Filipinos, foreigners, and real estate in the Philippines
Filipinos, foreigners, and real estate in the Philippines
These are the basic rules on land ownership:
A Filipino citizen can own land in the Philippines.
A foreigner cannot own land unless he is a former Filipino citizen or he happened to inherit that land.
For a corporation to own land, at least 60% of that corporation’s capital must be owned by Filipino citizens.
Can a foreigner own property in the Philippines?
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Section 7, Article XII of the 1987 Constitution famously restricts land ownership to Filipino citizens, but Section 8 provides an interesting exception to this. Former Filipino citizens who have taken foreign citizenship can still own land in the Philippines even before reacquiring Filipino citizenship. Section 8 provides:
SECTION 8. Notwithstanding the provisions of Section 7 of this Article, a natural-born citizen of the Philippines who has lost his Philippine citizenship may be a transferee of private lands, subject to limitations provided by law.
Former Filipinos can own land.
The limitations provided by law are fairly generous:
If the land is for residential use in urban areas, formerly natural born citizens can still own up to 1,000 square meters of land. This goes up to one hectare if the land is rural (Batas Pambansa Blg. 185).
If the land is for commercial use, formerly natural born citizens can own up to 5,000 square meters of urban land. This goes up to 3 hectares if the land is rural (Republic Act No. 8179).
Former Filipinos have some restrictions to land ownership.
Foreigners cannot own land through purchase.
The Supreme Court has explained that since the ban on foreigners is intended to preserve the nation’s land for future generations of Filipinos, that aim is achieved by making lawful the acquisition of real estate by aliens who became Filipino citizens by naturalization or those transfers made by aliens to Filipino citizens. As the property in dispute is already in the hands of a qualified person, a Filipino citizen, there would be no more public policy to be protected. The objective of the constitutional provision to keep Philippine lands in Filipino hands has been achieved.[1]
You may have heard that there are restrictions on foreigners’ ownership of condominiums. The truth is that foreigners can own condominium units outright. The restriction against foreigners applies to ownership of the land on which the condominium complex is built, and not directly on their ownership of individual condominium units.
What is a condominium unit?
Foreigners can own condominium units.
“Unit” means a part of the condominium project intended for any type of independent use or ownership, including one or more rooms or spaces located in one or more floors (or part or parts of floors) in a building or buildings and such accessories as may be appended thereto.[2]
However, there is a restriction on the share of the condominium corporation[3] which foreigners can own (only up to 40%) if the condominium corp. itself owns the land on which the building is built,[4] but the developers have usually taken this restriction into account in their apportioning of the property.[5]
Foreigner ownership of a condominium corporation is limited to 40%.
These calculations have to be made because the law provides that no condominium unit can be sold without at the same time selling the corresponding amount of rights, shares or other interests in the condominium management body, the Condominium Corporation; and no one can buy shares in a Condominium Corporation without at the same time buying a condominium unit. The law expressly allows foreigners to acquire condominium units and shares in condominium corporations up to not more than 40% of the total and outstanding capital stock of a Filipino-owned or controlled corporation. Under this set up, the ownership of the land is legally separated from the unit itself. The land is owned by a Condominium Corporation and the unit owner is simply a member in this Condominium Corporation. As long as 60% of the members of this Condominium Corporation are Filipino, the remaining members can be foreigners.[6]
References:
[1] Borromeo vs. Descallar, G.R. No. 159310, February 24, 2009
[2] Section 3(b), Republic Act No. 4726, The Condominium Act
[3] To enable the orderly administration over these common areas which are jointly owned by the various unit owners, the Condominium Act permits the creation of a condominium corporation, which is specially formed for the purpose of holding title to the common area, in which the holders of separate interests shall automatically be members or shareholders, to the exclusion of others, in proportion to the appurtenant interest of their respective units. City Treasurer of Makati City vs. BA Lepanto Condominium Corporation, G.R. No. 154993, October 25, 2005
[4] See Securities and Exchange Commission - Office of the General Counsel Opinion No. 08-27, November 27, 2008
[5] Where the common areas in a condominium project are held by a corporation, no transfer or conveyance of a unit shall be valid if the concomitant transfer of the appurtenant membership or stockholding in the corporation will cause the alien interest in such corporation to exceed the limits imposed by existing laws. (Section 5 of R.A. 4726, The Condominium Act)
[6] Hulst vs. PR Builders, Inc., G.R. No. 156364, September 25, 2008