When Can LGUs Levy Real Property for Tax Delinquency? Timelines Under the Local Government Code

Introduction

In the Philippines, local government units (LGUs) are empowered to impose and collect real property taxes as a primary source of revenue to fund local services and development projects. The Local Government Code of 1991 (Republic Act No. 7160, or LGC) provides the framework for real property taxation, including mechanisms for enforcing collection in cases of delinquency. Among these remedies, the levy on real property stands out as an administrative tool allowing LGUs to seize and potentially sell delinquent properties to recover unpaid taxes.

This article comprehensively examines the conditions and timelines under which LGUs may levy real property for tax delinquency, drawing directly from the provisions of the LGC. It covers the definition of delinquency, prerequisites for levy, procedural steps, associated timelines, redemption rights, and related considerations. Understanding these elements is crucial for property owners, local treasurers, and legal practitioners to ensure compliance and fair administration of local fiscal policies.

Real Property Taxation Under the LGC: An Overview

The LGC devolves significant fiscal authority to provinces, cities, municipalities, and barangays. Title II of Book II outlines the taxation powers, with Chapter II specifically addressing real property taxation. LGUs may levy an annual ad valorem tax on real property, including land, buildings, machinery, and improvements (Section 232). The basic real property tax rate is capped at 1% for provinces and 2% for cities or municipalities in the Metropolitan Manila Area (Section 233). Additional levies include the Special Education Fund (SEF) at 1% (Section 235), idle land tax up to 5% (Section 236), and special levies for public works up to 60% of project costs (Section 240).

Payment schedules are flexible but must align with national guidelines. Generally, taxes accrue on January 1 each year and are payable in four equal installments by March 31, June 30, September 30, and December 31, unless an ordinance provides otherwise (Section 246). Discounts may be offered for advance or prompt payments (up to 20%), and penalties apply for late payments (Section 248).

When Does Real Property Tax Become Delinquent?

Delinquency occurs when the taxpayer fails to pay the real property tax or any portion thereof by the prescribed due date (Section 254). The LGC does not provide a grace period beyond the due dates specified in local ordinances or the default quarterly schedule. Upon delinquency:

Interest accrues at a rate of 2% per month on the unpaid amount, including any fraction of a month, until fully paid.
The total interest cannot exceed 36 months (equivalent to 72% of the principal tax).
No additional penalties beyond interest are authorized, except in cases of fraud or willful omission, where a 25% surcharge may apply (Section 253).

Delinquency triggers the LGU's right to pursue collection remedies. The local treasurer is mandated to enforce collection through administrative actions (distraint of personal property or levy on real property) or judicial proceedings (civil action in court) (Section 255). Levy on real property is typically pursued when personal property is insufficient or unavailable.

Prerequisites for Levying Real Property

Before proceeding to levy, certain foundational elements must be in place:

Assessment and Notice of Assessment: Real property must be properly appraised and assessed by the local assessor (Sections 201–231). The owner receives a notice of assessment, which includes the fair market value, assessment level, and tax due. Appeals may be filed with the Local Board of Assessment Appeals (LBAA) within 60 days (Section 226).
Tax Declaration and Billing: The assessor issues a tax declaration, and the treasurer sends a bill or notice of tax due to the owner.
Superior Lien: The real property tax constitutes a superior lien on the property, second only to national government claims (Section 256). This lien attaches from January 1 of the taxable year and is not affected by sales, transfers, or encumbrances unless taxes are paid.
Notice of Delinquency: While not explicitly mandated before levy, in practice, treasurers often issue demand letters notifying the owner of the delinquency, accrued interest, and impending enforcement actions. This aligns with due process principles under the Constitution.

Levy cannot proceed if the tax is under appeal or if a stay order is issued by the LBAA, Central Board of Assessment Appeals (CBAA), or courts (Section 231).

The Levy Process: Conditions and Timelines

Section 257 of the LGC governs the levy on real property. The key condition is the expiration of the time required to pay the delinquent tax. There is no minimum waiting period after delinquency; levy may be initiated immediately upon the tax becoming overdue. However:

Issuance of Warrant of Levy: The provincial, city, or municipal treasurer issues a warrant of levy, which serves as the formal instrument for seizure. This warrant must describe the property and state the amount of delinquent tax, interest, and administrative costs.
Effecting the Levy: The levy is effected by:
- Annotating the warrant on the tax declaration held by the assessor.
- Registering the levy with the Register of Deeds (ROD) for annotation on the certificate of title.
- Serving written notice of the levy to the delinquent taxpayer, or if absent, to their agent, business manager, or property occupant.

The timeline for these actions is not rigidly fixed but must occur "after the expiration of the time required to pay." In essence, levy can commence as soon as the due date passes without payment.

Advertisement and Sale: Subsequent Timelines

Once levied, the property proceeds to sale unless the tax is paid. Section 258 outlines the timelines:

Advertisement: Within 30 days after the levy, the treasurer must advertise the property for public auction. Advertisement involves:
- Publication in a newspaper of general circulation in the province or city once a week for three consecutive weeks.
- Posting of notices in conspicuous places, such as the provincial capitol, city or municipal hall, and the barangay where the property is located.

The notice must include the property description, owner's name, delinquent amount, and auction details.

Public Auction: The sale occurs not later than 30 days after the last publication. It is conducted at the main entrance of the provincial, city, or municipal building, or at the property site if more expedient.
- The minimum bid is the total delinquent tax, interest (up to 72%), and sale costs.
- If no bidder meets the minimum, the LGU acquires the property by forfeiture.
- The highest bidder receives a certificate of sale.

If the owner pays the full amount before the sale, the process halts, and annotations are canceled.

Redemption Period and Final Purchase

Section 261 provides a one-year redemption period from the date of sale or forfeiture:

Redemption Timeline: The owner, or any interested party, may redeem within one year by paying the delinquent tax, interest (2% per month from sale date to redemption, up to 36 months total), sale costs, and a 2% interest on the purchase price if sold to a third party.
Effect of Redemption: Upon payment, the sale is voided, and the property reverts to the owner free of liens from the sale.

If unredeemed after one year:

Final Deed of Sale: The treasurer issues a final deed to the purchaser or LGU.
Tax Clearance: The owner loses all rights, and the new owner may secure a new tax declaration and title.

The one-year period is strict and not extendable, except in cases of fraud or irregularity proven in court.

Special Considerations and Exceptions

Prescription Periods: Actions to collect delinquent taxes prescribe after five years from accrual, or ten years if fraud is involved (Section 270). Levy must be initiated within these limits.
Installment Payments: LGUs may allow installment plans for delinquencies, but interest continues to accrue (Section 255).
Exempt Properties: Properties exempt from tax (e.g., those owned by the government, charitable institutions, or used for religious/educational purposes under Section 234) cannot be levied.
Multiple Properties: If the taxpayer owns multiple properties, levy targets the delinquent one first, but others may be levied if necessary.
Judicial Remedies: LGUs may opt for court action instead of or alongside administrative levy, with a five-year prescription from delinquency (Section 266).
Idle Lands and Special Levies: Delinquency in additional taxes on idle lands or special levies follows the same levy process and timelines.
Barangay Role: Barangays share in real property tax proceeds but do not directly levy; enforcement is by higher LGUs.
Due Process: All actions must comply with constitutional due process, including proper notice and opportunity to be heard. Failure may invalidate the levy (jurisprudence from cases like Estate of Lim v. City of Manila emphasizes this).

Implications for Taxpayers and LGUs

For taxpayers, prompt payment avoids escalation to levy, which can lead to property loss. Options include appealing assessments, seeking abatements for unjust taxes (Section 253), or negotiating settlements. For LGUs, efficient enforcement ensures revenue stability, but overzealous actions risk legal challenges.

In summary, LGUs can levy real property immediately upon tax delinquency under the LGC, with structured timelines for advertisement (within 30 days of levy), sale (not later than 30 days after last publication), and redemption (one year from sale). These provisions balance fiscal autonomy with taxpayer protections, fostering responsible local governance.