Liability for Real Property Tax Between Owner and Occupant in the Philippines

Last updated: based on the Local Government Code of 1991 (RA 7160) and long-standing jurisprudential principles. This is general information, not legal advice.

1) What the Real Property Tax (RPT) is—quick primer

What’s taxed: Land, buildings/other improvements, and machinery affixed to real property.
Who imposes it: Provinces, cities, and municipalities in Metro Manila (LGUs).
How it’s computed (at a glance):
- Assessed value = fair market value × assessment level (assessment levels are set by ordinance and vary by property class/use).
- Basic RPT rate: up to 1% of assessed value in provinces; up to 2% in cities/Metro Manila.
- Plus: an additional 1% levy for the Special Education Fund (SEF).
- Possible add-ons by ordinance: idle land levy, and “special levy” (special assessment) on properties specially benefited by public works.

The tax year runs on a calendar basis. RPT accrues on January 1 and is typically payable in four equal installments on or before March 31, June 30, September 30, and December 31. LGUs may grant discounts for prompt/advance payments. Interest on delinquency generally runs at 2% per month on the unpaid amount, capped at 36 months.

2) The default rule on liability

Primary liability rests on the owner or administrator of the property.

Owner = the person with title/ownership over the land/building/machinery.
Administrator = one who manages the property on behalf of the owner (e.g., property manager, trustee, executor, receiver).
If an “administrator” is on record with the assessor/treasurer, the LGU can collect from the administrator, without prejudice to recourse against the owner.

Key consequence: Private contracts (lease, management, BOT/concession agreements) do not bind the LGU. They may shift the economic burden between private parties, but they do not change who the government can legally collect from.

3) When the occupant/possessor can be liable

Although the owner/administrator is the default taxpayer, the occupant, lessee, or beneficial user may be the correct or practical payor in several situations:

A. Beneficial use of exempt property (government or other exempt owners)

Real property owned by the Republic, LGUs, and certain exempt entities (e.g., charitable or educational institutions) is exempt—unless the beneficial use is granted, for consideration or otherwise, to a taxable person.
In that case, the beneficial user/occupant (e.g., lessee, concessionaire) becomes liable for RPT on the property (or the taxable portion used).
Common examples:
- Private businesses leasing space in government-owned airports, seaports, expo centers, or parks.
- Commercial areas inside hospitals or schools otherwise enjoying exemptions (e.g., bank, canteen, retail spaces)—only the non-exempt use/portion is taxable.

B. Lessee builds or owns the improvement

If a lessee constructs a building or installs machinery on leased land and the lease or law recognizes the lessee’s ownership of such improvement/machinery (during the term), the lessee is liable for RPT on the improvement/machinery.
The landowner remains liable for RPT on the land (unless contractually the lessee must shoulder the owner’s land RPT—binding between them, not against the LGU).

C. Usufruct and similar arrangements

A usufructuary (beneficial owner) bears the annual charges and taxes on the property’s ordinary use. Thus, a usufructuary can be assessed/required to pay RPT in practice.

D. Administrator / possessor of unknown-owner property

Where ownership is uncertain or title is under dispute, the assessor may list the property in the name of the possessor/administrator; the LGU can collect from that person. This does not adjudicate civil ownership—it only identifies a person liable to pay.

Practical tip: If you are the beneficial user or possessor and the property is being taxed because of your use, expect the LGU to look to you for payment—even if you are not the titled owner.

4) Owner vs. occupant in leases (commercial and residential)

“Triple-net” or “plus taxes” clauses (common in commercial leases) shift the cost of RPT to the tenant, but LGUs can still pursue the owner/administrator. If the tenant doesn’t pay, the LGU can levy on the property; the owner then seeks reimbursement from the tenant under the lease.
Residential leases rarely make the tenant shoulder RPT (it’s typically built into rent). But if a resident agrees to pay RPT and fails, it’s a private breach, not a defense against LGU collection from the owner.
Who can challenge an assessment? The owner, administrator, or any person with a legal interest (including a tenant who is made to pay) may appeal.

5) The “lien” that decides everything

RPT is a lien on the property itself, superior to all liens, mortgages, or encumbrances, and attaches on January 1 each year until fully paid.
Because the lien follows the property, buyers must check for RPT arrears; unpaid taxes can lead to levy and auction even after a sale to an innocent purchaser.
Transfers (e.g., registration with the Registry of Deeds) typically require a tax clearance from the treasurer.

Bottom line: Regardless of who promised to pay in a contract, non-payment endangers the property, not just the person who broke their promise.

6) Exemptions and how occupancy/use affects them

Government-owned property: Exempt unless the beneficial use is granted to a taxable person (then taxable against the user).
Charitable institutions: Exempt only to the extent property is actually, directly, and exclusively used for charity. Leased/for-profit portions are taxable (the occupying business pays, or the owner per LGU practice).
Educational institutions: Like charities, the exemption is use-based; commercial use portions (e.g., bank/cafeteria spaces, off-campus income properties) are taxable.
Religious property: Property actually, directly, and exclusively used for religious worship or parsonages is exempt; mixed uses are taxable in part.

Key idea: Exempt ownership is not enough; what matters is actual use. Occupants using space for commercial/non-exempt purposes can become liable.

7) Improvements and machinery on leased land

Separate declarations: Land, building, and machinery can be separately declared. The owner of each component may differ.
Common industrial setup:
- Landowner pays RPT on land.
- Lessee (factory operator) pays RPT on building/machinery it owns/installed.
End of lease: Depending on the contract and civil law on accession, improvements may revert to the landowner (with or without compensation) and future RPT may shift accordingly.

8) Idle land levy and special levy (special assessment)

Idle land levy: LGUs may impose an additional levy on idle lands (parameters by ordinance). Occupation that amounts to productive use can remove “idle” status; otherwise, the owner generally bears the levy.
Special levy: If a public work (e.g., drainage, road widening) specially benefits certain properties, LGUs may impose a special assessment on the benefited properties, regardless of who occupies them. Parties can privately allocate the cost, but LGU collection follows the ordinance.

9) Collection & enforcement—what happens if nobody pays

Notice of delinquency is issued after due dates.
Warrant of levy may be issued and annotated on the tax declaration and title.
Advertisement and public auction of the property for unpaid RPT.
Redemption period (the former owner typically has one year to redeem by paying taxes, interest, and expenses).
If not redeemed, the purchaser gets a final deed; the buyer can recover possession (subject to lawful occupants’ rights, if any, but tax sale generally prevails).

LGUs can also deny permits/clearances or withhold transfer registration until arrears are settled.

10) Remedies & defenses (owner and occupant)

A. Before it becomes final—assessment side

Assessment appeal: Owner, administrator, or anyone with legal interest (including a paying lessee) can appeal to the Local Board of Assessment Appeals (LBAA) typically within 60 days from receipt of assessment/notice. Further appeal lies with the Central Board of Assessment Appeals (CBAA) and ultimately the Court of Tax Appeals (CTA).

B. Collection side

Payment under protest with the city/municipal treasurer, then elevate if denied.
Prescription: LGU actions to collect generally must be started within five years from the date the tax became due (longer if there’s fraud or intentional evasion).

C. Between owner and occupant (private side)

Lease or management contract governs reimbursement/indemnity.
Civil Code allows a person who paid another’s obligation without intent to donate to seek reimbursement if the payment was useful (and, with consent or subrogation, stronger rights).
Good-faith possessors may recover necessary expenses (which can include taxes) from the owner.

11) Special contexts

Economic zones / investment regimes: Incentive laws often do not exempt locators from RPT (although they may exempt local business taxes). Always check the exact incentives in the registration agreement; use, not mere location, drives exemptions.
Condominiums:
- Unit owners pay RPT on their units (and appurtenant interests).
- Common areas held by the condo corp/association are typically treated under specific rules; dues are not RPT but unpaid RPT on common areas can affect operations and marketability.
Agrarian reform beneficiaries: Once awarded the land, beneficiaries become owners and thus liable for RPT (subject to special condonation/amnesty laws when enacted). Tenant-farmers without ownership are not normally the RPT taxpayer unless they own improvements or are beneficial users taxed by reason of their use.

12) Who should actually pay (and how to allocate) — a decision guide

Is the property owned by a non-exempt private owner? → Owner/administrator is primarily liable. → Occupant pays only if a contract makes them do so; this does not bind the LGU.
Is the property owned by an exempt owner (government, charitable, educational, religious) but used by a private/commercial occupant? → Beneficial user/occupant is liable on the used portion.
Is the improvement/machinery owned by the occupant (on someone else’s land)? → Occupant pays RPT on that improvement/machinery; landowner pays on land.
Is there an administrator or trustee managing the property? → LGU may collect from the administrator, who then recovers from the owner/occupants per their agreements.

13) Practical checklists

For owners/landlords

Keep tax declarations updated (correct owner, administrator, property description, use).
Build RPT covenants into leases (payment, proof of payment, escrow/withholding, default remedies).
Monitor payments even if tenant is contractually liable; remember the lien.
Require RPT receipts as a condition for contract renewals and before sale/transfer.

For occupants/tenants/bidders

Read the lease: Are you on the hook for land RPT, improvement RPT, or both?
If occupying government/exempt property, assume you may be taxed on your beneficial use.
If you pay RPT to protect your tenancy or prevent auction, document payment and notify the owner—this preserves reimbursement rights.
For factories/plants, separately declare machinery you own; ensure valuation is accurate (depreciation, if applicable).

For buyers/lenders

Demand RPT clearances and verify delinquency history.
Understand that the tax lien can survive transfers and may prime mortgages.

14) Frequently asked questions

Q1: Our lease says the tenant pays RPT but they defaulted. Can the city go after me (the owner)? Yes. The LGU can levy on the property regardless of your lease. Your remedy is against the tenant.

Q2: I’m a private company leasing space in a government facility. Who pays RPT? Usually you, as beneficial user, for the portion you use.

Q3: I built a warehouse on leased land. Who pays RPT? Typically: you (for the warehouse), landowner (for the land)—unless your contract says otherwise between you, which doesn’t bind the LGU.

Q4: Can a tenant appeal an assessment? Yes, if the tenant has a legal interest (e.g., is made to pay), they may appeal to the LBAA within the prescribed period.

Q5: If I buy a property with unpaid RPT, am I safe because I’m a new owner? No. The lien follows the property. You should insist on full settlement or price adjustments/escrow.

15) Key takeaways

Owner/administrator = primary liability for RPT.
Occupant/beneficial user is liable when use of otherwise exempt property triggers taxation, or when the occupant owns the improvements/machinery.
Contracts can shift who pays between private parties, but cannot defeat LGU collection or the tax lien.
Exemptions are use-based; commercial use of exempt property (even partially) is taxable.
Stay proactive: update declarations, calendar due dates, and keep documentary proof of payment.
When in doubt, pay under protest and/or appeal within the set timelines.

Final note

Local ordinances can fine-tune rates, assessment levels, discounts, and procedures. For a live matter (specific property, arrears, or a planned transaction), consult the city/provincial assessor and treasurer where the property is located and consider formal legal advice—especially if exemptions, beneficial use, or mixed-use issues are involved.