RIGHTS AFTER EXPIRY OF A SANLA-TIRA CONTRACT

(Philippine Legal Context)

Key take-away: A sanla-tira (sometimes called pasanla, sangla-tirahan, or prenda con derecho de ocupar) almost never transfers ownership to the creditor when the redemption date lapses. After the “due date” the borrower still owns the land or house; the creditor merely gains the same remedies any mortgagee or antichretic creditor enjoys—foreclosure, collection, and retention of possession until paid. Any clause saying the property “automatically becomes” the creditor’s is void pactum commissorium under Art. 2088 of the Civil Code. Understanding what happens after expiry therefore turns on (1) how courts re-characterise the instrument, and (2) which Civil Code chapter ends up governing the parties.

1 What exactly is a sanla-tira?

Popular term	Civil-Code concept courts usually apply	Typical features
Sanla-tira (“pawn-and-stay”)	Equitable mortgage (Arts. 1602-1605) or antichresis (Arts. 2132-2139)	Debtor gets cash; creditor immediately occupies the house/land; debtor may “re-buy” (tubos) on or before a fixed date; possession/fruits stand in lieu of—or in addition to—interest.

Sanla-tira is not named in the Civil Code; it is a Filipino custom born of rural credit scarcity. Courts therefore look through the label and decide whether the deed is

a sale with right to repurchase (pacto de retro, Art. 1606),
an equitable mortgage (Art. 1602), or
an antichresis (Art. 2132).

Because the price is almost always far below market value and the debtor remains the party most interested in the property, the contract is presumed an equitable mortgage under Art. 1602 (paragraphs (1), (2), and (6)). When the right to possess the land and keep its fruits is explicitly granted, courts often add that the agreement is likewise antichresis.

Leading cases

Spouses Abella v. Court of Appeals, G.R. No. 100633 (15 Sept 1993) – declared a sanla-tira an equitable mortgage; creditor ordered to reconvey after debtor paid the principal, notwithstanding expiration.
Arbes v. Court of Appeals, G.R. No. 97952 (29 Oct 1993) – clarified that the continued possession of the creditor after due date does not ripen into ownership.
Gonzales v. Heirs of Cahilig, G.R. No. 127802 (14 Oct 2005) – fruits collected must be applied to the loan; creditor must render accounting.
Spouses Reyes v. Heirs of Malate, G.R. No. 164469 (22 July 2015) – a 30-year-long occupancy did not bar the owner’s action to recover; laches cannot override the statutory proscription of pactum commissorium.

2 Statutory anchors that control rights after expiry

Code provision	Why it matters at expiry
Art. 1602 & 1605	Enumerate badges that convert an ostensible sale into an equitable mortgage; impose in favorem debitoris interpretation.
Art. 2088 (pactum commissorium)	Any stipulation making the property automatically the creditor’s upon non-payment is void.
Arts. 2132-2139	For antichresis: creditor may keep fruits & must deduct them from interest then principal; must pay property taxes; may sue to have the land sold at public auction once the debt is due.
Rule 68, Rules of Court; Act 3135	Provide judicial (Rule 68) and extra-judicial (Act 3135) foreclosure procedures exactly parallel to mortgages; apply by analogy.
Arts. 1142 & 1149	Prescriptive periods for real actions (30 yrs unreg land; 10 yrs reg land) start only after clear repudiation of owner’s title—not mere expiry of redemption date.
Art. 448	If creditor-in-possession builds improvements in good faith, owner may either pay their value or sell the land to the builder; if in bad faith, owner may demand removal.

3 Rights and obligations while the debt is already due but unpaid

3.1 Rights of the debtor-owner

Right of redemption until foreclosure sale Even after the contractual “due date” lapses, the owner can still pay the principal, interest, and an accounting of fruits, thereby extinguishing the encumbrance.
Right to demand reconveyance & return of possession Upon tender or consignation of the correct amount, the debtor may sue for accion reinvindicatoria with damages.
Right to an accounting of fruits and rentals The creditor’s occupancy or harvests are treated the same way mortgage interest is treated; the debtor may compel a judicial reckoning (Arts. 1634, 2138).
Right to challenge usurious or unconscionable interest disguised as “rent”.
Right to invoke Art. 1602 to defeat any claim of automatic ownership transfer.

3.2 Rights of the creditor-in-possession

Right of retention until the loan, interest, and lawful expenses are fully paid.
Right to apply fruits to interest then principal (Art. 2133).
Right to foreclose the property—judicially or extra-judicially—at any time after maturity (subject to statute-of-limitations rules on actions to collect a debt).
Right to reimbursement for necessary expenses, taxes, and major repairs (Arts. 452, 2135).
Right to recover deficiency if foreclosure sale proceeds are insufficient (Art. 2137 para 3; case-law allows deficiency unless contract forbids).

3.3 Obligations that continue

Creditor must preserve the property with diligence of a good father (Art. 1173).
Creditor must pay real-property taxes while in possession (Art. 2135).
Debtor must pay interest, subject to usury ceilings (Bangko Sentral circulars now lift ceiling but courts still scrutinise unconscionable rates).

4 Effect on third persons

Scenario	Governing rule
Property titled under Torrens and sanla-tira is unregistered or un-annotated	It binds only the parties; buyer in good faith (BPF) with a clean title can acquire ownership; the debtor’s remedy becomes personal (damages vs. creditor).
Agricultural land & occupant becomes a de facto tenant	Agrarian laws (RA 3844, RA 6657) may superimpose security of tenure; ejectment needs DAR clearance.
Creditor sub-leases or sells rights to a third occupant**	Sub-lessee merely steps into creditor’s shoes; ownership still with debtor; after redemption, debtor may eject sub-lessee via unlawful detainer.
Subsequent mortgage registered	Priority follows registration date (Property Registration Decree §53). A later mortgage takes second-ranking lien; a later sale to BPF can still be defeated by earlier annotated mortgage/antichresis.

5 Tax and registration wrinkles

Documentary Stamp Tax (DST) – BIR treats sanla-tira re-cast as “real mortgage” and imposes DST under Sec. 195 of the Tax Code.
Capital Gains Tax (CGT)/DST on sale – not applicable because there is no transfer of ownership.
Real-Property Taxes (RPT) – creditor pays while in actual possession (Art. 2135) but may charge them back upon redemption.
Registration – The contract may be recorded as a mortgage under Sec. 60 of the Property Registration Decree; annotation spares the debtor later title disputes and gives notice to third parties.

6 Prescription, laches, and quiet-title actions

Action to recover possession never prescribes as long as the creditor’s possession is traceable to the void pactum commissorium (Art. 1390 & Heirs of Malate).
Judicial foreclosure of mortgage prescribes in 10 years from maturity (Art. 1144).
Extra-judicial foreclosure under Act 3135 is likewise time-barred after 10 years.
Laches cannot validate an illegal automatic-ownership clause but can bar stale money claims (Art. 1155; Arbes).

7 Procedural road-map once the “grace period” lapses

Step	Best practice
Debtor deposits the amount due in court (consignation) or directly offers payment.	Stops interest from running; starts prescriptive period for creditor’s refusal-to-accept damages.
Creditor dissatisfied with payment	Must file collection or foreclosure within 10 years; may keep possession tentatively.
Debtor files accion reinvindicatoria + accouting	Venue: RTC where property situated; cannot be dismissed on ground debtor “slept” on rights if within 30/10-year real-action periods.
Either party may move for reformation of instrument if deed on its face is a “sale” (Art. 1365).	Must be brought within 10 years from execution.
Foreclosure sale is held	Debtor retains statutory right of redemption (12 mos for judicial foreclosure; 1 yr for extra-judicial under Sec. 6, Act 3135).

8 Checklist for drafting / litigating a sanla-tira case

Examine the deed: price vs. market value, right to occupy, who pays taxes.
Gather parol evidence: intent of parties, length of relationship, who harvests fruits.
Compute fruits received: apply Art. 2134 order—first to interest, then to principal.
Check registration status: is the contract annotated or just private writing?
Flag any pactum commissorium clause: prepare to move for partial nullity.
Beware tenancy issues: ask DAR for clearance before ejectment.
Observe foreclosure timelines: 10-year prescriptive clock.
Prepare accounting and consignation: essential for debtor’s quiet-title relief.

9 Practical pointers

For creditors:
- If you really want ownership, require a mortgage + separate notarised Deed of Absolute Sale in escrow; release it only after proper foreclosure and expiration of redemption—avoids pactum commissorium.
- Keep meticulous fruit/expense ledgers; courts often deny interest if you cannot prove net fruits.
- Pay RPT promptly; unpaid taxes are a statutory ground for owner’s ejectment suit.
For debtors:
- Record the agreement with the Registry; unregistered private deeds expose you to BPF purchasers.
- Use consignation in court if creditor refuses payment; delay breeds interest.
- If creditor adds concrete structures, invoke Art. 448 (builder in bad faith); this deters over-improvement abuses.

10 Conclusion

When a sanla-tira reaches its “expiry,” nothing magical happens—title does not silently migrate to the creditor. Instead, the ordinary mortgage-and-antichresis rules spring into effect: the owner may redeem; the creditor may foreclose; both sides account for fruits and expenses; and any automatic forfeiture clause is void. Philippine jurisprudence has been unwavering in treating these folk arrangements with an equitable mortgage lens to prevent small borrowers from losing their homes through hidden pactum commissorium. Navigating the aftermath therefore demands a clear grasp of Civil Code arts. 1602-1605, 2088, and 2132-2139, the foreclosure statutes, and the Supreme Court’s steady line of decisions protecting debtors’ equity of redemption.