How To Own Real Estate Property In Rp

[newbster]

I recently received an interesting email about owning property in RP. It laid it out better than I've ever seen and helped me clear up a few questions that I had about owning property in RP. In particular their advice about how to structure a corporation that owns property seemed interesting. But I wonder what the costs of forming such a corporation are. Does anyone know?

 

Also leasing land for only 25 years and building a house on it seems quite risky. What happens if at 25 years the land lease-provider (i.e. person who owns the land that the house is built on) becomes unreasonable - refusing to renew the land lease or raising the price to some very high amount. I guess they can just take possession of the house you've built? Am I misunderstanding?

 

I'll paste the email below:

==========================

As a foreigner, or non-Philippine national, you cannot legally own a piece of land in the Philippines in your own name. You can lease a Privately-owned, titled piece of land for 25 years, renewable for another period of 25 years upon mutual agreement of both lessor and lessee. Commercial land can be leased by foreigners for 50 years initially with the possibility of an additional 25 year extension. 

 

A foreigner can own a building, but not the piece of land where the building is put on. So you can rent the land for 25 years and build a house on it which you actually do own. The local real estate laws differ somewhat from those of your home country, so be sure to employ the services of local legal counsel if you decide to pursue property ownership in this beautiful island paradise. 

 

Additional information: 

 

1. A foreigner can own up to 40% of a condominium project, while the remaining 60% has to be Filipino-owned. 

 

2. You can own a unit in a condominium, but as stated above, only 40% of the units in any given condominium may be sold to foreigners. 

 

3. Foreign nationals or corporations may completely own a condominium or townhouse unit. To take ownership of a private land parcel, residential house and lot, or commercial building and lot, foreign nationals or corporations should form a Philippine corporation. The corporation can be 40% foreign-owned (maximum) and 60% Filipino-owned (minimum), and must have at least five (5) incorporators total. The standard distribution our members report utilizing is to divide the 60% Filipino portion of the ownership interest between five Filipinos equally, making six individuals with interest in the corporation. This means that as the owner of 40% of the corporation, you will only require the consent of one Filipino member of the corporation in order to exert effective control over the property. 

 

Real estate sales transaction or closing costs include the following. 

 

Documentary Stamp Tax - P5.00 per P1,000 of contract price, or it may derived based on zonal value/fair market value, whichever is higher. 

 

Transfer Tax - P5.00 per P1,000 of contract price, or zonal value/fair market value, whichever is higher. 

 

Registration Fee - P1.50 per P1,000 of contract price, or zonal value or fair market value, whichever is higher. 

 

The Seller is legally responsible for transaction closing cost of capital gains tax. This is Philippine Real Estate Law, and the buyer is not legally obligated to cover these costs. 

[Thomas]

Yes,  (as I have written elsewhere, when someone had believe else)  foreigners CAN own

/100 % HOUSE on LEASED land

/max 40 %  of land - through company.   BUT NOTE! To be legal the company need to need land for it's BUSINESS.   (I suppouse it's ok to buy land and plant forest on most of it and put a house there.)

 

You worried about 25 years lease.  I BELIEVE the additional 25 is optional for the person WHO LEASE.

Lease contracts FOLLOW THE LAND undepending of who owns it,

BUT REGISTER the lease  (I have forgot where) so land buyer can't claim they didn't know of the lease.

 

I would worry MORE of having only 40 % control, and the other owners put together by same lawyer   :)   Or even if not, they can get to know each other and vote you down.   There are rather common "Dummy solutions" concerning foreigners geting control in companies, BUT I DON'T believe such arrangement would stand a control in court.

 

BUT I suppouse MY idea is legal   :)

UNDEPENDING of if you try to own part of the land through company, do this:

SEPARATE ownership of HOUSE and LAND.

Make LEASE CONTRACT even if you own part of the land.

 

IF the land is titled, you can give LOAN to the land owner with the land as COLATERAL.   (You can try to write such document even if it isn't titled, although it isn't colaterable then, but I suppouse many common Filipins don't know   :)   But then you can't register the loan deal.)

Include a paragraph where you have OPTION to BUY the land for a predecided price, so you have control in long run too.

Make lease fee and loan interest sums so they suit each other, with some benefit for the OTHER part, so they want to continue :)

 

NOTE!   Even if you make it legaly corect, some Filipins have SCARED AWAY house owners leasing their land,  so try to make sure you make deals with nice family AND give them a fee bonus EACH YEAR, so they LIKE the deal in the long run. 

Many Filipin land owners think very short ahead, so some have been FOOLED by a ONE TIME pay, but a very bad deal for them in the long. Not odd if they get angry when they notice...

(E g a land owner at Mindanao leased out long time his farmland to a big fruit company. He got big problem to sell his land, because the yearly lease fee is realy crap - I don't remember the sum, but it was only 2 % or so of the land value...)

But I wonder what the costs of forming such a corporation are. Does anyone know?

I don't remember but the registration fee is SMALL  (2000 pesos  or so)  so lawyer costs are much higher...

[Dave Hounddriver]

Foreigners cannot own land in Philippines.  Any attempt to circumvent that law is also illegal.

 

That being said, there are many 'schemes' that are touted by various people who think they have a way to beat the system.  Sometimes these unusual systems work and sometimes they do not.  I suggest talking to three different lawyers who specialize in foreign ownership or control of land in Philippines.  My experience is you will get three different answers.  That should give you some clue as to the minefield.

 

I live by 3 rules:

 

1)  Don't 'invest' more in Philippine real estate than you can afford to walk away from if things go sour.

 

2)  Protect your investment by putting the property in the name of a person (usually your wife or partner) or corporation (that you own 40% of) who can legally own it and then holding a lien on the property until you get your investment paid back. (This carries risk but as far as I can tell is legal)

 

3)  Lease it back so you have control over the use of the property.

 

Remember, this is what I am comfortable with and your comfort level will be different but I still say foreigners cannot own land here and every transaction that contravenes that law is very risky (See rule 1)

[Gerald Glatt]

Form a company, get a 50 year lease with 25 year renewal, or lease as an individual 25 years + 25 renewal .  75 years or 50 ears and you worry that the landlord will get new/old improvements.  He may have mine in fifty

 

[i am bob]

A really basic explanation of what you can and can't do as a foreigner can be found here: real-estate-guide.philsite.net/foreigners.html

[brock]

You cant lease land from your Wife but you can from your girlfriend,,,is that correct ?

[Kinilaw]

I have started two corporations in Cebu. It is not difficult but it does take some time. Consult a lawyer. A typical structure would be five shareholders, four Filipino's and yourself where you own 99% of the stock. I am not sure I would use this type of entity for purchasing property though. As others have mentioned, you will get as many opinions on this as there are lawyers.

 

Worrying about whether the title is clean is enough to scare me away from any land purchases in the Philippines. That said I do own a condo at City Lights.

 

Also consider the capital gains involved in the sale of your property should you have to relocate and need the cash.

[Dave Hounddriver]

You cant lease land from your Wife but you can from your girlfriend,,,is that correct ?

 

I see that as just another mine in the field.  It has been the discussion of many a gathering.  The conversation touches on

 

1)  The changes to the family act in 2009 that give common law partners more rights and the courts will take years to decide on that.

 

2)  Enforcing a lease with your girlfriend if it goes sour.

 

3)  If you marry your gf later does the lease become communal property and thus useless?

 

And there are other sub topics.  My opinion?  I will lease from my GF, but the total invested will be non - critical.  I will have all the paperwork I can get to cover my arse.  I will take my chances.

[Thomas]

Foreigners cannot own land in Philippines. Any attempt to circumvent that law is also illegal.

Well.  I agree with you concerning shemes

BUT it's legal for foreigners to own max 40 % through a company IF the company NEED land for it's BUSINESS. Otherwice it's a sheme   :)

putting the property in the name of a person (usually your wife or partner) or corporation (that you own 40% of) who can legally own it and then holding a lien on the property until you get your investment paid back. (This carries risk but as far as I can tell is legal)

3) Lease it back so you have control over the use of the property.

But if you LEASE the HOUSE you can own WHOLE in YOUR name.

Many have been fooled by gf/wife by puting things in their name...  IF she aim at your wallet, then puting things in her name ASSIST her scam you  :)  

I have started two corporations in Cebu. It is not difficult but it does take some time. Consult a lawyer. A typical structure would be five shareholders, four Filipino's and yourself where you own 99% of the stock. I am not sure I would use this type of entity for purchasing property though.

99%?!  Companies doing what?  Only EXPORT companies are allowed to have such high foreign ownership, and if it own land, then it's max 40 % even if it's an export company.

(Max % OWNERSHIP. I don't know if it's allowed to have shares with different vote power, giving 40% the VOTE majority. ) 

 

You cant lease land from your Wife but you can from your girlfriend,,,is that correct ?

Married couples are counted as ONE juridical person at least concerning having business.  If a foreigner is involved, then the whole couple is counted as foreign concerning max allowed ownership.

Concerning business there is a "Anti-Dummy" law, which don't allow Filipina wife be owner, I supouse depending of they expect the foreigner is behind it anyway.  (I'm not sure if that goes for land too, I have heared both Yes and No concerning that.)

 

It can make some redicilous effects, because the Filipina can have own business and land BEFORE she meet the foreigner...  :1 (103):

1) The changes to the family act in 2009 that give common law partners more rights and the courts will take years to decide on that.

  :thumbsup:   Interesting.  Do you know where to find the law text? 

2) Enforcing a lease with your girlfriend if it goes sour.

Better get the lease BEFORE the relation goes sour  :lol:

[Thomas]

A really basic explanation of what you can and can't do as a foreigner can be found here: real-estate-guide.philsite.net/foreigners.html

 

* Acquisition thru hereditary succession if the foreign acquire is a legal or natural heir. This means that when you are married to a Filipino citizen and your husband/wife dies, you as the natural heir will become the legal owner of his/her property. The same is true for the children. Every natural child (legitimate or illegitimate) can inherit the property of his/her Filipino father/mother even if he/she is not a Filipino citizen.

According to that a Filipina wife CAN own real estate  :thumbsup:   

(But that text is what the writer of the text think, it's not the law text.)