In Philippine real estate transactions, the death of a seller before the final transfer of the Transfer Certificate of Title (TCT) creates a complex legal intersection between the Law on Sales and the Law on Succession. Under the Civil Code of the Philippines, the general rule is that rights and obligations derived from a contract are transmissible to the heirs, unless the rights are purely personal in nature.

The following guide outlines the legal principles, procedural requirements, and remedies available to a buyer when a seller passes away before the title is successfully transferred.

1. The Legal Basis: Transmission of Obligations

According to Article 1311 of the Civil Code, "contracts take effect only between the parties, their assigns and heirs." When a seller enters into a valid contract to sell or a deed of sale, that obligation survives their death. The heirs step into the shoes of the deceased seller and are legally bound to honor the commitment, provided that the value of the obligation does not exceed the value of the inheritance.

2. Differentiating the Contractual Status

The steps required depend heavily on the stage of the transaction at the time of the seller's death:

A. Contract to Sell (Installment Basis)

If the parties signed a Contract to Sell and the buyer was still paying installments when the seller died:

The contract remains valid.
The buyer should continue making payments to the estate of the deceased or to the legal heirs.
Upon full payment, the heirs are required to execute the final Deed of Absolute Sale.

B. Fully Paid but No Deed of Sale Executed

If the buyer has fully paid the purchase price but the seller died before signing the formal Deed of Absolute Sale:

The buyer must deal with the heirs.
Because the deceased can no longer sign, the heirs must execute the deed in their capacity as legal successors.

C. Signed Deed of Sale but Not Yet Registered

If a Deed of Absolute Sale was already signed and notarized before the death, but the title has not yet been transferred at the Registry of Deeds:

The document remains valid.
However, the Bureau of Internal Revenue (BIR) and the Register of Deeds (LRA) may require additional documentation regarding the settlement of the seller's estate before processing the transfer.

3. The Necessity of the Extrajudicial Settlement (EJS)

In the Philippines, a dead person cannot technically transfer property. The property must first "pass" to the heirs through the settlement of the estate.

Extrajudicial Settlement with Sale

The most efficient path is for the heirs to execute an Extrajudicial Settlement of Estate with Absolute Sale. In this single document:

The heirs adjudicate the property to themselves.
The heirs simultaneously sell the property to the buyer.

Requirements for EJS:

The decedent left no will and no debts.
All heirs are of legal age (or represented by judicial guardians).
The settlement is recorded in a public instrument (notarized).
Publication of the EJS in a newspaper of general circulation for three (3) consecutive weeks.

4. Taxation Requirements

One of the most significant hurdles is the settlement of taxes. Before the Registry of Deeds can issue a new title to the buyer, the BIR must issue a Certificate Authorizing Registration (CAR).

Estate Tax: The heirs must settle the estate tax of the deceased seller. Under the TRAIN Law, the rate is generally 6% of the value of the net estate.
Capital Gains Tax (CGT): The 6% CGT must be paid on the sale transaction.
Documentary Stamp Tax (DST): Usually 1.5% of the selling price or zonal value.

If the EJS with Sale route is taken, the BIR will require the payment of both the Estate Tax (for the transfer from the deceased to the heirs) and the CGT (for the transfer from the heirs to the buyer).

5. Procedural Steps for the Buyer

Verify the Heirs: Determine the legitimate heirs of the deceased (spouse, children, etc.). A copy of the Death Certificate and Marriage/Birth Certificates will be necessary.
Negotiate Cooperation: Ideally, the heirs will cooperate. If they acknowledge the sale, they can proceed with the EJS with Sale.
Secure Documentation: Collect the original Owner’s Duplicate Copy of the TCT, the Tax Declaration, and the latest Real Property Tax (RPT) clearance.
Publish the EJS: Ensure the heirs comply with the publication requirement.
File with the BIR: Submit the EJS, pay the corresponding taxes, and wait for the CAR.
Register with the LRA: Present the CAR, EJS, and the old TCT to the Register of Deeds for the issuance of the new title.

6. What if the Heirs Refuse?

If the heirs refuse to recognize the sale or refuse to sign the necessary documents, the buyer must resort to judicial action:

Action for Specific Performance: The buyer can file a case in court to compel the heirs to execute the deed of sale.
Action for Consignation: If the heirs refuse to accept remaining installment payments, the buyer may deposit the money with the court to prevent a default on the contract.
Notice of Lis Pendens: The buyer should aim to annotate a "Notice of Lis Pendens" on the title at the Register of Deeds. This serves as a warning to the rest of the world that the property is subject to ongoing litigation, preventing the heirs from selling it to a third party.

7. Crucial Considerations

The "Double Tax" Issue: Buyers should be aware that the death of a seller often necessitates the payment of both Estate Tax and transfer taxes. Contracts should be reviewed to see who bears these costs, though Estate Tax is legally the responsibility of the estate/heirs.
The Two-Year Rule: Under Section 4, Rule 74 of the Rules of Court, a lien is annotated on titles derived from an EJS, which exists for two years to protect any other heirs or creditors who may have been excluded from the settlement. This does not prevent the sale but remains an encumbrance on the title for that period.