An Analysis of Land and Real Property Laws in the Philippines PDF

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An Analysis of Land and Real Property Laws in the Philippines By: Augusto B. Agosto February 25, 2019, Cebu City Introduction Land is the original source of wealth of nation. Everything that we use can be traced ultimately to land. In economics, land is one of the factor of production. Land serve al...

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An Analysis of Land and Real Property Laws in the Philippines By: Augusto B. Agosto February 25, 2019, Cebu City

Introduction

Land is the original source of wealth of nation. Everything that we use can be traced ultimately to land. In economics, land is one of the factor of production. Land serve also as a commodity, it can be bought or sold. Due to its value there are different laws that ensure real estate transactions are properly performed and recorded. Land also can be pass on to family members through estate planning, or maybe owned by one or more person. In governance, the State and local government regulates the use and purpose of the land, it must be in accordance with the zoning and the construction will not damage the surrounding environment. The Philippine Constitution enshrined the basic concepts and principles of land and real estate laws. It recognizes the ownership of the State over lands, natural resources and minerals within its territory and jurisdiction. Several laws had been passed and implemented also which directly affects property and real estate management. Local laws especially the Local Government Code defined the powers of local government units in reclassifying lands and craft land use planning through Comprehensive Land Use Plan and Zoning Ordinance, Schedule of Assessment and other related laws. This study will attempt to analyze the major points of these laws and provide an insight on its governance and management, actual cases and conflict with other laws. Finally, the study will recommend some points on the improvement of its governance. I.

Basic Concepts and Principles in Land and Property Law

In studying land laws of the country, it is important to define first the territory in which the property or land comprises. We should have the primary knowledge on the scope of the territory on which any laws will be applied and implemented. In Article I of National Territory provision, it is stated that the territory comprises the Philippine Archipelago, including all the islands and waters embraced therein. This provision is important in studying the different laws of the land. We can only start and process titling of land which are situated or part of this territory. Furthermore, what is subject for titling are only those lands, included its terrestrial and aerial domains. Not included are the waters, fluvial and submarine areas. In Article XII, Section 2, Paragraph 1 of the 1987 Constitution also stated that all lands of the public domain, waters, minerals, coal, petroleum and other mineral oils, fisheries, forests or timber, wildlife and flora and fauna and other natural resources are owned by the State. All of these natural resources should not be alienated except agricultural lands. This is what we call the Regalian doctrine.

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There are specific laws regarding the Property Rights of Indigenous People which declares ancestral lands and domain as never to have been a public land and are private. (Cruz v. Secretary, 347 SCRA 128) Furthermore, those alienated or transferred to private individuals are subject to police power of the State including power of eminent domain, and taxation. In this provision, the constitution clearly state the citizenship requirement and that only Filipino citizens where the State can forge a joint venture or production-sharing agreement. If corporation or association, it should be sixty percent controlled by Filipino Citizen. in Section 1, Article XIII of the 1935 Constitution, agricultural lands include residential, commercial and industrial lands. The Constitution state that the natural resources, with the exception of public agricultural land, shall not be alienated, and with respect to public agricultural lands, their alienation is limited to Filipino Citizens. But the purpose is to conserve agricultural resources in the hands of Filipino citizens. In Section 3, Article XII of the 1987 Constitution, lands of the public domain are classified into agricultural, forest or timber, mineral lands and national parks. Agricultural lands of the public domain may be further classified by law according to the uses to which they may be devoted. Alienable lands of the public domain shall be limited to agricultural lands. What we are calling as agricultural lands are currently subdivided into residential, commercial, industrial, institutional and other uses. The constitution also provides that private corporations or associations may not hold such alienable lands of the public domain except by lease, for a period not exceeding twentyfive years, renewable for not more than twenty-five years, and not to exceed one thousand hectares in area. Citizens of the Philippines may lease not more than five hundred hectares, or acquire not more than twelve hectares thereof, by purchase, homestead, or grant. Outside of this provision the Congress will determine, by law, the size of the land that will be acquired, held or leased and laydown considerations on this matter. Property can be either public dominion or privately owned. Public dominion, under Article 419423 of the New Civil Code, refers to those intended for public use such as roads, canals, rivers, ports and bridges constructed by the State, banks, shores and other intended for public service or for the development of the national wealth. Other properties which are not intended for public use will form part of the patrimonial property of the State. Private properties are those owned by the individual or collectively through its corporation or association.

Land Titling and Registration The Philippine is using the Torrens System in land registration. Land registration is important to secure owners from any threat of land-grabbing, or other intentions. Torrens title serve as a proof of ownership but not the sole proof. Under the mirror principle in Torrens System, the title of the property reflects of the property, free of any adverse claims. Anything happen in the land should be found in the title i.e. adverse claims, liens and any encumbrances. The title will show to the world on the ownership and claims that an interested party would want the world to know such as mortgages, caveats, liens, adverse claims can be found in the title. However, not all can be seen in the title itself. Other limitations, restrictions and other can be imposed by the State through its police power, expropriation, zoning, height limitations, and area consideration.

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Torrens system also considers curtain principle which assumes that the face of the title is sufficient and there is no reason to look for the past. However, if there is doubt anyone can lift the curtain and look for the traced back up to the mother title. This is what we call as due diligence in real estate parlance. One of the laws in land registration is the Property Registration Decree (PD No. 1529). The law simplifies the registration of lands under the Torrens system and the unregistered lands. This decree was issued to integrate various laws that pertains to registration of property. Incorporated in this law are the following laws: Act 49 or the Land Registration Act, CA 141 or the Public Land Act, Act 2259 or the Cadastral Act, Presidential Decree 27 or the Emancipation Patent Law and other laws. This law also created the Land Registration Authority as the central repository of records of original registration, subdivision and consolidation plans of titled lands. Under the Commonwealth Act No. 141 or the Public Land Act, it gives the President to classify public domain into alienable and disposable lands of the public domain. It also authorizes the President to declare what lands are open to disposition or concession. Under Art.712 of the New Civil Code, the modes of acquiring ownership by occupation and by intellectual creation. Ownership and other real rights over property are acquired and transmitted by law, by donation, by estate and intestate succession, and by tradition and prescriptions. For the purpose of land registration, IPRA specified that there is no need to secure separate certification that the ancestral land is alienable and disposable, the process of identification, delineation and certification as ancestral land will suffice. Unlike regular registration proceedings where the applicant must prove possession of the land since June 12, 1945, as well as classification of alienable and disposable land. IPRA already classified ancestral lands as alienable and disposable even it has a slope of 18% or over. This provision of law will contradict, other laws that set 18% and above as non-alienable and disposable. It is clearly stated under Presidential Decree 705 under Section 15, Topography that no land of the public domain eighteen per cent (18%) in slope or over shall be classified as alienable and disposable, nor any forest land fifty per cent (50%) in slope or over, as grazing land.

Ownership Under the Civil Code of the Philippines, Chapter 1 Art.427-430, the ownership may be exercised over things or rights. Under the bundle of rights concept, which the property ownership is compared to a bundle of stick. The owner has the right to enjoy and dispose of a thing, right to recover, to exclude any person. Thus an owner can fence his/her property without detriment to others. Ownership also include all of its surface and everything under it, and he can construct whatever improvement he deem proper. Under Section 2 of the Code, Art.445-450, the law states that whatever is built, planted or sown on the land of another and the improvements on it, belong to the owner of the land. Thus whenever there are properties which is inhabited by the informal settlers, can be attributed to the owner of the land under this provision. However there are limitations imposed on the rights of ownership. These limitations can be group either imposed by the state in the exercise of its inherent powers; or by specific provisions of the law; by the transferor of the property and by the owner; and inherent to the property.

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There are two types of estates in land: one is freehold hold which indicates title of ownership; and the other one is leasehold estate which signifies some sort of right short of fee simple of title. Under the general limitations, it uses the three inherent powers of the state such as the police power, eminent domain and taxation. Limitations imposed by law are legal easement such as zoning regulation, building code, rent control, subdivision regulations, escheat. Limitations imposed by the owner himself such as voluntary servitudes, mortgages, lease and deed restrictions. There are also limitations imposed by the transferor such as donations and usufruct, while the inherent limitation is co-ownership. Article 476 and 478 of the Civil Code state that “whenever there is a cloud on title to real property or any interest therein, by reason of any instrument, record, claim , encumbrance or proceeding which is apparently valid or effective but it is in truth and in fact invalid, ineffective, voidable or unenforceable, or has been extinguished or has terminated, or has been barred by extinctive prescription and may be prejudicial to said title, an action may be brought to remove such cloud or to quiet the title.” In the absence of a title, tax declaration coupled by actual possession and existence of improvement can also substantiate claim for ownership. Tax receipts and declarations are prima facie proofs of ownership or possession of the property for which such taxes have been paid. Coupled with proof of actual possession of the property, they may become the basis of a claim for ownership. The Family Code outlines the property regime of spouses. In the absence of a marriage settlement or prenuptial agreement, the provision of the Family Code will apply with regard to the property regime of the spouses. If the marriage was contracted before the Family Code (before 03 August 2988) then the conjugal partnership of gains will govern. However, if the marriage was contracted after August 3,1988, then the absolute community of property will apply. Under the regime of absolute community of property, all property owned by the spouses at the time of the celebration of the marriage or acquired thereafter shall form part of the community property. However, the following shall be excluded in the community property and be considered as an exclusive property of the spouse: That which brought to the marriage as his or her own; acquired during the marriage by gratuitous title; acquired by right of redemption, by barter or by exchange of the property belonging to only one of the spouses; and that which is purchased with the exclusive money of the wife or the husband. Article 92 of Family Code states that inherited or donated pieces of property acquired during the marriage, as well as the fruits and income, do not form part of the absolute community of property. In general the Philippine law prohibits foreign ownership of land. This prohibition can be found in the Philippine Constitution and several special laws. Former Filipinos may own land, buildings and condominiums. Corporations with Filipino nationality can own land provided that the corporation has atleast 60% owned by Filipino citizens. Under the RA 4726, foreigner may own condominium units as long as not more than 40% of the units in a project were acquired by foreigners. There are exceptions however on the foreign ownership such as those land acquired before the 1935 Constitution; acquisition thru hereditary succession, if the heir is the legal and natural heir ; Former natural-born Filipino citizen, under the Batas Pambansa 185 and RA 8179(Foreign Investment Act), can own 1000 square meters of urban land or one hectare of rural land; can

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own a maximum of 2 lots only; ownership of urban or rural land used for business purposes will lower the 5,000 square meter and 3 hectare limits. Also, foreign individuals, corporations or association may lease land for a period of 25 years renewable for another 25 years. (PD No.471) and lease up to 50 years renewable for another 25 years under the Investor’s Lease Act or RA 7652.

Rights and encumbrances Under the Civil Code, Art.562 the usufruct gives a right to enjoy the property of another with the obligation of preserving its form and substance, unless the title constituting it provides. It’s the right of others to enjoy the fruit of the immovable property for a certain period of time. The rights and obligation of the usufructuary includes his entitlement to all natural, industrial and civil fruits of the property of usufruct. However, in the usufruct arrangement the owner is obliged to reimburse at the termination of the usufruct from the proceeds of the fruits, all other expenses including cultivation, ordinary expenses and others. We also have common ownership that pertains to the property that is not subdivided yet due to different problems. Both of the co-owners are entitled to the fruits of the property. Easement is an encumbrance imposed upon an immovable for the benefit of another immovable belonging for another owner. Easement of way is a form of encumbrance, it will benefit others to use another property. Example if a landowner, owns a lot which is landlocked will need to pass along another property to access a public road. If there will be no easement, there is a probability that the landlocked owner or whoever from his family will trespass the property of the servient property. Under the Civil Code, there are different types of easement, it can be legal easement or voluntary easement. The former was established by law while the latter by the will of the owners. There are different type of easement such as easement of road right of way; easement from the water bodies as stated in the Water Code of the Philippines; Easement under the Highway Act and the easement from corregidor right of way of transmission lines, electricity utility and many more.

Eminent domain The power of eminent domain is the most controversial nowadays. Under the build, build, build program of the Duterte administration, there are road widening and construction in different part of the country. Eminent domain or expropriation is the taking of the private property by the government for public use. Under the law, the government can take the property of others and pay thru different mode of payment and in market value. In practice, even the local government are doing expropriation for the purpose of its project. However, there are cases of long and delayed payment which eventually will negate the owner of the proper just compensation. Case in point is my client in appraisal which the local government expropriated their lands for the construction of a new access road. The landowner has been offered payment which is equivalent to the amount they have declared in the tax declaration. The court process of solving

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the problem takes time and gives the owner more sleepless nights and languish in fear of no payment.

Land use There are other issues that gives limitations to the ownership. In the Republic Act 7160 or the Local Government Code of 1991, Section 447-448, states that land use planning in local level has been strengthened under the principle of subsidiarity. It mean that local governments gain responsibilities in a variety of planning fields, including development and land use planning. The Sangguniang Panglunsod will prescribe necessary limits and restrains on the use of the property within the jurisdiction of the city; adopt a Comprehensive Land Use Plan; reclassify lands within the jurisdiction of the City and enact Zoning Ordinances. Under Executive Order 71, the approval and process of subdivision plans have been devolve to the local government units. Such function has been held by the Housing and Land Use Regulatory Board. Property Taxation

In general, there are three types of taxation on real property. One is the transfer tax, the estate tax and real property taxes (RPT) account for the bulk of internally generated tax revenues, with local business taxes coming in second. For most LGUs, the tax on ownership of real property is the most significant internal source of revenue. From 2003-2007, the basic RPT together with SEF accounted for 49% of total tax revenues. All taxes on real property, taken together, accounted for 52 % of LGU tax revenues. Business taxes accounted for only 39% of LGU tax revenue (Gomez, 2010). Property valuation on the local level is market based, as per the Local Government Code. However, in the implementation the schedule of market value is very low in compare to the market value provided by the Independent Property Appraisers. In Art.6.Sec.28 (3) of the Philippine Constitution states that charitable institutions, churches and personages or convents appurtenant thereto, mosques, non-profit cemeteries, and all lands, buildings, and improvements, actually, directly, and exclusively used for religious, charitable, or educational purposes shall be exempt from taxation. This provision only shows that in terms of taxation, lands and improvements were differentiated not on its type of use but with the type of owner who uses it for religious, charitable or educational purposes. A corporation sole which consists of one person only, is vested and hold real estate and to register the same in trust for the faithful society or church for which the corporation was organized. It may acquire and register private agricultural land. Corporation sole is not an ordinary private corporation acquiring public agricultural lands. The reason for this is that the corporation sole has no nationality.

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II. Governance of Land & Real Property in the Philippines Land plays a great role in national development. Good governance of land and real property will help in the social, economic and ecological development of a society. It is a prerequisite in economic progress, social stability and sustainable development. Currently, the country has a total land area of 30 million hectares, 51 percent of which are considered forest lands, 47 percent are classified as alienable and disposable lands and about 2...