In the Philippine real estate market, particularly in transactions involving bank financing or private lending, the simultaneous transfer of title and registration of a Real Estate Mortgage (REM) is a standard procedure. This process allows the buyer to acquire ownership while concurrently securing the lender’s interest in the property.
Navigating this dual process requires meticulous coordination between the seller, the buyer, and the mortgagee (the bank or lender). Below is an exhaustive breakdown of the requirements and procedures involved.
I. The Nature of the Transaction
This procedure typically occurs when a buyer purchases property using a loan. The lender requires the property to be in the buyer's name before the mortgage can be fully perfected, but the lender also refuses to release the full loan proceeds until the mortgage is registered. To bridge this, the Register of Deeds (RD) processes the Deed of Absolute Sale and the Deed of Real Estate Mortgage in a single "chain" of registration.
II. Documentary Requirements for the Transfer of Title
Before the mortgage can be registered, the title must first be transferred from the seller to the buyer. The following documents are mandatory for the Bureau of Internal Revenue (BIR) and the Register of Deeds:
Original Owner’s Duplicate Copy of the Title: (TCT or CCT).
Deed of Absolute Sale (DOAS): Must be notarized and usually requires three to five original copies.
Tax Declaration: Current and certified true copies for both Land and Improvements.
Tax Clearance: Issued by the City or Municipal Treasurer, proving all Real Property Taxes (RPT) are paid.
Certificate Authorizing Registration (CAR): Issued by the BIR after payment of:
Capital Gains Tax (CGT): Usually 6% of the selling price or zonal value, whichever is higher.
Documentary Stamp Tax (DST): 1.5% of the selling price or zonal value.
Transfer Tax Receipt: Payment made to the Local Government Unit (LGU).
Secretary’s Certificate/Board Resolution: If either party is a corporation.
Special Power of Attorney (SPA): If a representative is signing on behalf of a party.
III. Documentary Requirements for the Real Estate Mortgage
Once the transfer is "in-flight," the mortgage documents are attached to the application:
- Deed of Real Estate Mortgage: Executed by the buyer (now the Mortgagor) in favor of the lender (Mortgagee).
- Promissory Note: The underlying credit agreement.
- Mortgagee’s Copy of the Title: While the title is being processed, the bank usually holds the "Owner's Duplicate" once it is issued in the buyer’s name.
- Documentary Stamp Tax (Mortgage): A separate DST payment specifically for the mortgage agreement, calculated based on the loan amount.
IV. The Procedural Workflow
1. Tax Compliance and BIR Clearance
The process begins at the BIR. You cannot register a transfer at the RD without a CAR. Both the sale taxes (CGT/DST) and the mortgage taxes must be settled.
2. Payment of Transfer Tax
After obtaining the CAR, the buyer proceeds to the City or Municipal Treasurer’s Office to pay the Transfer Tax. This must be done before the RD will accept the documents.
3. Entry in the Primary Entry Book
The documents for both the Sale and the Mortgage are submitted to the Register of Deeds simultaneously. The RD enters them in the Primary Entry Book in chronological order:
- The Sale (Transfer of Title).
- The Mortgage (Encumbrance on the new Title).
4. Issuance of the New Title
The RD cancels the seller's title and issues a new Transfer Certificate of Title (TCT) in the buyer’s name. However, this new title will immediately bear an Annotation (Memorandum of Encumbrances) on the back, detailing the mortgage lien in favor of the lender.
V. Essential Costs and Fees
The following fees are standard in this simultaneous transaction:
| Fee Type | Basis |
|---|---|
| Capital Gains Tax | 6% of Gross Selling Price or Zonal Value |
| DST (Sale) | 1.5% of Gross Selling Price or Zonal Value |
| Transfer Tax | 0.5% to 0.75% (depending on LGU) |
| DST (Mortgage) | Calculated per PHP 2,000 of the loan amount |
| Registration Fees | Based on the RD's graduated table of fees |
VI. Key Legal Considerations
- The Mirror Doctrine: Under the Torrens System, a mortgagee (bank) has the right to rely on what appears on the face of the title. In simultaneous transfers, the bank’s legal team ensures there are no prior liens (like a "Notice of Lis Pendens" or "Adverse Claim") before the transfer occurs.
- Automatic Registration: The mortgage cannot be registered if the title is not yet in the name of the mortgagor, as one cannot mortgage property they do not own. Therefore, the law treats the transfer and the mortgage as a continuous sequence of events.
- Non-Registration Risk: If the mortgage is not registered, it remains a "Binding Equitable Mortgage" between the parties but does not bind third persons or the property itself against future claims.