Introduction

In the Philippines, land ownership and transfer are governed by a complex framework of laws, including the Civil Code, the Property Registration Decree (Presidential Decree No. 1529), and various agrarian reform statutes. While the Torrens system of land registration provides the most secure form of title, a significant portion of land remains unregistered, particularly in rural areas or properties inherited through generations without formal titling. For such unregistered lands, tax declarations serve as a common instrument for evidencing possession and facilitating transactions, including sales.

This article explores the intricacies of selling unregistered land using a tax declaration. It delves into the legal foundations, procedural requirements, potential risks, and practical considerations within the Philippine legal context. While this method is widely practiced, it is not without limitations, as tax declarations do not confer absolute ownership and may expose parties to disputes or challenges.

What is Unregistered Land?

Unregistered land refers to real property that has not been brought under the Torrens system of registration. Under the Torrens system, a Certificate of Title is issued by the Registry of Deeds, providing indefeasible and conclusive evidence of ownership. In contrast, unregistered land lacks this formal title and is often identified through historical documents, such as old Spanish titles, deeds of sale from previous owners, or simply through continuous possession.

Such lands are common in the Philippines due to historical factors, including colonial-era land grants, informal settlements, and delays in the land registration process. Owners of unregistered land typically pay real property taxes based on assessments by local government units (LGUs), which issue tax declarations as proof of tax compliance and de facto possession.

The Role of Tax Declarations in Land Transactions

A tax declaration is an official document issued by the municipal or city assessor's office, declaring the property for taxation purposes. It includes details such as the property's location, area, boundaries, assessed value, and the name of the declared owner. Under Section 209 of the Local Government Code (Republic Act No. 7160), tax declarations are used to determine real property taxes but are not conclusive proof of ownership.

However, in the absence of a formal title, tax declarations hold evidentiary value. The Supreme Court has ruled in cases like Heirs of Malabanan v. Republic (G.R. No. 179987, 2009) that long-term possession under a tax declaration can support claims for original registration of title. For sales, tax declarations are often used to demonstrate the seller's possessory rights, making them a practical tool for transferring unregistered land.

Legal Basis for Selling Unregistered Land Using Tax Declaration

The sale of unregistered land is permissible under Philippine law, primarily governed by Articles 1458 to 1637 of the Civil Code, which define contracts of sale. A sale is perfected by mutual consent on the object and price, and for real property exceeding P500, it must be in writing to be enforceable (Article 1403, Civil Code).

Key legal principles include:

Presumption of Ownership from Possession: Article 433 of the Civil Code states that actual possession raises a presumption of ownership. Tax declarations, combined with payment of taxes, strengthen this presumption, as noted in Republic v. Court of Appeals (G.R. No. 108998, 1994).
No Requirement for Title in Sale: The law does not mandate a Torrens title for a valid sale. In Spouses Abrigo v. De Vera (G.R. No. 154409, 2004), the Court upheld sales of unregistered land based on deeds of sale and tax declarations.
Public Instrument Requirement: For enforceability against third parties, the deed of sale should be notarized and recorded with the Registry of Deeds under Section 113 of P.D. 1529, even for unregistered land.
Agrarian Reform Considerations: If the land is agricultural, Republic Act No. 6657 (Comprehensive Agrarian Reform Law) may apply, restricting sales without Department of Agrarian Reform (DAR) clearance.
Indigenous Lands: For ancestral domains, Republic Act No. 8371 (Indigenous Peoples' Rights Act) requires Free and Prior Informed Consent (FPIC) from indigenous communities.

Requirements for the Sale

To effect a valid sale of unregistered land using a tax declaration, the following elements must be satisfied:

Capacity of Parties: Both seller and buyer must have legal capacity—adults, mentally sound, and not disqualified by law (e.g., no conflicts under family law).
Proof of Seller's Rights: The seller must provide:
- Current tax declaration in their name.
- Tax receipts showing consistent payment.
- Affidavits of ownership or possession.
- Boundary descriptions or sketches to avoid disputes.
Deed of Sale: A written contract, preferably a Deed of Absolute Sale, detailing the property, price, terms, and warranties. It should be notarized.
Clearances and Certifications:
- BIR Certificate Authorizing Registration (CAR) for capital gains tax.
- DAR clearance if agricultural.
- Barangay certification of no adverse claims.
- If applicable, clearances from the Department of Environment and Natural Resources (DENR) for forest or public lands.
Payment of Taxes and Fees: Capital gains tax (6% of selling price or zonal value, whichever is higher), documentary stamp tax (1.5%), and transfer tax (0.5-0.75% depending on LGU).
Buyer's Due Diligence: The buyer should verify no pending litigations, encumbrances, or adverse possessors through the assessor's office, Registry of Deeds, and physical inspection.

The Process of Selling Unregistered Land

The sale process typically unfolds as follows:

Negotiation and Agreement: Parties agree on terms, including price and payment mode.
Documentation Preparation: Draft the Deed of Sale, gather supporting documents like tax declarations.
Notarization: Execute the deed before a notary public.
Tax Payments: Seller pays capital gains tax and obtains CAR from the Bureau of Internal Revenue (BIR). Both parties handle documentary stamp and transfer taxes.
Transfer of Tax Declaration: Submit the deed and CAR to the assessor's office to transfer the tax declaration to the buyer's name. This involves annotation and issuance of a new declaration.
Recording: File the deed with the Registry of Deeds for annotation, which provides notice to third parties.
Possession Transfer: Seller delivers physical possession, often with a turnover document.

The entire process can take weeks to months, depending on government processing times.

Risks and Caveats

Selling unregistered land via tax declaration carries inherent risks:

Lack of Conclusive Title: Tax declarations are merely prima facie evidence. In Director of Lands v. Abad (G.R. No. L-30035, 1978), the Court emphasized that they do not vest ownership and can be challenged.
Adverse Claims: Hidden heirs, squatters, or prior sales may surface, leading to ejectment or quieting of title suits.
Fraud and Forgery: Without a title, documents are easier to falsify, exposing buyers to scams.
Difficulty in Financing: Banks rarely accept unregistered land as collateral, limiting buyer options.
Prescription and Registration Issues: Buyers may face hurdles in registering the land later, requiring proof of 30 years' open possession under Section 14 of P.D. 1529.
Tax Implications: Underassessment in declarations can lead to back taxes or penalties.
Environmental and Zoning Restrictions: Unregistered lands may unknowingly violate land use laws, resulting in demolitions or fines.

To mitigate, buyers should conduct thorough title searches, obtain title insurance if available, and consider joint applications for registration.

Post-Sale Considerations

After the sale:

Registration Pursuit: The buyer should apply for original registration via judicial confirmation (ordinary registration) or administrative means (e.g., free patents under Commonwealth Act No. 141 for public lands).
Updating Records: Ensure all LGU records reflect the transfer to avoid tax delinquencies.
Warranties Enforcement: If defects arise, the buyer can invoke warranties against eviction or hidden defects under Articles 1547-1566 of the Civil Code.
Succession Planning: For inherited unregistered lands, secure extrajudicial settlements before selling.

Alternatives and Recommendations

While tax declarations enable sales, alternatives include:

Registering Before Selling: Sellers can file for title to command higher prices and reduce risks.
Lease or Usufruct: If sale is impractical, consider long-term leases.
Joint Ventures: For development, partner with entities experienced in land titling.

Recommendations:

Consult a lawyer specializing in real property law.
Use escrow services for payments to protect against non-delivery.
For large transactions, involve a geodetic engineer for surveys.

Conclusion

Selling unregistered land using a tax declaration remains a viable, albeit imperfect, mechanism in the Philippines for transferring property rights. It bridges the gap for lands outside the Torrens system but underscores the importance of due diligence and legal safeguards. Ultimately, transitioning to registered titles enhances security and value, aligning with the state's policy of promoting land registration for economic stability and dispute resolution. Parties engaging in such transactions should prioritize transparency and compliance to avoid protracted legal battles.