(Philippine legal context; general information, not legal advice.)

1) What “Unpaid Property” Usually Means (and why it matters)

In Philippine practice, “selling an unpaid property” commonly refers to selling real property despite an unresolved financial obligation attached to it. The “unpaid” aspect can come from different sources, and each changes the legal risks:

Unpaid bank mortgage or other loan secured by the property (property is mortgaged; the mortgage may be annotated on the title).
Unpaid purchase price (seller still owes the developer, a prior seller, or is still paying under an installment contract).
Unpaid real property taxes (arrears with the local government; could lead to levy and tax delinquency sale).
Unpaid association dues/condominium dues (not always on the title but can affect use/transfer, and can be pursued as a civil obligation).
Property subject to liens/encumbrances, adverse claims, lis pendens, attachment, levy, or pending litigation (some appear as annotations; some are discoverable through court records).
Estate/ownership issues (seller is not the true owner, or property is still part of an estate; extra-judicial settlement issues; heirs’ rights).

The legal consequences depend on (a) what obligation is unpaid, (b) what the seller represented to the buyer, and (c) whether the buyer had notice (actual or constructive) of the encumbrance.

2) Core Principle: A Sale Transfers Ownership—But Subject to Existing Encumbrances

A seller can sell property even if it is mortgaged unless the parties agreed otherwise—but the buyer generally takes the property subject to the mortgage if it remains unpaid and annotated. Practically, that means:

If the mortgage is not settled, the mortgagee (e.g., bank) can still foreclose even after the sale.
The buyer may lose the property (subject to redemption rights) if foreclosure proceeds.

So the “illegality” is not automatic. The legal exposure usually comes from:

Misrepresentation / concealment,
Selling without authority or without ownership,
Fraudulent acts, or
Contractual breach (e.g., seller promised a clean title but cannot deliver).

3) Civil Liability: The Most Common Consequence

Most disputes over “unpaid property” result in civil cases, not criminal ones.

A. Breach of Contract and Damages

If the seller promised a clean title, no encumbrances, or to pay off the debt before transfer, failure can lead to:

Rescission (cancel the sale) and return of what was paid,
Specific performance (compel payoff/clearing of encumbrance if possible),
Actual damages (payments made, bank interest, penalties, lost rentals),
Moral damages (in fraud/bad faith cases),
Exemplary damages (if fraudulent/bad faith), and
Attorney’s fees (when justified).

B. Warranty Against Eviction and Hidden Encumbrances

Under civil law concepts, a seller generally warrants that the buyer will not be deprived of the property by someone with a superior right (eviction), and there are consequences if the buyer later loses the property due to a pre-existing right that the seller should answer for—especially where the seller acted in bad faith or failed to disclose material encumbrances.

C. Rescission vs. Annulment vs. Nullity (Choosing the right theory)

Rescission: valid contract, but undone due to breach/substantial nonperformance.
Annulment: contract is voidable due to vitiated consent (fraud, mistake, intimidation).
Void/ineffective sale: seller had no ownership/authority (e.g., forged documents; selling someone else’s land; unauthorized sale of estate property).

If the seller is not the owner and cannot legally sell, the buyer’s remedy often becomes recovery of money + damages, and the “sale” may not protect the buyer against the true owner.

D. Double Sale Risk

If a seller sells the same property to multiple buyers, the dispute becomes a double sale problem. Priority generally turns on registration and good faith:

For registered land, the buyer who first registers in good faith is usually protected.
Buyers who fail to register and rely only on private documents are vulnerable.

4) Criminal Liability: When “Unpaid Property Sale” Becomes a Crime

A sale involving unpaid obligations becomes criminal exposure mainly when fraud, deceit, falsification, or unlawful taking is present. Common criminal angles:

A. Estafa (Swindling)

Estafa can arise when the seller:

Deceives the buyer (e.g., claiming the title is clean; claiming no mortgage; claiming full ownership despite lacking it),
Receives money because of that deceit,
And the buyer suffers damage/prejudice.

Estafa cases are fact-sensitive: prosecutors look for intent to defraud and the link between misrepresentation and payment.

Typical examples that trigger estafa allegations:

Seller takes full payment promising to deliver a clean title, but knowingly cannot because of a mortgage, levy, or ownership defect and then disappears or refuses to perform.
Seller misrepresents being authorized by co-owners/heirs and collects payment.
Seller sells property already foreclosed or already sold to another and hides that fact.

B. Falsification (Documents/Title-Related Fraud)

If the transaction uses:

forged signatures (spouse, co-owner, heir),
fake SPA (Special Power of Attorney),
falsified deeds, tax declarations, IDs, notarization irregularities,

then falsification and related offenses may apply, often together with estafa.

C. Other Possible Offenses

Depending on conduct: perjury (false statements in affidavits), use of falsified documents, or violations related to notarial rules (usually administrative for the notary, but can be criminal if tied to falsification).

Key point: Selling mortgaged property is not automatically criminal. It becomes criminal when the seller’s acts show deceit/intentional fraud, or when documents are falsified.

5) Special Situations (Very Common in the Philippines)

A. Selling Property with an Existing Mortgage (Bank or Private)

Legal reality: The mortgage “follows the property.” Consequences if unpaid:

Bank may foreclose; buyer may lose property or must redeem if eligible.
Buyer may sue seller for breach, rescission, damages if seller promised payoff.
If seller hid the mortgage or lied, criminal exposure increases.

Practical risk trigger: The mortgage is usually annotated on the Transfer Certificate of Title (TCT/CCT). That means the buyer is deemed to have constructive notice once it’s on the title. A buyer who ignored it may have weaker claims of being deceived—though the seller may still be liable if there were specific promises.

B. Selling “Assume Balance” Properties (Developer/Bank Financing)

Common arrangement: buyer “assumes” remaining loan balance. Risks:

If the lender/developer does not consent or the assumption is not properly documented, the original borrower remains liable and the buyer may not obtain a clean transfer.
If the seller collects large amounts but cannot deliver transfer/authority, disputes arise.

C. Selling Property Still Under Installment (Developer Sales)

If the seller is still paying the developer (e.g., subdivision/condo) and sells rights without settling terms:

The buyer may only acquire contractual rights, not yet title.
If the seller defaults, the property/rights can be canceled under the governing contract/laws, and the buyer’s remedy may be against the seller.

D. Unpaid Real Property Tax (Amilyar)

Unpaid local taxes can lead to:

Levy,
Tax delinquency sale,
Complications in transferring (some LGUs require tax clearances for processing certain documents).

If a buyer purchases property with tax arrears, the buyer may end up paying to protect the property. Civil remedies depend on what the seller promised and whether arrears were disclosed.

E. Family Code/Spousal Consent Problems (Married Sellers)

A sale can be attacked if the property is conjugal/community and sold without required spousal consent/authority. This can result in:

Sale being void/voidable as to the non-consenting spouse’s share,
Title problems and litigation,
Possible criminal issues if signatures/consent were forged or falsified.

F. Co-Ownership / Heirs / Estate Property

Selling property that is:

still in the name of a deceased person,
not yet settled among heirs,
lacking required consents or proper authority,

invites civil suits (partition, annulment/nullity of sale) and potentially criminal exposure if there is deception or document falsification.

6) Effects on the Buyer: What Can Happen to Their “Ownership”

Even after paying, a buyer can face:

Foreclosure (mortgage not paid)
Annotation issues preventing transfer or causing buyer to be subject to third-party claims
Eviction by a person with a better right (true owner, co-owner, heirs)
Inability to register the deed of sale or obtain title
Loss of money and lengthy litigation

A buyer who is a purchaser in good faith is better protected in many contexts, but “good faith” is often defeated by:

obvious defects,
annotations on the title,
red flags (seller not in title, missing spouse/heirs, suspicious notarial details),
failure to do basic due diligence.

7) Due Diligence Standards (What parties are expected to check)

In Philippine property transactions, parties are generally expected to exercise prudence. Common due diligence items include:

Certified true copy of the title from the Registry of Deeds
Check annotations: mortgage, adverse claim, lis pendens, levy, etc.
Verify seller identity and authority (spouse consent, SPA, corporate authority, heirs’ documents)
Verify tax declarations and real property tax status
Confirm property is not tenanted / occupancy issues
For condos: check condo certificate of title (CCT) and association/condo dues status
Confirm no boundary/encroachment disputes, and match technical descriptions

Failure to do these doesn’t automatically bar claims, but it often weakens arguments of good faith.

8) Remedies and Practical Options (Structured by Scenario)

If you are a buyer who discovered the property is “unpaid”:

Document everything (title annotations, messages, receipts, promises).
Demand letter: ask seller to pay/clear encumbrance or refund, within a deadline.
Consider rescission and refund (especially if clean title was promised).
If mortgage exists, consider tripartite settlement (buyer-seller-bank) to ensure payoff and proper release.
If fraud is clear, consider criminal complaint (often with a parallel civil action for damages).
If there are ownership defects, prioritize quieting of title / nullity / reconveyance strategies with counsel.

If you are a seller planning to sell a property with unpaid obligations:

Disclose encumbrances in writing (and reflect it in the contract).
Use an escrow-like structure: payment released upon loan payoff and release of mortgage.
Get lender/developer consent for any assumption/transfer.
Ensure proper spousal/heir/co-owner authority.
Avoid “shortcut” notarization or document substitutions—this is where criminal exposure spikes.

9) Contract Clauses That Commonly Control Liability

In many disputes, the outcome depends heavily on the written contract (Deed of Absolute Sale, Contract to Sell, Deed of Assignment, etc.). Clauses that matter:

Representation and warranties (clean title/no liens)
Undertaking to pay off mortgage (deadline + proof requirements)
Condition precedent (sale effective only upon release of mortgage)
Escrow/holdback provisions
Allocation of taxes/fees/arrears
Default and remedies (rescission, liquidated damages)

A properly drafted agreement can convert a risky transaction into a manageable one; a vague one makes litigation more likely.

10) Litigation Reality in the Philippines: What cases typically look like

Many “unpaid property” disputes involve overlapping proceedings:

Civil case for rescission/refund/damages or nullity of sale
Criminal complaint for estafa and/or falsification (if fraud is alleged)
Administrative issues (notarial misconduct) if notarization is questionable
Separate foreclosure or tax delinquency processes if arrears remain unpaid

Because timelines, evidence, and defenses differ across forums, coordinated legal strategy matters.

11) Bottom Line Rules of Thumb

Selling property that is mortgaged or burdened is not automatically unlawful—but failing to disclose, making false promises, or using falsified documents can create serious civil and criminal liability.
For registered land, title annotations are central. They affect notice, good faith, and enforceability.
The highest risk situations are those involving non-owners, missing consents (spouse/heirs/co-owners), double sales, and document irregularities.
If money has already changed hands and deception is involved, estafa/falsification become realistic possibilities—but they require proof of elements like deceit and damage.

12) When to Get a Lawyer (Practical triggers)

You should strongly consider consulting a Philippine real estate lawyer if any of these are present:

Mortgage is annotated and seller insists “don’t worry” without a structured payoff plan
Seller is not the person named on the title
Property is inherited and not yet properly settled among heirs
Spouse consent is missing or disputed
Notarization looks rushed, remote, or inconsistent
You are asked to pay “reservation/earnest money” without clear documentation and conditions

If you want, you can paste (remove personal info) the key facts—type of unpaid obligation (mortgage, taxes, installment), what the contract says, and what was represented—and I’ll map the most likely liabilities and remedies under Philippine practice.