Process to Buy Out Co-Owner of Property When Abroad

Process to Buy Out a Co-Owner of Property When You’re Abroad (Philippines)

This is practical, general information about Philippine law and common practice. Complex deals, tricky family situations, or unusual titles call for advice from a Philippine lawyer or a trusted Philippine conveyancer (“processor”).

Big picture

Buying out a co-owner means acquiring their ideal/undivided share so you become the sole owner (or the majority owner). In the Philippines, you can complete the entire process while abroad by appointing an attorney-in-fact via a Special Power of Attorney (SPA) that’s properly apostilled or consularized. Taxes must be paid and registration completed in the Philippines for the title to reflect the change.

Legal foundations to know (in plain English)

  • Co-ownership basics (Civil Code, Arts. 484–501). Each co-owner owns an ideal share in the whole. Until you partition, you’re not buying a particular corner; you’re buying the seller’s percentage.

  • Free disposition of a share (Art. 493). A co-owner may sell, mortgage, or otherwise dispose of their share without the others’ permission (although practical issues and existing agreements may matter).

  • Partition anytime (Art. 494). Co-owners may demand partition at any time (except when validly agreed otherwise for up to 10 years or when partition is impractical). Courts can order sale if the property is indivisible (Art. 498).

  • Legal redemption among co-owners (Art. 1620). If a co-owner sells to a stranger, the remaining co-owners may redeem (take over) the sale within 30 days from written notice of the sale. Note: This redemption does not apply when one co-owner sells to another existing co-owner.

  • Spousal consent (Family Code, Arts. 96 & 124). If the share being sold is community/conjugal property, both spouses must consent in writing. Dispositions without the other spouse’s written consent are generally void (subject to limited judicial exceptions). If the share is exclusive property (e.g., inherited), no spousal consent is needed—unless the transaction is partly a donation, which raises separate issues.

  • Sales between spouses (Civil Code, Art. 1490) and donations (Family Code, Art. 87). As a rule, spouses cannot sell property to each other (save for narrow exceptions like judicial or prenup-agreed separation of property), and donations between spouses during marriage are void (except moderate gifts on family occasions). If the co-owners are spouses, a “buy-out” is usually not the right mechanism—seek counsel on property regime changes.

  • If title is still in a deceased person’s name (Rule 74; Estate Tax rules). You must settle the estate first (e.g., Extrajudicial Settlement of Estate (EJS) if allowed) and pay estate tax. Only then can you validly transfer to a buyer/heir.

Doing it from abroad: the SPA route

1) Prepare a Special Power of Attorney (SPA)

  • Content: Authorize your attorney-in-fact to negotiate price and terms; sign the Deed of Absolute Sale (DOAS), Deed of Assignment/Waiver/Partition if needed; obtain TIN; file/pay BIR taxes (CGT/DST); receive eCAR; pay transfer tax; appear before the Registry of Deeds (RD), Assessor, and other offices; secure clearances and release the new TCT/CCT.

  • Execution abroad:

    • In a country party to the Apostille Convention: sign before a local notary and have it apostilled by the designated authority.
    • In a non-apostille country: sign and have it consularized at the Philippine Embassy/Consulate.

  • Tip: It’s often cleaner for you (the abroad buyer) to sign the SPA and have your Philippine agent sign the sale documents in the Philippines before a Philippine notary.

2) Identify your attorney-in-fact

Pick a trusted relative or a professional processor. Give them:

  • Apostilled/consularized SPA (with clear, specific powers)
  • Your valid ID (authenticated copies)
  • Proof of your civil status (e.g., marriage certificate) if relevant
  • Your TIN (they can obtain one for you via SPA if you don’t have one)

Two common scenarios & step-by-step

Scenario A: Title already lists you and the seller as co-owners (TCT/CCT in both names)

  1. Deal terms & valuation

    • Agree on price. Taxes will be based on the higher of: (i) contract price, (ii) BIR zonal value, or (iii) LGU fair market value (Schedule of Values on the tax dec).
    • If price is below fair value, BIR may treat the difference as a donation (possible donor’s tax). Keep a paper trail (appraisal, comps).

  2. Document check

    • Owner’s duplicate TCT/CCT, latest Tax Declaration, Real Property Tax clearance, IDs, marital status docs, any co-ownership agreement, encumbrances (mortgage, lis pendens, adverse claims), HOA/condo clearances if applicable.

  3. Draft & notarize documents (in PH, via your agent)

    • Deed of Absolute Sale of Undivided Share (seller → you).

      • Describe the property as per title, and specify the seller’s share (e.g., “20% undivided share”).
      • Include marital consent if required.

    • If applicable: Deed of Partition (to convert ideal shares into specific lots/units). Partition changes land geometry and needs Assessor/RD processing; many buy-outs skip partition and simply consolidate shares first.

    • Affidavits/clearances required by city/HOA/condo (e.g., dues clearance).

  4. Taxes & eCAR

    • Capital Gains Tax (CGT): generally 6% of the higher of zonal value, LGU FMV, or gross selling price. (Individuals and many corporate sellers pay 6% on land/buildings classified as capital assets.)

    • Documentary Stamp Tax (DST): 1.5% of the higher base (as above).

    • Who pays? By practice, seller pays CGT; buyer pays DST and transfer/registration fees. But you can agree otherwise in writing.

    • Deadlines:

      • CGT return/payment typically within 30 days from date of notarized sale.
      • DST return/payment generally on or before the 5th day following the month of the sale.

    • BIR issues eCAR (electronic Certificate Authorizing Registration) after evaluation.

  5. LGU transfer tax & Assessor

    • Pay Transfer Tax (rate set by LGU; commonly around 0.5% in provinces, up to ~0.75% in cities/Metro Manila). LGUs also require RPT clearance and will issue updated Tax Declaration.

  6. Registry of Deeds (RD)

    • Submit eCAR, tax receipts, notarized deed(s), IDs, title, clearances, and pay registration fees.
    • RD cancels the old title and issues a new TCT/CCT reflecting your consolidated ownership.

Outcome: Your share increases and, if you bought all other shares, you become sole owner (without partition) or sole owner of the specific lot/unit (if you also processed partition).

Scenario B: Title is still in the deceased owner’s name (common in family properties)

You cannot skip estate settlement.

  1. Settle the estate first

    • If there’s no will, no debts (or all paid), and all heirs are of age (or properly represented), heirs may execute a notarized Extrajudicial Settlement of Estate (EJS) under Rule 74, with newspaper publication once a week for three consecutive weeks.
    • Otherwise, proceed with judicial settlement.
    • Pay Estate Tax (generally 6% of net estate). BIR issues an eCAR (estate).

  2. Transfer from estate to heirs (by EJS or adjudication)

    • RD cancels the decedent’s title and issues titles to heirs (co-ownership) or directly to the buyer-heir if you did an EJS with Sale.

  3. Buy-out among heirs

    • If titles were first placed in all heirs’ names, proceed with Scenario A (sale of undivided share).
    • Or structure the EJS as EJS with Sale/Assignment (some BIR/RD prefer 2 steps—estate transfer first, then sale; others accept a combined deed—local practice varies).

Tip when abroad: You (as buyer-heir) and other heirs may sign relevant SPAs so Philippine agents can handle BIR, LGU, publication, and RD work.

Money, taxes, and compliance—what to expect

  • CGT (6%): Generally on sales of land/buildings classified as capital assets.

    • If the seller is engaged in real estate business and the property is an ordinary asset, income tax and possibly VAT rules apply instead of CGT.

  • DST (1.5%): On the deed of sale.

  • Local Transfer Tax: LGU-imposed; pay before RD.

  • Registration Fees: Based on a sliding schedule at the RD (plus small documentary fees).

  • Donor’s Tax (6%): If part of the transfer is gratuitous (price far below value), BIR may assess this on the net gift.

  • Estate Tax (6%): If dealing with a decedent’s estate.

  • TINs are required for all parties (estate gets its own TIN). Your agent can obtain a TIN for you via SPA.

  • Foreign currency prices are converted using the BSP rate on the date of the deed for tax bases.

  • AMLA: Large cash deals trigger due-diligence; banks, developers, and brokers have KYC obligations (e.g., IDs, source of funds).

Special situations & roadblocks

  • Mortgaged/encumbered property: You’ll need mortgagee consent or a release. Plan for loan payoff/assumption if needed.
  • Condominiums: Get condo dues clearance; foreigners may buy only up to 40% of the project’s saleable area.
  • Foreigners buying land: Not allowed (with narrow exceptions, e.g., hereditary succession). Former natural-born Filipinos may acquire limited land for residential/business under special laws; dual citizens may own like Filipinos.
  • Agricultural/CARL/CLOA land: Check DAR restrictions (e.g., non-transferability within certain periods; transfers usually limited to heirs/government or require DAR clearance).
  • Minors/incompetent co-owners: Sale requires court approval through a guardianship proceeding.
  • Co-ownership agreements: If you have one, follow ROFR, valuation, or consent clauses.
  • Unregistered land / title issues: Expect judicial steps (confirmation/reconstitution) before a clean buy-out and registration are possible.

Practical playbook (abroad buyer’s checklist)

Before negotiating

  • Latest TCT/CCT (or certified true copy), Tax Declaration, RPT receipts/clearance
  • Check annotations on title (mortgage, lis pendens, adverse claims)
  • Confirm marital status & property regime of the seller; get spouse’s consent if needed
  • Decide on valuation (appraisal; zonal value/LGU FMV review)
  • Agree who pays what (CGT, DST, transfer, registration, RPT arrears)

Paperwork to prepare

  • SPA (apostilled/consularized), with broad real-estate powers
  • Buyer and seller IDs; TINs; proof of status (marriage certificate, CENOMAR if requested)
  • Deed of Absolute Sale of Undivided Share (and spousal consent where required)
  • If heirs: EJS (with publication), estate tax filings, eCAR (estate)
  • Clearances: HOA/condo dues, RPT, barangay/city if required
  • BIR forms: CGT return, DST return, and supporting documents
  • Payment proofs: Manager’s check/RTGS/receipt/escrow instructions

Execution & filing sequence (typical)

  1. Notarize the sale deed in the Philippines (via attorney-in-fact).
  2. File & pay CGT and DST; secure eCAR (sale) from BIR.
  3. Pay LGU Transfer Tax; update Tax Declaration.
  4. Register with RD; obtain the new title.
  5. Safekeep: new TCT/CCT, latest Tax Declaration, all official receipts, and scanned copies.

Structuring choices

  • Straight sale of undivided share (most common).
  • Partition then sale (useful if you want a specific portion; more steps/fees).
  • Waiver/Assignment among co-owners (watch out for donor’s tax if gratuitous).
  • EJS with Sale when dealing with estates (can streamline, but local practice varies).

Simple model clauses (for your lawyer to refine)

SPA core powers (excerpt-style)

TO BUY REAL PROPERTY / BUY OUT CO-OWNER’S SHARE:
— To negotiate, agree on price and terms; sign any Memorandum of Agreement.
— To sign and acknowledge the Deed of Absolute Sale of an undivided share, Deed of Partition, Waiver/Assignment, and related instruments; to receive or deliver payments.
— To secure TIN(s); file and pay BIR taxes (CGT/DST), obtain eCAR(s); pay LGU transfer taxes and fees; and secure RPT and HOA/condo clearances.
— To appear before the BIR, City/Municipal Assessor/Treasurer, Registry of Deeds, and other offices; to submit documents and receive titles.
— To do all acts necessary to effect registration and issuance of a new TCT/CCT in my name.

Deed of Absolute Sale of Undivided Share (key points)

  • Identify property exactly as on title
  • State the seller’s share (e.g., “twenty percent (20%) undivided share”)
  • State consideration, tax allocation, and delivery of owner’s duplicate title
  • Marital consent clause if applicable
  • Warranty: seller’s share is free of liens/claims except those disclosed
  • Undertaking to cooperate with BIR/RD processes

Who pays what (typical, but negotiable)

  • Seller: CGT (6%), any RPT arrears, and release fees for their annotations
  • Buyer: DST (1.5%), Transfer Tax, RD fees, processing fees
  • Either: appraisal, escrow, courier/legalization costs, publication (if EJS)

Put this allocation in writing to avoid last-minute disputes.

Timing & logistics tips (for smooth remote closings)

  • Use an escrow or staged payments tied to milestones (e.g., upon notarization, upon eCAR, upon new title).
  • Ship apostilled documents via reliable courier; keep notarization originals.
  • Keep certified true copies of the title and scan everything.
  • If paying in foreign currency, agree on FX rate basis (e.g., BSP selling rate on deed date).

FAQs

  • Will other co-owners have a right to redeem my purchase? No, not if you bought from a co-owner and you are already a co-owner. Redemption (Art. 1620) applies only if the buyer is a stranger.

  • Do I need the other co-owners’ consent to buy one co-owner’s share? Legally, no (Art. 493) unless your co-ownership agreement says otherwise or there are spousal/guardianship constraints.

  • Can I do everything without flying home? Yes—use a properly apostilled/consularized SPA and a reliable Philippine agent.

  • What if the property is indivisible (e.g., a single house or a condo unit)? You can still buy the share and later seek partition by sale or negotiate to acquire the entire remaining share.

  • What if we’re spouses co-owning? A spouse-to-spouse “buy-out” is typically not allowed (sales between spouses & donations are restricted). Explore judicial separation of property or a court-approved settlement.

Quick pre-deal diagnostic

  1. Whose name is on title? (You & seller? A deceased parent?)
  2. Any encumbrances? (mortgage, liens, adverse claims)
  3. Is the seller married? (need spousal consent?)
  4. Is there a co-ownership agreement? (ROFR, valuation rules)
  5. What’s the tax base? (GSP vs. zonal vs. LGU FMV)
  6. Will any part be treated as a gift? (possible donor’s tax)
  7. Are you using an SPA? (apostille/consularization)
  8. Are LGU/BIR/RD requirements clear? (local checklists vary)

If you want, tell me your scenario (title status, how many co-owners, married/unmarried, condo/land, inheritance or not), and I’ll adapt this into a tailored step-by-step pack with a draft SPA outline you can hand to your agent.

Disclaimer: This content is not legal advice and may involve AI assistance. Information may be inaccurate.

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