subject to succession law safeguards and third-party legal requirements (tax, titling, permitting).