The Risks of Buying Land Not Yet Titled in the Seller’s Name (Philippines)

Buying real property in the Philippines is safest when the seller is the registered owner on the title (under the Torrens system). When the land is not yet titled in the seller’s name, you’re effectively paying someone who doesn’t hold the definitive legal proof of ownership—which multiplies legal, financial, and practical risks. This article maps those risks in depth, explains how they arise under Philippine law, and outlines safer deal structures and due-diligence steps.

I. Why title matters

Conclusive evidence of ownership. For registered land, the Transfer Certificate of Title (TCT) or Original Certificate of Title (OCT) is the best and often conclusive evidence of ownership. Registry entries (including encumbrances) bind third persons when properly recorded under the Property Registration Decree (P.D. 1529).
Registration beats possession. In double-sale situations, Article 1544 of the Civil Code favors the buyer who first registers in good faith (for immovables). If your seller isn’t on the title, you likely cannot register your purchase—leaving you exposed.

II. Common scenarios—and the risks in each

1) Land is already registered, but title remains in another person’s name

Typical situations:

Seller bought from the registered owner but never registered the deed.
Seller is an heir claiming rights but estate remains unsettled.
Seller has only a private document (e.g., unnotarized deed, receipt, SPA) or an old notarized deed unregistered.

Key risks:

Double sale exposure. The titled owner (or someone who deals with them) can sell to another buyer who registers first.
Defective chain of title. Missing or flawed deeds in the chain (e.g., wrong technical description, defective notarization, revoked SPA) can void your seller’s claimed rights.
Estate issues. If the titled owner died, transfers normally require estate settlement (judicial or extrajudicial), estate tax clearance, publication and/or bond (see Rule 74), and execution by all heirs. Partial signatures or “waivers” by some heirs can be challenged, and creditors have recourse against the property for a statutory period.
Spousal consent. If the land is conjugal or community property, a sale without the other spouse’s consent can be void (Family Code).
Existing liens and adverse claims. Mortgages, levies, lis pendens, or adverse claims on the title can survive a transfer; a seller not on title may be unable to discharge them.

2) Land is unregistered (no OCT/TCT); seller relies on tax declarations or possession

Key risks:

Tax declarations ≠ ownership. A tax dec proves payment of real property tax, not ownership. Long possession aids a future judicial/administrative titling claim but doesn’t guarantee clear title today.
Overlap and boundary conflicts. Unregistered parcels may overlap public domain (e.g., forest, timberland, foreshore) or neighboring surveys.
Proof problems. You may struggle to prove grantors’ ownership, continuity of possession, or exact metes and bounds—issues that derail subsequent titling.

3) Land is government-awarded or specially regulated

Examples:

Agrarian reform lands (CLOA) with non-transferability and DAR clearance requirements.
Homestead/free patents or other public land awards with statutory restrictions on sale/encumbrance within specific periods or with repurchase rights.
Ancestral domains/lands subject to CADT/CALT under the IPRA (R.A. 8371), where transfers typically need community/NCIP approval and obey custom. Risks:
Void or voidable transfers without required agency clearances.
Criminal/administrative exposure for circumvention.
Non-registrability, leaving you with a paper contract but no registrable title.

4) Land is actually public domain or environmentally restricted

Alienable and Disposable (A&D) status is essential for private ownership; otherwise it’s non-disposable public land.
Lands within protected areas, easements (e.g., shorelines, banks), or road rights-of-way have use/alienation limits. Risks:
Transactions can be void; improvements can be subject to removal; you may lose both land and investment.

5) Land has informal settlers/tenants or is under agrarian tenancy

Security of possession can be entirely different from ownership.
Tenants’ rights under agrarian laws can bar ejectment and restrict land use or development. Risks:
Protracted litigation, damages, and criminal complaints (e.g., for harassment) if you try to forcibly recover possession.

6) Seller is a co-owner or is selling only an undivided share

A co-owner may alienate only their ideal/undivided share (Civil Code). Risks:
You become a co-owner with others; physical partition may be contentious or impracticable; third-party occupants may resist.

7) Seller is a corporation/association with internal authority defects

Board approvals, secretary’s certificates, and signatories’ authority must align with the Articles/By-Laws. Risks:
Sale can be ultra vires or voidable; later corporate disputes can cloud your title.

8) Foreign participation issues

Non-Filipinos generally cannot own private land (subject to limited exceptions). Condominium ownership is capped at 40% foreign per corporation/project. Risks:
Structures to skirt nationality rules can be void and expose parties to penalties (e.g., Anti-Dummy Law).

9) Tax and regulatory pitfalls

Unpaid real property taxes can lead to levy/auction by the LGU—even against you as successor-in-interest.
Capital Gains Tax/Expanded Withholding Tax, Documentary Stamp Tax, transfer taxes, and registration fees must be settled; unpaid taxes or wrong filings can stall title transfer indefinitely.

III. Red flags specific to a seller who isn’t on the title

“We’ll transfer after payment” with no control for you over the transfer process.
Reliance on photocopies of title or CTC that’s outdated, with mismatched technical descriptions.
Unnotarized or recently notarized “old” deeds (possible backdating).
Missing SPA for agents; SPA executed abroad without proper consular/apostille formalities.
“Some heirs are abroad but gave verbal consent.”
“Title is lost but we can get a new one soon” (reconstitution/lost title petitions take time and are contestable).
Presence of lis pendens, adverse claim, notice of levy, or mortgages on the existing title.

IV. Due diligence roadmap (what to verify before you pay)

Identify the land precisely
- Secure a recent Certified True Copy (CTC) of the title (if any) from the Registry of Deeds (ROD). Check the primary entry number, date, registered owner, technical description, and the encumbrances page.
- For unregistered land, obtain the approved survey plan and technical description from a licensed geodetic engineer; reconcile with tax map and assessor’s records.
Trace the chain of transfers
- Collect all deeds (sale, donation, extrajudicial settlement), SPAs, board approvals, and IDs of signatories; verify notarization and commission (to catch fake notarizations).
- For estates: death certificates, heirship documents, extrajudicial settlement or court order, and BIR estate tax electronic Certificate Authorizing Registration (eCAR).
Check for legal burdens
- Encumbrances: mortgages, real estate mortgages (REM), adverse claims (Sec. 70, P.D. 1529), lis pendens (Sec. 76), attachments, levies.
- Possession and occupants: site inspection; barangay certifications; tenancy checks; proof of peaceful possession.
- Zoning & land classification: local zoning compliance; whether land is A&D or within protected/foreshore/timberland.
- Taxes: RPT receipts; arrears/delinquencies; prior auction or redemption histories.
Confirm seller’s authority
- If dealing with heirs, ensure all heirs sign or a proper administrator/guardian acts under court authority.
- If corporate seller, verify board resolution and officers’ authority.
Validate boundaries and area
- Commission a relocation/verification survey; ensure monuments match the technical description; resolve overlaps and encroachments early.
Paperwork for eventual transfer
- Pre-clear BIR requirements (CWT/CGT, DST), LGU transfer tax, and ROD documentary checklists.
- For regulated lands (CLOA, patents, CADT), obtain DAR/DENR/NCIP clearances as applicable before paying the bulk of the price.

V. Safer deal structures when seller isn’t yet on title

Option to buy (with exclusivity) while seller completes title transfer to their name. Pay only an option fee, not the purchase price.
Contract to sell (not deed of absolute sale) with clear conditions precedent: (a) title issued in seller’s name; (b) cancellation of all liens; (c) tax and regulatory clearances; (d) delivery of physical possession free of occupants.
Escrow for the purchase price: release only upon objective deliverables (e.g., CTC of new TCT in seller’s name and clean encumbrance page).
Annotation of buyer’s rights (when possible):
- If there’s already a registrable deed from the registered owner, register it immediately.
- If not, consider adverse claim annotation to give notice (limited duration; must be grounded on a registrable claim).
- Notice of lis pendens if litigation is necessary to protect your claim.
Warranties & indemnities:
- Special warranty deed stating seller’s title chain and a no-encumbrance warranty.
- Undertaking to cancel liens, pay taxes/penalties, and defend title against specified claims.
- Holdback or retention (e.g., 10–20% of price) released after a period free of challenges.

VI. Special traps to watch for

CLOA splitting/transfer via “rights” sale without DAR authority—often void and non-registrable.
Sales via guardians or attorneys-in-fact without court approval (for minors/wards) or with expired/revoked SPAs.
Forged signatures or deeds—criminal liability plus civil nullity.
Boundary “ballooning” (claimed area much larger than titled area).
Foreshore or easement breaches (e.g., 20-meter riverbank easements; 3-meter urban easements).
Unpaid estate taxes—deal cannot close at ROD without the BIR eCAR.
RPT delinquencies—LGU levy can override private arrangements.

VII. Practical checklist (buyer’s side)

Identity and authority of seller (IDs, marital status, spousal consent, corporate authorities).
Latest CTC of title + encumbrances; or, for unregistered land, complete survey and proof of possession chain.
Full chain of documents from the registered owner to your seller; check notarization and dates.
Tax status: RPT, BIR capital gains/withholding, DST readiness.
Occupancy status and written vacate/turnover undertakings.
Regulatory clearances (DAR/DENR/NCIP/LGU zoning).
Survey (relocation) and technical check against title.
Escrow and/or holdback mechanics documented.
Insurance and risk allocation between signing and closing.
Default and remedies clauses (specific performance, rescission, liquidated damages).
Dispute resolution venue and governing law (Philippines), attorney’s fees clause.

VIII. Clauses worth adding to your contract (illustrative)

Condition precedent—Clean title in seller’s name “Closing shall occur only after issuance of a TCT in Seller’s name covering the Property, reflecting the agreed technical description, free from all liens/encumbrances except Permitted Encumbrances.”
Escrow release mechanics “Purchase price shall be deposited in escrow and released upon Buyer’s receipt of (i) CTC of the TCT in Seller’s name; (ii) Owner’s Duplicate; (iii) BIR eCAR; (iv) tax clearance; (v) notarized deed in favor of Buyer; (vi) possession turnover certificate.”
Title and authority warranties “Seller warrants good and marketable title derived from the Registered Owner(s), full authority to sell, and absence of undisclosed claims; Seller shall defend and hold Buyer harmless from any breach.”
Vacate/turnover “Seller shall deliver possession free of occupants, squatters, and tenants on or before Closing; failure constitutes material breach.”
Survival “Warranties and indemnities survive Closing for __ years.”

(Have counsel tailor these to your facts.)

IX. When walking away is prudent

Seller cannot show a clean chain from the registered owner.
Land classification or regulatory status is unclear (A&D vs. restricted).
Heirs/claimants are disputing ownership.
Seller refuses escrow, holdbacks, or registrable instruments.
Occupancy problems the seller won’t resolve.

X. Bottom line

Buying land from a seller not yet on the title is inherently high-risk. You must assume:

You may not be able to register your deed promptly (or at all).
You can lose priority to a good-faith registrant dealing with the titled owner.
The property might be encumbered, restricted, or misclassified, or tied up in estate/agrarian/public land issues.

If you still wish to proceed, structure the deal to close only after the seller secures title in their name and clears all red flags, with money in escrow, robust warranties, and registrable documents ready. And have Philippine counsel review every step—from due diligence checklists to closing deliverables.