Legality of Selling Inherited Property by One Heir in the Philippines

Introduction

In the Philippines, inheritance laws are primarily governed by the Civil Code of the Philippines (Republic Act No. 386), as amended, along with relevant provisions from the Family Code, the Tax Code, and jurisprudence from the Supreme Court. When a person dies intestate (without a will) or testate (with a will), their property passes to their heirs, who may include compulsory heirs such as legitimate children, spouses, and parents, as well as voluntary heirs designated in a will. A common issue arises when one heir wishes to sell inherited property: Is it legal for a single heir to do so without the consent of the others?

The short answer is nuanced. Under Philippine law, an heir can sell their undivided interest or share in the inherited property, but they cannot unilaterally sell the entire property if it remains in a state of co-ownership. This principle stems from the concept of co-ownership that automatically arises upon inheritance among multiple heirs. Selling the whole property requires either the agreement of all co-owners or a judicial or extrajudicial partition to divide the estate. This article explores the legal framework, rights and limitations of heirs, procedural requirements, tax considerations, and potential pitfalls in detail.

Inheritance and Co-Ownership Under Philippine Law

Upon the death of the decedent, the estate—including real property such as land, houses, or agricultural lots—vests immediately in the heirs by operation of law (Article 777 of the Civil Code). If there are multiple heirs, the property is held in co-ownership until partitioned. Co-ownership means that each heir owns an ideal or abstract share of the whole property, not a specific physical portion, unless a partition has occurred.

Intestate Succession: If there is no will, the estate is distributed according to the rules of intestate succession (Articles 978-1014 of the Civil Code). For example, legitimate children and the surviving spouse are entitled to shares, with children receiving equal portions after the legitime (mandatory share) is satisfied.
Testate Succession: If a will exists, it must respect the legitime of compulsory heirs (Article 886). Voluntary heirs or legatees may receive specific properties, but if not, co-ownership still applies to undivided assets.

In either case, until the estate is settled and partitioned, the heirs are co-owners. This co-ownership is governed by Articles 484-501 of the Civil Code, which emphasize that no co-owner can act on the whole property without the others' consent, except in cases of preservation or administration.

Rights of Co-Owners in Inherited Property

Each co-owner has certain rights over the inherited property:

Use and Enjoyment: Co-owners may use the property in accordance with its purpose, provided it does not prejudice the interests of others (Article 486).
Fruits and Benefits: Each co-owner is entitled to a proportionate share of any income or fruits from the property, such as rents or harvests (Article 485).
Alienation of Share: Crucially, Article 493 states: "Each co-owner shall have the full ownership of his part and of the fruits and benefits pertaining thereto, and he may therefore alienate, assign or mortgage it, and even substitute another person in its enjoyment, except when personal rights are involved. But the effect of the alienation or the mortgage, with respect to the co-owners, shall be limited to the portion which may be allotted to him in the division upon the termination of the co-ownership."

This provision forms the legal basis for an heir's ability to sell their share. However, the buyer acquires only the seller's undivided interest, becoming a co-owner with the remaining heirs.

Limitations: Acts affecting the entire property, such as selling, leasing long-term, or encumbering it, require the majority or unanimous consent of co-owners, depending on the act (Article 491). Unilateral actions by one heir that alter the property's state (e.g., demolishing a structure) are prohibited.

Selling an Undivided Share by One Heir

It is legally permissible for one heir to sell their undivided share in the inherited property without the consent of the other heirs. This is explicitly allowed under Article 493 of the Civil Code.

Process:
1. Determine the Share: The heir must know their proportionate interest (e.g., 1/4 if there are four equal heirs).
2. Execute a Deed of Sale: A notarized deed of absolute sale is prepared, specifying that only the undivided share is being sold.
3. Registration: The sale should be registered with the Register of Deeds to annotate the title. If the property has a Torrens title (under the Property Registration Decree, Presidential Decree No. 1529), the buyer's interest will be noted on the certificate of title.
4. Taxes and Fees: The seller pays capital gains tax (6% of the selling price or zonal value, whichever is higher) and documentary stamp tax (1.5%). The buyer pays transfer taxes.
Effects on Other Heirs: The buyer steps into the shoes of the selling heir, becoming a co-owner. Other heirs retain a right of redemption under Article 1620 of the Civil Code, allowing them to repurchase the share within 30 days of notice if the sale is to a third party (applicable in co-ownership of immovable property under Article 1623).
Risks: If the estate is not yet settled (e.g., no extrajudicial settlement of estate has been executed and published), the sale may be challenged. Creditors of the estate could also claim against the property if debts remain unpaid.

Selling the Entire Inherited Property by One Heir

A single heir cannot legally sell the entire property without the consent of all co-owners. Any such sale would be void or voidable as to the shares of the non-consenting heirs.

Exceptions:
- With Consent: If all heirs agree, they can execute a joint deed of sale. This often occurs after an extrajudicial settlement of estate (ESE) under Section 1, Rule 74 of the Rules of Court, where heirs adjudicate the property among themselves.
- Judicial Authorization: In rare cases, if the property is indivisible and co-owners cannot agree, a court may order a sale under Article 498 of the Civil Code, with proceeds divided proportionally.
- If Sole Heir: Obviously, if there is only one heir, they can sell freely after settling the estate.
Consequences of Unauthorized Sale: If one heir sells the whole property fraudulently, the sale is valid only for their share. Non-consenting heirs can file an action for annulment, reconveyance, or damages. The buyer may sue the seller for breach of warranty against eviction (Article 1548).

Partition of the Estate: A Prerequisite for Full Disposal

To enable the sale of specific portions or the entire property by individual heirs, partition is essential. Partition terminates co-ownership and allocates physical shares.

Extrajudicial Partition: Heirs can agree via a notarized ESE, published once a week for three weeks in a newspaper of general circulation (Rule 74, Section 1). This must include a bond if there are minors or debts. The deed is registered, and new titles are issued.
Judicial Partition: If heirs disagree, any co-owner can file an action for partition in court (Article 494; Rule 69 of the Rules of Court). The court may appoint commissioners to divide the property or order a public sale if division is impractical.

After partition, each heir owns their allocated portion absolutely and can sell it without restrictions.

Legal Requirements and Procedures for Settlement and Sale

Estate Settlement: Before any sale, the estate must be settled. This includes paying estate tax (under the TRAIN Law, Republic Act No. 10963, at 6% of the net estate) within one year of death, or penalties apply. An ESE or judicial settlement is required for real property transfers.
Documentation for Sale:
- Certificate Authorizing Registration (CAR) from the BIR.
- Original certificate of title.
- Tax declarations and clearances.
- If the heir is a minor or incapacitated, court approval is needed (Family Code, Article 225).
Special Cases:
- Agricultural Land: Subject to the Comprehensive Agrarian Reform Law (Republic Act No. 6657), sales may require DAR clearance to prevent fragmentation.
- Conjugal Property: If inherited from a parent but part of conjugal assets, the surviving spouse's consent is required.
- Foreign Heirs: Non-Filipino heirs cannot own land (Constitution, Article XII), so they may need to sell their share.

Tax Implications

Estate Tax: Paid on the gross estate minus deductions; rate is flat 6%.
Capital Gains Tax (CGT): 6% on the gain from selling inherited property, based on fair market value.
Donor's Tax: Not applicable to inheritance, but if an heir "donates" their share, it's taxable.
Withholding Tax: If the buyer is a corporation, creditable withholding tax applies.
Local Taxes: Real property tax arrears must be cleared.

Failure to pay taxes can result in liens on the property, preventing transfer.

Relevant Jurisprudence

Philippine Supreme Court decisions reinforce these principles:

Heirs of Dela Cruz v. Heirs of Cruz (G.R. No. 162890, 2005): Affirmed that one co-owner cannot sell the entire property; the sale is limited to their share.
Acap v. Court of Appeals (G.R. No. 118114, 1997): Highlighted the right of redemption in co-ownership sales.
Torres v. Lapinid (G.R. No. 187408, 2012): Emphasized that partition is necessary to convey specific portions.

These cases underscore that while heirs have autonomy over their shares, the integrity of co-ownership protects all parties.

Conclusion

In summary, Philippine law allows one heir to sell their undivided share in inherited property but prohibits unilateral sale of the entire asset without consent or partition. This balances individual property rights with collective interests in co-ownership. Heirs contemplating a sale should settle the estate promptly, comply with tax obligations, and consider partition to avoid disputes. Consulting a lawyer is advisable to navigate specifics, as nuances like debts, wills, or property types can alter outcomes. Proper adherence to the Civil Code and related laws ensures a valid and hassle-free transaction.

Disclaimer: Grok is not a lawyer; please consult one. Don't share information that can identify you.