Legal Requirements for Selling a House and Lot in the Philippines

This article explains—end-to-end—the legal, tax, documentary, and practical requirements for selling a residential house and lot (“real property”) located in the Philippines. It is written for individual owners, families, and closely held corporations. Laws cited include the Civil Code of the Philippines, Property Registration Decree (PD 1529), the Notarial Practice Rules, the National Internal Revenue Code (NIRC), the Condominium Act, the Anti-Money Laundering Act (AMLA), and the Real Estate Service Act (RESA). Always confirm local implementing rules and current tax rates with the BIR, your LGU, and your Registry of Deeds (ROD).

1) Can you legally sell the property?

A. Capacity to sell

Natural persons: Must be of legal age and not otherwise incapacitated. If an owner is a minor or judicially declared incapacitated, a court-approved guardian must sell.
Married sellers: Under most regimes (e.g., Absolute Community or Conjugal Partnership), spousal consent is required for the sale of real property. If the regime is Separation of Property, attach proof (e.g., marriage settlement or court decree) and ensure the seller actually owns the property.
Co-owners: Any sale of the entire property needs consent of all co-owners. A co-owner may sell only his/her undivided share otherwise.
Corporations/partnerships: The entity must be authorized by its Board (board resolution/secretary’s certificate). Signatory must have authority (e.g., special power of attorney, corporate secretary’s certificate).

B. Eligibility of the buyer

Citizens and entities: Filipino citizens and corporations at least 60% Filipino-owned may own land.
Foreign nationals: Generally cannot own land. They may own condos (subject to the 60% Filipino ownership cap in the condominium corporation) and may lease land long-term.
- Former natural-born Filipinos who lost citizenship have limited rights to own land for residential purposes (size caps apply).
- Dual citizens (RA 9225) are treated as citizens for ownership.

2) Pre-sale due diligence (what a prudent seller prepares)

Title verification
- Obtain a Certified True Copy (CTC) of the title (TCT/CCT) from the Registry of Deeds and compare with your Owner’s Duplicate. Confirm:
  - Registered owner’s name, exact technical description, lot/area.
  - Encumbrances page: mortgages, liens, adverse claims, lis pendens, easements, annotations (e.g., right of way, road widening).
Tax checks
- Latest Real Property Tax (RPT) receipts and Tax Declaration (land and improvements).
- Verify no RPT delinquencies with the City/Municipal Treasurer/Assessor.
Zoning & use
- Check zoning (residential vs. other) and any setback/easement requirements (e.g., Water Code easements).
Structure legality
- Keep copies of Building Permit and Certificate of Occupancy, and any approved plans; buyers may ask.
Association & utilities
- Secure Homeowners’ Association (HOA)/Condo admin clearance (no arrears), and know the water/electric meter account status.
Tenancy
- If tenanted, prepare the lease contract, rental ledger, and plan how to assign/terminate the lease according to its terms and applicable rent laws.
Special property
- If estate property (owner deceased), see Section 7B (estate sale).
- If mortgaged, see Section 7A (discharge/substitution).
- If right of way or boundary issues exist, document them early.

3) Core documents (typical, residential freehold)

Owner’s Duplicate Title (TCT for land/house; CCT for condo).
Latest Tax Declaration (land and improvements), RPT receipts, and Tax Clearance if available.
Valid government IDs of all signatories (with competent evidence of identity under the Notarial Practice Rules).
Deed of Absolute Sale (DOAS) or Deed of Conditional Sale (if installment), to be acknowledged before a notary.
SPA (Special Power of Attorney) if signing by agent/representative; if executed abroad, consularized or apostilled and, if needed, translated.
Marital documents (marriage certificate; proof of regime/separation if applicable).
Corporate documents (if seller/buyer is a company): Articles, SEC Certificate, latest GIS, Board resolution, Secretary’s certificate, ID of signatory.
HOA/Condo Certification of no arrears; Move-out/clearance requirements.
BIR Certificate Authorizing Registration (CAR/eCAR)—issued after taxes are paid (see Section 5).
Official receipts for taxes/fees, Transfer Tax receipt, and ROD Registration receipt.

Optional but helpful: Survey plan, vicinity map, house plans/permits, occupancy cert, photos, appliance list, punch-list.

4) The sale contract (form & key clauses)

Form: A Deed of Absolute Sale must be in writing and notarized (acknowledgment) to be a public document registrable with the ROD.
Essential terms: Parties, full legal descriptions (per title/technical description), price, payment terms, delivery/possession date, tax allocations, inclusions (fixtures, appliances), representations (no hidden liens; authority to sell), default and remedies, dispute resolution, and governing law (Philippines).
Warranties:
- Ownership and peaceful possession (eviction warranty under the Civil Code).
- No hidden encumbrances/defects; disclosure of known issues.
Possession vs. ownership: Clarify when possession transfers and who bears risk between signing and registration.
If installment: Consider Deed of Conditional Sale with retention of title until full payment, and compliance with buyer protection rules for installment sales.

5) Taxes and fees (who pays what)

The parties may allocate by contract, but Philippine practice often follows the below. Verify current rates with the BIR/LGU; thresholds and rates can change.

Capital Gains Tax (CGT) – 6% of the higher of (a) gross selling price, (b) BIR zonal value, or (c) Assessor’s fair market value.
- Applies when the property is a “capital asset” (e.g., not used in trade/business by the seller).
- Deadline: CGT return is generally due within 30 days from notarization of the sale.
Creditable Withholding Tax (CWT) – Applies when the property is an ordinary asset (seller is engaged in real estate business or it’s used in business). The buyer withholds and remits; the seller recognizes regular income tax on the gain. (Rates vary by classification; confirm with BIR.)
Value-Added Tax (VAT) – May apply to VAT-registered sellers of real property; exemptions can apply (e.g., certain residential sales below statutory thresholds or socialized housing). Confirm current VAT thresholds and exemptions.
Documentary Stamp Tax (DST) – Typically 1.5% of the higher of selling price, zonal value, or FMV. Commonly for buyer’s account, but negotiable.
Local Transfer Tax – Payable to the LGU (province/city/municipality), commonly ~0.5%–0.75% of the tax base. Usually buyer’s account.
Registration Fees – Payable to the Registry of Deeds (per LRA schedule). Often buyer’s account.
Notarial Fees – Negotiable; often shared or buyer’s.
Broker’s Commission – As agreed in the listing/agency contract; typically seller’s obligation.

Important: Taxes are computed on the highest of contract price, zonal value, or FMV. Always obtain the BIR valuation early to avoid surprises.

6) Standard closing workflow (step-by-step)

Deal terms agreed (LOI/offer to buy) and earnest money (if any) set out.
Draft and notarize the Deed of Sale (or Conditional Sale if installment).
BIR processing for CAR/eCAR:
- Submit Deed, IDs/TINs, title/CTC, tax decs, RPT, and other BIR forms.
- Pay CGT/CWT, DST, and other BIR-assessed amounts.
- Obtain CAR/eCAR and claim stubs.
LGU transfer tax: Pay within the LGU’s deadline (often counted from notarization).
Registry of Deeds: Present Owner’s Duplicate Title, CAR, Tax Clearance/Receipts, Transfer Tax receipt, Deed, and other requirements; pay registration fees.
- ROD cancels old TCT/CCT and issues the new title in buyer’s name.
- Assessor updates Tax Declaration to buyer.
Turnover & possession:
- Deliver keys, house/utility documents, meter change-of-name forms, HOA/admin letters, and final water/electric bills.
- Execute turnover receipt/inventory.

Tip: Keep a closing checklist and a folder of originals and certified copies.

7) Special scenarios

A. Mortgaged or encumbered property

Obtain a Statement of Account from the mortgagee bank. Choose a method:
1. Full release: Buyer/seller pays off the loan; bank issues Cancellation of Mortgage, which is then annotated at the ROD; or
2. Assumption of mortgage: With bank’s written consent; document via Deed of Assumption; ensure ROD annotation.
Remove other liens/adverse claims via the appropriate deed/court order before closing, or disclose and price accordingly.

B. Sale of inherited/estate property

If the registered owner is deceased:
- Settle estate taxes; obtain eCAR for estate first.
- Transfer title to heirs via Extrajudicial Settlement (if no will and no debts, with publication) or Probate/Court order, then sell;
- Or heirs may sell rights with buyer’s consent and close after estate title is issued. Coordinate sequencing to avoid double work.

C. Spousal issues, co-ownership, legitime

Confirm the property regime and who owns the property.
If the property is family home, spousal consent is crucial.
Where there are heirs with legitime interests (e.g., pre-death donations), seek counsel to avoid future annulment or rescission claims.

D. Subdivision or condominium specifics

Subdivision lots: Verify road lots, restrictions, and HOA rules.
Condominiums: Ensure condo is within the foreign ownership cap, obtain Condo Admin Clearance, condo dues status, and check for special assessments.

E. Properties with occupants/tenants

Sale does not automatically cancel a lease. The buyer typically steps into the landlord’s shoes unless otherwise agreed.

F. Corporate sellers/buyers

Prepare board approvals, SPA/resolutions, and verify BIR classification (ordinary vs. capital asset).
Check VAT and withholding obligations.

8) Notarization (mandatory for registration)

Use a Deed with full technical description.
Appear before a notary public with valid, current IDs constituting competent evidence of identity.
Ensure the notary’s details, serial numbers, and acknowledgment are complete; keep multiple originals.

9) Anti-Money Laundering (KYC) and data privacy

Covered persons (e.g., developers and brokers) must conduct KYC, keep records, and report threshold transactions/suspicious activity under AMLA.
Expect requests for TINs, IDs, source of funds declarations, and proof of address.

10) Typical allocation of taxes/fees (market practice; negotiable)

Seller: CGT (if capital asset) or income tax (if ordinary asset), and often broker’s commission.
Buyer: DST, Transfer Tax, ROD registration fees, assessor transfer fees.
Shared/Negotiated: Notarial fees, incidental certifications (CTCs, clearances).

11) Common pitfalls (and how to avoid them)

Name/title mismatches: Make sure the title and IDs match exactly (including middle names, suffixes).
Undisclosed encumbrances: Always check the Encumbrances page of the title’s CTC.
RPT arrears: Settle before BIR submission.
Wrong tax base: BIR uses the highest of price/zonal value/FMV—budget for this.
Expired SPA or foreign SPAs not apostilled/consularized: Fix formalities early.
Missing spousal consent/co-owner signatures: This can void registration.
Estate not settled: You cannot validly transfer a deceased owner’s title without estate compliance.
Condo foreign ownership cap overlooked: Verify percentages with the admin.

12) Practical timeline (illustrative only)

Week 1–2: Due diligence; collect docs; negotiate terms; draft Deed.
Week 2–4: Notarize Deed; file with BIR; pay due taxes; secure CAR/eCAR.
Week 4–6: Pay Transfer Tax; lodge for ROD registration; obtain new title.
Week 6–8: Assessor issues new Tax Declarations; complete turnover to buyer.

Actual timelines vary by BIR/LGU/ROD processing and case complexity.

13) Seller’s checklist (condensed)

Owner’s Duplicate Title matches CTC; encumbrances reviewed
Latest Tax Declaration (land + improvements)
RPT receipts / Tax Clearance (no arrears)
IDs/TINs of all signatories; marital/civil status papers
HOA/Condo clearance; utility status letters
If estate: settlement docs, estate eCAR
If mortgaged: bank payoff/consent; Cancellation of Mortgage steps
Notarized Deed (full technical description)
BIR: CGT/CWT, DST paid; CAR/eCAR obtained
LGU Transfer Tax paid
ROD: registration fees paid; new title released
Assessor: new Tax Declarations issued
Turnover/possession, keys, meters, inventory

14) Quick FAQs

Q: Do I need a broker to sell? No. Owners can sell directly. However, if you engage a broker, ensure they are licensed (RESA). Put the commission and exclusivity in writing.

Q: Can we undervalue the deed to save taxes? No. The BIR will assess using the highest of price, zonal value, or FMV. Under-declaring can trigger penalties and issues with AMLA and BIR.

Q: When is the buyer safe to pay in full? Use escrow or lawyer’s trust account. Commonly, the buyer releases full payment upon issuance of CAR and submission for ROD registration, or against title-in-buyer’s-name if using full escrow.

Q: Is notarization enough to transfer ownership? No. Registration with the ROD is what perfects transfer and makes it binding against third persons.

15) Model allocation clause (sample language)

Taxes and Fees. The Seller shall bear any applicable Capital Gains Tax or income tax on the sale. The Buyer shall bear the Documentary Stamp Tax, Local Transfer Tax, Registry of Deeds registration fees, and Assessor transfer fees. Notarial fees shall be [shared/for Buyer’s account]. Any contrary law-mandated withholding or VAT shall be complied with and the price grossed-up as necessary.

16) Key legal anchors (for orientation)

Civil Code (sale, obligations & contracts; warranties; co-ownership; conjugal property)
PD 1529 (Property Registration Decree)
Rules on Notarial Practice (2004, as amended)
NIRC and BIR issuances (CGT, CWT, DST, VAT; CAR/eCAR)
Condominium Act; 1987 Constitution (land ownership limits)
AMLA (covered transactions; KYC)
RESA (licensing of real estate service practitioners)

Final notes

Always obtain current BIR and LGU schedules, forms, and rates.
For edge cases (e.g., judicial titles, agricultural land conversion, ancestral domain, complex estates), consult counsel and the relevant agencies.

This article is for general guidance and does not constitute legal advice for a specific transaction.