In the Philippines, the sale of a motor vehicle is not just a matter of handing over keys and cash; it is a legal process governed by the Civil Code and Land Transportation Office (LTO) regulations. Central to this process is the Deed of Absolute Sale, a document that must be notarized to transform it from a private instrument into a public document.
A common point of contention between buyers and sellers is: Who is legally responsible for paying the notarial fees?
1. The General Rule: Civil Code Provisions
The primary legal basis for the payment of expenses in a contract of sale is Article 1487 of the Civil Code of the Philippines, which states:
"The expenses for the execution and registration of the sale shall be borne by the vendor, unless there is a stipulation to the contrary."
Under this law, the Seller (Vendor) is default-liable for the costs associated with the sale. This includes the preparation of the deed, the notarial fees, and the expenses required to ensure the title or ownership can be transferred.
2. The Exception: "Stipulation to the Contrary"
While the law sets the Seller as the default payor, the principle of Autonomy of Contracts (Article 1306, Civil Code) allows parties to agree on different terms.
In the Philippine automotive market, it is common practice for the Buyer to shoulder the notarial fees, or for the parties to split the cost. As long as both parties agree to this arrangement before the document is signed, it is legally binding.
3. Why Notarization is Mandatory
A Deed of Sale for a motor vehicle must be notarized for several critical reasons:
- LTO Requirement: The Land Transportation Office will not process a Transfer of Ownership unless the Deed of Sale is a public document (notarized).
- Binding Against Third Parties: While an unnotarized sale is valid between the buyer and seller, it does not bind third parties or the government until it is notarized and registered.
- Presumption of Regularity: Notarization grants the document the presumption that it was executed voluntarily and that the signatures are authentic.
4. Breakdown of Common Costs
When processing a motor vehicle sale, the notarial fee is just one part of the financial "closing" costs. Typically, these are distributed as follows:
| Expense | Default Debtor (Law) | Common Practice |
|---|---|---|
| Notarial Fee | Seller | Buyer or Negotiable |
| Documentary Stamp Tax (DST) | Seller | Negotiable |
| LTO Transfer Fees | Seller | Buyer |
| HPG Clearance | Seller | Buyer |
5. Risks of Non-Payment or "Open" Deeds
Sometimes, parties attempt to save on notarial fees by using an "Open Deed of Sale"—a document signed by the seller where the buyer’s name and the date are left blank.
- Legal Risk: This is highly discouraged by the HPG (Highway Patrol Group) and the LTO.
- Liability Risk: If the fee is not paid and the document is not notarized/registered, the Seller remains the "registered owner" in the eyes of the law. Under the Registered Owner Rule, the seller may still be held civilly liable for damages if the vehicle is involved in an accident, even if they no longer possess the car.
6. Practical Summary
- By Law: The Seller pays for the notarial fees ().
- By Practice: It is a matter of negotiation. Most "as-is, where-is" private sales expect the buyer to handle registration and notarial costs.
- Recommendation: Always include a specific clause in the Deed of Sale stating who will bear the notarial and registration expenses to avoid future disputes.