In the Philippines, co-ownership is a common legal arrangement where two or more persons hold undivided interests in a property. Governed primarily by the Civil Code of the Philippines and the Property Registration Decree (P.D. 1529), the process of transferring a land title to a co-owner—whether by adding a new person to the title or one co-owner transferring their share to another—requires strict adherence to legal documentation and tax compliance.
1. Legal Basis of Co-Ownership
Under Article 484 of the Civil Code, co-ownership exists whenever the ownership of an undivided thing or right belongs to different persons. Each co-owner has full ownership of their part and of the fruits and benefits pertaining thereto.
Consequently, a co-owner may alienate, assign, or mortgage their ideal share, except when personal rights are involved (Article 493). This legal right forms the basis for transferring shares between co-owners.
2. Modes of Transfer
The process begins with identifying the "mode" of transfer, as this determines the taxes and documents required:
- Sale of Share: One co-owner sells their undivided interest to another. This is the most common method when "buying out" a partner.
- Donation: A co-owner transfers their share to another out of liberality (gratuitously).
- Partition: If the co-owners decide to terminate the co-ownership and divide the property into specific lots, they execute a Deed of Partition. Each owner then receives a separate title for their specific portion.
- Adding a Co-Owner: The current sole owner executes a deed (Sale or Donation) transferring a portion (e.g., 50%) to another person, effectively creating a co-ownership.
3. Step-by-Step Process
Step 1: Execution of the Legal Instrument
The parties must draft and sign a notarized deed.
- If it is a sale: Deed of Absolute Sale.
- If it is a gift: Deed of Donation.
- If it is dividing the property: Deed of Extrajudicial Partition.
Step 2: Payment of Taxes at the Bureau of Internal Revenue (BIR)
Once the deed is notarized, the parties have a specific timeframe (usually within 30 days of notarization for most taxes) to pay the following:
- Capital Gains Tax (CGT): 6% of the gross selling price or the fair market value (FMV), whichever is higher.
- Documentary Stamp Tax (DST): 1.5% of the selling price or FMV, whichever is higher.
- Donor’s Tax: If the transfer is a donation, a flat rate of 6% (under the TRAIN Law) applies to the value of the gift in excess of ₱250,000.
Step 3: Issuance of the CAR
After payment and submission of documents, the BIR will issue a Certificate Authorizing Registration (CAR). This document is proof that the taxes for the transfer have been settled. No title can be transferred in the Philippines without a CAR.
Step 4: Payment of Transfer Tax (Local Government Unit)
The parties must go to the City or Provincial Treasurer’s Office where the property is located to pay the Transfer Tax. This is usually 0.5% to 0.75% of the property value, depending on the local ordinance.
Step 5: Tax Declaration Clearance
Visit the Assessor’s Office to obtain a Tax Declaration Clearance. You must ensure that all real property taxes (RPT) or "Amilyar" are paid up to date.
Step 6: Registration at the Registry of Deeds (RD)
The final step is submitting all compiled documents to the Registry of Deeds. The RD will cancel the old title and issue a new Transfer Certificate of Title (TCT) reflecting the new ownership structure.
4. Documentary Requirements
To complete the transfer, the following documents are typically required:
| Document Type | Source |
|---|---|
| Original Owner's Duplicate Copy of Title | The Owner |
| Notarized Deed (Sale, Donation, or Partition) | Notary Public |
| Certificate Authorizing Registration (CAR) | BIR |
| Tax Clearance (Real Property Tax) | City/Municipal Treasurer |
| Certified True Copy of Tax Declaration | City/Municipal Assessor |
| Official Receipts of CGT, DST, and Transfer Tax | BIR/Treasurer |
| Valid IDs of all parties | Government Issued |
5. Important Legal Considerations
The Right of Redemption
In a co-ownership, if one co-owner sells their share to a third party (stranger), the other co-owners have the legal right of redemption under Article 1620 of the Civil Code. They may "buy back" the share at the same price within 30 days from the time they were notified in writing by the vendor. However, if the transfer is between existing co-owners, this right usually does not apply.
Pro-Indiviso Shares
Unless specified otherwise in the deed, co-owners are presumed to have equal shares in the property. If the intention is for one person to own 70% and the other 30%, this must be explicitly stated in the legal document and will be reflected on the face of the new title.
Conjugal Property
If the co-owners are married, the "spousal consent" might be required on the deed of transfer, especially if the property was acquired during the marriage and falls under the Absolute Community of Property or Conjugal Partnership of Gains.