Real estate and foreign ownership

Atty. Raymund Martelino
/in /by

We see that in recent years there’s been an influx of foreigners in the country. Of course, they will need to live somewhere, either by leasing or buying real estate. Perhaps you may have received an offer from these foreigners for the purchase of your house-and-lot or condominium unit.

Take note that the Philippines has restrictive real property rules when it comes to foreign ownership. Ownership of land in the Philippines is exclusive and limited only to Filipino citizens. This protectionist policy is provided in the 1987 Constitution.

Foreigners interested in acquiring real property have to respect and follow the limits set in the law. Certainly, they cannot own and acquire land in their own name. These foreigners usually form a domestic corporation with 60 percent Filipino equity and 40 percent foreign equity. The said corporation is considered a Filipino corporation and therefore may acquire and own land in the Philippines.

This mode acquisition by a foreigner is not only tedious for it requires the registration of a corporation in the SEC, it is also indirect ownership. The legal owner of the property is the corporation as a separate and distinct juridical entity from the shareholders and officers.

Other exceptions to foreign ownership of land would be if the property was before the adoption of the 1935 Constitution, acquisition by hereditary succession of a foreigner who is a legal or natural heir, purchase of a condominium unit, purchase of land by a foreigner married to a Filipino citizen, and purchase by foreigners who were formerly natural-born Filipinos.

Even if we have the 1987 Constitution today, property rights of foreigners who owned land before the 1935 Constitution is respected.

Section 7 of Article XII of the 1987 Constitution provides that “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.” Thus, foreigners who are legal heirs of a decedent may inherit land.

The Condominium Act of the Philippines or Republic Act No. 4726 allows foreign citizens to purchase condominium units in any condominium project, provided that the foreign ownership of that project does not exceed 40 percent.

The foreigner who buys a condominium buys an interest and his share in the project is limited to an aliquot part or portion of that project. A condominium is defined in the law as an interest in real property consisting of a 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 a 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, 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.

A foreign citizen who marries a Filipino citizen may acquire land but that land will be registered in the name of the Filipino spouse. The certificate of title to be issued by the Registry of Deeds will be in the name of the Filipino spouse.

Natural-born Filipino citizens or those who acquire foreign citizenship are still eligible to own lands under the Section 8 of Article XII of the Constitution subject to certain limitations by law. A “natural-born” Filipino is a citizen of the Philippines from birth without having to perform any act to acquire or perfect their Filipino citizenship.

The next time you entertain the idea of dealing with foreigners for the sale of property, remember the general rule that Filipinos exclusively have the right to own land. Make sure that the deal is in order by checking if it falls under any of the exceptions mentioned. Avoid making false expectations and assurances that would entice foreigners to invest and part with their funds. Be candid outright to be fair to both parties. There may be other ways to satisfy the needs of our foreign friends. Find out how.

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Raymund may be reached by email at [email protected]. Visit www.mblawofficesph.com for more details.

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