Who Can Acquire Real Estate in The Philippines?

By Manley Salazar, REB, REA

This is a basic question that realty service practitioners, like me, needs to be able to answer right off the bat. This is a standard information to test whether the prospective investor has the legal capacity to acquire the subject property that he or she has in mind.

As a general rule, only Filipino citizens and corporations with capitalization of at least sixty percent (60%) owned by Filipinos are allowed to acquire and own land in the Philippines.

But just like most rules, there are exemptions. Let us take a look at these four scenarios wherein a non-Filipino may be able to acquire real estate here in the Philippines:

1) Acquisition before the 1935 Constitution
Let us have a short review of history. The Philippines was passed to Spain by virtue of what they claim as “discovery and conquest”. The Spaniards introduced a Western legal concept of ownership called the “Regalian Doctrine” which simply means that all lands belong to the state.   Thus, all lands became the exclusive patrimony and dominion of the Spanish Crown. Suffice it to say, foreign ownership of land was allowed at that time. The Spanish government took charge of distributing the lands by issuing royal grants and concessions to Spaniards, both military and civilian. Private land titles could only be acquired from the government either by purchase or by various modes of land grant from the Crown.

Then came the “Treaty of Paris” on December 10, 1898 when Spain ceded to the government of the United States of America all rights, interests and claims over the national territory of the Philippine Islands for USD 20,000,000. Subsequently, the Americans introduced various Public Land Acts under the Jones Law.

• Act 926 or First Public Land Act which set regulations for the homesteading, selling, and leasing of portions of the public domain as well as issuance of patents to certain native settlers upon public lands.
• Act 2874 or 2nd Public Land Act of 1919 provided that exploitation is limited to agricultural lands and available to all Filipinos, Americans and citizens of other countries.
• Act 496 or Land Registration Law of 1903 placed all public and private lands in the Philippines under the Torrens System of Registration that we are using until today. The Torrens title is deemed as the best evidence of ownership.

Another milestone was the enactment of The 1935 Constitution. This provided the legal basis of the Commonwealth Government, a transition deemed necessary before granting of the Philippines’ independence. Significantly, this reserved the ownership of lands only to Filipino citizens.  Foreigners cannot acquire land anymore unless through a corporation where minimum ownership of Filipinos is 60%.  However, foreigners who already own lands by virtue of previous land laws were not compelled to give up their ownership. That is why we have this exemption number 1.

2) Acquisition by a legal heir through hereditary succession or inheritance
There are cases when a Filipino citizen who owns properties in the Philippines has a child or children who are citizens of other countries. In the event that they pass on, their children, even if they are non-Filipinos, are legal heirs to the properties that they will leave behind. The basis for this is Article XII (National Economy and Patrimony) Section 7 of the 1987 Constitution, which states:

“Section 7. Save in cases of hereditary succession, no private lands shall be transferred or conveyed except to individuals, corporations, or associations qualified to acquire or hold lands of the public domain.”

3) Purchase of not more than forty percent (40%) interest in a condominium project
Let us take a look at Republic Act No. 4726, otherwise known as “The Condominium Act” which governs the development of condominium projects in the Philippines.

“Section 2. A condominium is an interest in real property consisting of separate interest in a unit in a residential, industrial or commercial building and an undivided interest in common, directly or indirectly, in the land on which it is located and in other common areas of the building. A condominium may include, in addition, a separate interest in other portions of such real property. Title to the common areas, including the land, or the appurtenant interests in such areas, may be held by a corporation specially formed for the purpose (hereinafter known as the “condominium corporation”) in which the holders of separate interest shall automatically be members or shareholders, to the exclusion of others, in proportion to the appurtenant interest of their respective units in the common areas.”

From the said section, we can see that whenever someone buys a condominium unit, he will have two types of ownership:

• First is the separate interest or absolute ownership of the specific unit he buys which will be evidenced by a Condominium Certificate of Title (CCT) under his name.
• Then he automatically obtains undivided interest or co-ownership of the common areas including the land whose Transfer Certificate of Title (TCT) will be placed under the name of the Condominium Corporation that needs to follow the 60-40 ownership ratio. 60% minimum Filipino ownership, 40% maximum foreign ownership. This is why foreign ownership of up to 40% of the units is possible.

4) Purchase by former natural-born Filipino citizens
For those who have opted to change their citizenship, they may still purchase land in the Philippines subject to the following limitations:

a) Maximum area that may be acquired for residential purpose prescribed by Batas Pambansa 185

• • 1,000 square meters of urban land or
  • 1 hectare of rural land

b) Maximum area that may be acquired for business purpose prescribed by Republic Act No. 8179

• • 5,000 square meters of urban land or
  • 3 hectares or rural land

“Business purpose” refers to the use of land primarily, directly, and actually in the conduct of business or commercial activities in the broad areas of agriculture, industry and services, including the lease of land but excluding the buying and selling thereof.

Please take note that once a former natural-born Filipino decides to re-acquire Philippine citizenship through Republic Act No. 9225 or the Citizenship Retention and Reacquisition Act of 2003, the limitations stated above will not apply anymore. The entitlements bestowed upon a natural-born Filipino when it comes to property ownership will be restored.

That is it. I hope I was able to provide valuable information though this article. For further questions, kindly fill-up this form:

 

References

Act 926 – First Public Land Act
Act 2874 – 2nd Public Land Act of 1919
Act 496 – Land Registration Law of 1903
1935 Constitution
1987 Constitution
R.A. 4726 – Condominium Act
B.P. 185 – An Act to Implement Section Fifteen of Article XIV of the Constitution and for Other Purposes
R.A. 8179 – An act to further liberalize foreign investments, amending for the purpose Republic Act No. 7042, and for other purposes
R.A. 9225 – Citizenship Retention and Reacquisition Act of 2003