1.

1 Fundamentals of Property Ownership

1.1 Fundamentals of Property Ownership

by Wilfredo L. Segovia
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Concepts of Property Ownership
 Property – may be real estate (land, buildings..) or real property (includes real estate as well as
intangible properties). Property is also classified as “tangible” (land, buildings, cars..) or
“intangible” (patent, contract, franchise..)

 Ownership – the rights covered by the “bundle of rights”: right to possess, right to use and
enjoy, right to the fruits (natural fruits, civil, industrial fruits); right to dispose (sell, donate,
assign, exchange); right to recover; right to exclude others.

Fruits: Natural – spontaneous products of soil; Civil – rental income; Industrial – produced by
cultivation or labor.
Real Estate – refers to land and improvements thereon. “Estate” means the degree of an owner’s
interest in land.

Basic types of estate:

 Freehold – ownership is backed by title; includes “Fee simple” – absolute unrestricted estate in
perpetuity; “Fee tail” – designed to pass title to heirs; “Life estate” – ownership only as long as
grantee is alive.
 Less than Freehold – limited possession; “Estate for years” – a lease (99 years max under Civil
Code); “Tenancy” – leases or rentals; period may be specified or if not, the lessor may terminate
at will.

Kinds of Ownership: 1) Sole ownership; 2) Joint ownership or co-ownership; 3) Condominium

Rights of co-owners under Civil Code:

A co-owner may sell his rights over an undivided portion; can not sell those of others. A co-owner may
demand partition. Right to repurchase, pre-emption and redemption applies only to the extent of shares
owned.

Ownership of land - includes ownership of portions beneath the surface and above the surface, subject
to servitudes, special laws, or contract.

Hidden treasure – defined as any hidden or unknown deposit of money, jewelry, precious objects whose
lawful ownership is not shown; hidden treasurer belongs to the land owner. But the finder of hidden
treasure (not the land owner) is entitled to 50% unless he is a trespasser; the State may acquire at a just
price those of interest to science or arts;

Right of accession – means land owner also owns everything produced, incorporated, or attached
thereon.

Rules affecting land owners adjoining rivers: they will own soil deposited as accretion; but do not own
land left dry or will not lose land inundated by flood water. River beds that have dried up can be
acquired by those whose own lands are occupied by the new bed in proportion to area lost. Land owners
adjoining the old bed may acquire the same. When a river opens a new bed by natural action, the bed
shall become a public dominion.

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 1.1 Fundamentals of Property Ownership

Legal restrictions on ownership:

Zoning laws, subdivision regulations, building code, eminent domain, escheat, taxation.

1. Power of Eminent Domain - power to take private property for public use upon just compensation.
2. Escheat - reversion of property to the State due to intestate death of an owner with no heir.
3. Police Power of the State
 Taxation - power of the State to impose and collect tax and other charges on the real estate.
 Zoning laws – regulations of the LGU governing land use.

4. Voluntary or contractual restrictions:

4.1 Lease Contract - temporary surrender of the rights to possess, use and enjoy to lessee or renter.
4.2 Right of Way Easement - given to an owner of an adjoining land to pass or have access.
 Servient estate – the property owner giving the right of way
 Dominant estate – the entity enjoying the right of way.

4.3 Usufruct - transfer to another person of the right to enjoy the fruits of the property.
4.4 Use Restrictions – restrictions imposed as part of the contract to sell.

Documents of Ownership
Title – a generic word which means “proof of ownership”; includes the “muniments” of ownership such
as tax declaration, realty tax payments, deed of sale, and the Original Certificate of Title or the Transfer
Certificate of Title. Philippine titling system is based on the Torrens system developed in Australia.
Quieting of title – means an action brought to court to remove a cloud or question as to ownership of
property; a plaintiff must have documents but need not be in possession to bring this action.

Modes of Acquiring Title

1. Private transfer: by sale, assignment, donation, or exchange.
2. Succession: acquisition of ownership from an owner who has died.
3. Public grants: acquisition of alienable agricultural land.
a) Free patents and homestead patents given by DENR.
b) Emancipation patents (now CLOA – Certificate of Land Ownership) – originally established by
PD 27, continued by RA 6657 (CARP 1988) and various extensions.
c) Reclamation – under Public Estates Authority; government still owns reclaimed land but may pay
reclaimers in terms of portions of the land reclaimed.
d) Adverse possession or prescription – applies to alienable agricultural land, continuously occupied
by a citizen.
> Ordinary prescription – 10 years possession in good faith, with just title (muniments).
> Extraordinary prescription – 30 years continuous possession (bad faith).
e) Accretion due to alluvium, changes in the natural river bed.

4. Involuntary Events:
Expropriation (eminent domain), execution by the sheriff to satisfy judgment, foreclosure of
mortgaged property.

Property Rights under Philippine Law

1987 Constitution: Article IV, Section 1. The following are citizens of the Philippines:

1) Those who are citizens of the Philippines at the time of the adoption of this Constitution;

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 1.1 Fundamentals of Property Ownership

2) Those whose fathers or mothers are citizens of the Philippines;

3) Those born before January 17, 1973, of Filipino mothers, who elect Philippine citizenship upon
reaching the age of majority; and
4) Those who are naturalized in accordance with law.

Article IV, Section 2. Natural-born citizens are those who are citizens of the Philippines from birth
without having to perform any act to acquire or perfect their Philippine citizenship. Those who elect
Philippine citizenship in accordance with paragraph (3), Section 1 hereof shall be deemed natural-born
citizens.

Filipino citizens can acquire --

a) Alienable lands of the public domain – own up to 12 hectares; lease up to 500 hectares.

What is “land of the public domain”? – Public domain is classified as agricultural, forest (or timber),
mineral and national parks. Only agricultural is alienable. Modes of acquiring title to alienable lands
of the public domain – by sale, homestead patent, sales patent, free patent or through uninterrupted
possession for a period of time under a claim of title.

What is “land of the public dominion”? – Under Art. 420 of the Civil Code, public dominion are lands –
(a) For public use as roads, rivers, etc; b) Lands intended for some public service. All other lands are
consdiered “patrimonial property”.

b) Private real estate property – no limitation.

Former natural born Filipino citizens may acquire land

(Section 7, Article XII of 1987 Constitution) subject to special laws:

 BP 185: for residential purpose – 1,000 sqm urban or 1 hectare rural;

 RA 7042 as amended by RA 8179 – for business purpose – 5,000 sqm urban or 3 hectares rural.

Former Filipinos can regain citizenship under RA 9225: Dual Citizenship Law of 2003 - natural born
citizens of the Philippines who were naturalized as citizens of another country may re-acquire Philippine
citizenship by swearing allegiance to the Philippine.

Foreigners - can not acquire real property in the Philippines except by --

1) Hereditary succession ;
2) Acquisition of real property under the 1935 Philippine Constitution;
3) Purchase of not more than 40% of the units in a condominium project in the Philippines.

> Under PD 471, foreigners can lease land 25 years renewable 25; and under RA 7652, if a foreign
investor, 50 years renewable 25.

Rights and restrictions of private corporations.

Private Corporations or associations organized under the laws of the Philippines with 60% capital owned
by Filipinos are entitled to acquire and own private lands but not in excess of 1,024 ha. If leasing, not to
exceed 2,000 ha. They may hold alienable agricultural lands of the public domain only by lease for a
period not to exceed 25 years renewable for not more than 25 years and not to exceed 1,000 hectares.

Deeds – a written instrument used to transfer ownership of land and/or improvements. Deeds must have:
1) Grantor and grantee; 2) Word of conveyance; 3) Signature of grantor and at least 2 witnesses; 4)
Notarization.

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 1.1 Fundamentals of Property Ownership

Basic requisites for the validity of contracts to buy/sell real property –

1) Consent of the contracting parties;
2) Object certain which is the subject matter of the contract;
3) Cause or consideration of the obligation which is established.

Contract is void if consent from -- (a) un-emancipated minor or those persons below 18 years old; or (b)
insane or demented persons or deaf-mutes who do not know how to write; (Art. 1327, New Civil Code).
If consent is given through mistake, violence, intimidation, undue influence or fraud, the contract will be
voidable or valid until annulled (Art. 1330 NCC).

Obligations of a property owner in the Philippines

1) Pay annual Real Property Tax (RPT) and Special Education Fund Tax (SEFT);
2) Comply with the Building Code on its requirements;
3) Observe Subdivision Regulations in case of subdivision lot;
4) Comply with zoning regulations of the LGU;
5) Comply with Philippine laws on Eminent Domain, Escheat, Easement of Right of Way, taxation, etc..
6) In case of condominium, unit owners are obliged to –
 Pay RPT and SEFT on his unit; Share in RPT and SEFT on common area and land;
 Get insurance on the unit; Share in the payment of insurance premium on the common areas;
 Comply with use restrictions; pay condominium and association dues and assessments.

Property Relations between Spouses (E.O. 209, Family Code, July 6, 1987)
1. Types of relationships: Absolute Community, Absolute Separation, Conjugal Partnership of
Gains. Before marriage, spouses may choose from three (3) types of relationships by signing a
public instrument (pre-nup) to be registered in the local civil registry. If none is made, and the
marriage occurred after August 4, 1988, Absolute Community governs. :

2. Definition:
 Absolute Community – co-ownership of all properties acquired before and during marriage, except
for “exclusive properties” which are : those acquired by gratuitous title during marriage, properties
for personal use (except jewelry), and properties acquired before marriage by a spouse with legitimate
descendants by a former marriage.
 Absolute Separation – ownership of all properties acquired before or during marriage are separate.
 Conjugal Partnership of Gains – only those properties acquired during marriage are conjugal; those
acquired before marriage are still separate; those acquired during marriage by gratuitous title, by
redemption, barter or exchange with one’s exclusive property or purchased with exclusive money are
also separate.
3. Special Notes:
 Gambling loses not chargeable to community property, winnings are part of it.
 Spouses jointly administer community property, but in disagreement husbands decide.
 Termination of conjugal partnership: death, judicial decree of separation, marriage annulment.
 Causes for judicial separation of property: judicially declared absentee, sentence to jail long-term,
abandonment, separation at least one year, abuse of power.
 Living-in couples: co-ownership rules prevail if both have a capacity to marry; if not, only the
property they acquired while living together are common. [ ]

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