Property buying checklist
It is believed by some that real estate is the best investment one can make. Owning a home could be one of the fastest paths to wealth.
Even when the real estate (property) purchased is not for personal use but for business purposes, purchasing and owning the property is still preferable to renting, considering that even as the business may undergo ups and downs, the property asset could continue to increase in value.
For sure, there were instances in the past when political unrest or financial crises have caused a plunge in property prices. However, when the crisis passed, valuations not only recovered, they even surpassed pre-crisis levels.
Unfortunately, there are buyers who, after transacting with the seller of the property, are surprised to discover problems which prevent them from obtaining complete ownership, transferring the of title, or taking possession and custody of their property investment.
Accordingly, those looking to purchase real estate or property, referred to here as the land and the structure built on the land, excluding condominium units, whether for personal use or for business, may find it helpful to have a checklist to confirm that they have everything they need.
Due diligence is recommended for buyers looking to purchase property, regardless of whether it is a big or small purchase. Here is a checklist of the usual essential documents:
1. Transfer (or Original) Certificate of Title (TCT)
2. Tax declaration
3. Government-issued identification cards of sellers and buyers
4. Tax Identification Numbers (TIN) of the sellers and buyers
5. Special power of attorney or secretary’s certificate
6. Subdivision plan
7. Tax mapping plan
8. Lot plan
9. Real property tax payments and Tax Clearance Certificate
10. Subdivision or homeowners’ certification that there are no outstanding or unpaid assessments or dues
11. Statements of accounts and proof of payment for utilities (water, electricity, telephone, internet and others)
12. Permits (occupancy, electrical, sanitary, mechanical, fire permits, building, blue prints and others)13. Other permits such as DENR permits (Environmental Compliance Certificate or Certificate of Non-Coverage, Permit to Operate for Air Pollution, Hazardous Waste Generator Registration, and Civil Aviation Authority Clearance and others)
14. Zoning regulation and locational clearance 15. BIR zonal value
After the buyer has seen and inspected the property for sale and decided they are interested in buying it, they should commence with due diligence to check the title and the condition of the property as well as the capacity of the seller to dispose, by requesting for and obtaining the documents listed above.
The Transfer Certificate of Title (Certificate of Title) is evidence that the seller holds the title to the property being sold. It provides some basic information such as the registered owner’s name, civil status and address, technical description and the size of the land, date of issuance of the title, the previous title number, and other annotations.
Each title consists of two original copies, one with the Registry of Deeds of the city or municipality (local government) where the property is located and the other with the owner of the property, which is called Owner’s Duplicate Original Transfer Certificate of Title. (Chapter IV, Presidential Decree No. 1529).
The buyer should also obtain a copy of the Tax Declaration of the property which provides information on the owner and the property from the Tax Assessor’s Office of the local government where the property is located.
If there is a structure built on the land, there will also be a tax declaration issued covering the structure. (Title II, Local Government Code of the Philippines, Republic Act No. 7160).
Buyers should read all pages of the Certificate of Title and Tax Declarations. The documents will show what, if any, annotations are printed on the title such as claims, liens, mortgages, disputes, or conditions, limitations and restrictions on the use or disposition of the property. Depending on whether there are annotations, more documents may have to be obtained for the due diligence.
The buyers and sellers should also exchange their government-issued identification documents, and those acting through a representative should prepare a Special Power of Attorney, for individuals, and Secretary’s Certificate for corporations to evidence such authority.
Aside from these, the buyers and sellers should also provide their respective Tax Identification Numbers early in the process for the parties to check that everything is up to date.
A common question is: will a reading of the Certificate of Title or Tax Declaration allow the buyer to determine the exact address of the property covered by the title to enable one to find the location of the property? The answer is no.
These documents usually only indicate the block, lot, and plan numbers. Though sometimes, the Tax Declaration will indicate the name of the street where the property lies.
That is why, to verify if the Certificate of Title and Tax Declaration actually pertain to the land being sold, the buyer should obtain a copy of the subdivision plan from the Land Registration Authority (Section 50, Presidential Decree 1529) as well as the tax mapping plan from the Tax Assessor’s Office of the local government and cross-reference it with the lot, block and plan number as indicated by the title’s technical description. (Local Government Code of the Philippines).
Buyers are advised to have an architect or engineer prepare a lot plan that will show the shape and dimensions of the land.
After confirming the address, shape and dimensions of the property, buyers should also check the zonal value for the property set by the Bureau of Internal Revenue at www.bir.gov.ph as taxes assessed are based on the selling price or zonal value, whichever is higher.
The Local Government Code empowers local governments to assess and collect real property taxes on land, buildings, equipment and machineries that are installed on the land, such as generators, elevators and the like. (Title II, Local Government Code of the Philippines, Republic Act No. 7160)
Failure to pay the real property taxes allows for the levy and public auction of the property and the responsibility to pay the real property taxes attached to the property itself such that any new owner shall be responsible to settle any unpaid taxes. Accordingly, the buyer should obtain the receipts of payment of the real property taxes and the Tax Clearance Certificate issued by the City or Municipal Treasurer.
Buyers must also check the payment of association dues and assessments by villages or subdivisions, bills for utilities such as electricity, water, telephone, and the like which if unpaid, will make it difficult for the new owner to continue the service or transfer of the registrations to their name.
For land with improvements, buyers should also obtain copies of permits for occupancy, electrical, sanitary, mechanical, fire, and building , as well as the blueprints and plans. Other relevant permits for commercial properties are the zoning or locational clearance issued by the local government and permits from the DENR.
Agricultural properties may need certifications and authorizations from the Department of Agrarian Reform and properties that were awarded to beneficiaries may require approvals from the National Housing Authority.
Documents obtained in this due diligence process should be originals or certified true copies.
Finally, to ensure that the property acquisition process goes smoothly, it is a good idea for buyers to seek professional assistance to assist them in the process of due diligence and in the entire transaction, to ensure that one’s investment is secured and protected.
The author, Atty. John Philip C. Siao, is a practicing lawyer and Co-Managing Partner of Tiongco Siao Bello & Associates Law Offices, a Professor at the MLQU School of Law, and an Arbitrator of the Construction Industry Arbitration Commission of the Philippines. He may be contacted at [email protected] The views expressed in this article belong to the author alone.
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