Letter to a Lawyer

Dear Attorney,

I hope this message finds you well. I am currently in the process of purchasing a piece of land, and before I proceed with signing the Deed of Sale, I want to ensure that all legal considerations are properly addressed. I wish to avoid future complications or disputes related to the property. Could you kindly guide me through the essential steps I need to undertake before signing the document? Your detailed advice would be greatly appreciated.

Sincerely,
A Prudent Buyer

Guide to Due Diligence Before Signing a Deed of Sale for Land in the Philippines

The purchase of real property, especially land, is a significant investment in the Philippines. It requires careful scrutiny of legal documents, compliance with government regulations, and verification of ownership. This article outlines the critical steps and considerations a buyer must take before signing a Deed of Sale.

1. Verify Ownership of the Land

a. Request a Certified True Copy of the Title from the Registry of Deeds
Ensure that the seller has a genuine title over the property. Request a certified true copy of the Transfer Certificate of Title (TCT) or Original Certificate of Title (OCT) from the Registry of Deeds. Confirm the following:

The title is in the name of the seller.
The title does not contain annotations of encumbrances such as mortgages, liens, or adverse claims.

b. Confirm Authenticity of the Title
Falsified land titles are a recurring issue in the Philippines. Check the physical title for signs of authenticity:

The presence of a red-blue border.
Watermarks and security features, such as fibers that glow under UV light.

Alternatively, visit the Land Registration Authority (LRA) to authenticate the title.

2. Conduct a Physical Inspection of the Property

a. Inspect the Land
Ensure that the physical boundaries match the technical description indicated in the title. Survey discrepancies may lead to disputes with neighboring property owners.

b. Confirm Possession and Occupancy
Determine if the seller is in actual possession of the land. If there are tenants or informal settlers, ensure the seller resolves these issues before proceeding.

3. Check for Tax Liabilities

a. Secure a Tax Declaration and Tax Clearance Certificate
Request a copy of the latest Tax Declaration from the municipal or city assessor's office to verify the property’s declared value for tax purposes. Obtain a Tax Clearance Certificate to ensure all real property taxes have been paid up to date.

b. Be Aware of Tax Delinquencies
Unpaid taxes become the liability of the buyer once the sale is finalized.

4. Verify Zoning and Land Use Regulations

a. Check Zoning Compliance
Visit the local zoning office to confirm that the land’s use aligns with your intended purpose. For instance, residential land cannot be used for industrial purposes unless reclassified.

b. Review Comprehensive Land Use Plans (CLUPs)
Examine the local government’s CLUPs to check for potential infrastructure projects or changes that may affect the property.

5. Validate Survey and Technical Descriptions

a. Compare the Title and the Survey Plan
Verify that the technical descriptions in the title match the actual measurements of the property. A licensed geodetic engineer can assist in this process.

b. Secure a Relocation Survey
A relocation survey ensures the boundaries are correct and that there are no overlaps with adjacent properties.

6. Verify if the Land is Tenanted

The Comprehensive Agrarian Reform Program (CARP) mandates that agricultural lands over a certain size may be covered for redistribution to tenants. Obtain clearance from the Department of Agrarian Reform (DAR) to verify the property’s status.

7. Review Legal Documents

a. Draft of the Deed of Sale
Request a draft of the Deed of Sale and review its contents. Key elements to verify include:

Complete names of buyer and seller.
Full and accurate description of the property.
Agreed purchase price and payment terms.
Warranties provided by the seller, including freedom from encumbrances.

b. Other Pertinent Documents

Special Power of Attorney (if the seller is not personally transacting).
Marriage certificate of the seller (if married) to ensure spousal consent.
Death certificate and Extra-Judicial Settlement (if the seller inherited the property).

8. Understand Tax and Fee Responsibilities

a. Capital Gains Tax and Documentary Stamp Tax
The seller generally pays the capital gains tax (6% of the sale price or zonal value, whichever is higher). The buyer usually shoulders the documentary stamp tax (1.5%). Clarify these obligations before signing the deed.

b. Transfer Tax and Registration Fees
The buyer typically pays for the transfer tax and registration fees. Prepare for these additional costs.

9. Confirm the Seller’s Identity and Capacity

a. Verify the Seller’s Identity
Ensure that the seller is the registered owner or authorized representative. Request government-issued IDs and proof of authority (e.g., notarized Special Power of Attorney).

b. Assess Legal Capacity
Ensure that the seller has legal capacity to sell (e.g., they are of legal age, mentally sound, and not subject to legal restrictions).

10. Obtain Notarial Services

Under Philippine law, a Deed of Sale must be notarized to be valid and enforceable. Ensure that the notary public is authorized to practice in the jurisdiction where the property is located.

11. Confirm Compliance with CARP and Ancestral Land Laws

If the property is agricultural, secure a DAR clearance. If the land is within an ancestral domain, ensure compliance with the Indigenous Peoples' Rights Act (IPRA).

12. Plan the Payment Process

a. Use an Escrow Service
To safeguard payment, consider using an escrow service. The funds will only be released to the seller upon fulfillment of agreed conditions.

b. Secure an Official Receipt
Request a notarized receipt of payment from the seller as proof of transaction.

13. Post-Sale Steps

After signing the Deed of Sale, immediately proceed with:

Payment of taxes (Capital Gains Tax and Documentary Stamp Tax).
Transfer of title at the Registry of Deeds.
Update of Tax Declaration with the local assessor's office.

Conclusion

The purchase of land in the Philippines requires thorough due diligence to protect your investment. Each step—from title verification to compliance with government regulations—ensures the legitimacy of the transaction. Consulting a lawyer for expert guidance is invaluable, especially in reviewing documents and clarifying legal obligations.

By following these steps meticulously, you can confidently proceed with signing the Deed of Sale and enjoy your property with peace of mind.