Deed of sale 101

(First of two parts)

Real estate investing, even on a very small scale, remains a tried and true means of building an individual’s cash flow and wealth,” said Robert Kiyosaki, an American businessman and the author of the best-selling book, “Rich Dad, Poor Dad.”

The Philippines is following suit to Kiyosaki’s adage. In a report by Business World entitled “State of the Philippine Real Estate,” the country’s real estate industry has been steadily growing for decades because of the increase in demand for residential and commercial properties. Such demand is driven by, among others, the rising urban population growth, housing needs of persons in the business process outsourcing industry and remittances from overseas Filipino workers.

“Buoyed by a strong macroeconomic environment, cash-laden investors and a full pipeline of projects scheduled to be built over the next decade, the real estate sector will continue to exhibit strong growth in the coming years,” reported research publishing firm Oxford Business Group. “A steady stream of new residential and mixed-use projects is under way at locations across the Metro Manila area, as well as other fast-growing secondary cities around the country.”

In fact, according to the Global Property Guide, the take-up of pre-sold condominium units throughout Metro Manila in 2017 rose by 52,600 units, or about 24 percent more than in 2016.

As purchasing your first condominium unit or house and lot is nowadays a wise investment, keep in mind the following when executing the corresponding deed of sale:

Under a contract of sale, one of the contracting parties, the seller, obligates himself to transfer the ownership of and to deliver a determinate thing, such as said unit or house and lot, while the other, the buyer, pays therefor a price certain in money or its equivalent.

Sale, by its very nature, is a consensual contract because it is perfected by mere consent of the parties thereto.

From the moment of perfection of a contract of sale, the parties may reciprocally demand performance of their respective obligations.

Under Article 1191 of the Civil Code, should one of the parties fails to fulfill with his obligation, the injured party may choose between its fulfillment and the resolution thereof, with the payment of damages in either case.

The perfection of a contract of sale, however, does not automatically transfer to the buyer the ownership of real property.

In San Lorenzo Development Corp. v. Court of Appeals, the Supreme Court held that sale is not a mode, or the legal means by which ownership is created, transferred, or destroyed, but a title. Thus, sale by itself does not transfer or affect ownership; the most that sale does is to create the obligation to transfer ownership.

It is tradition or delivery of the subject property, as a consequence of sale, that actually transfers ownership.

In this regard, the property subject of a contract of sale is delivered when it is placed in the control and possession of the buyer. Delivery of real property may occur by: (a) the execution of a public instrument, particularly a notarized deed of sale, unless the contrary appears therein; or (b) mere consent of the parties, if the property cannot be transferred to the buyer’s possession at the time of sale, if the latter already possessed it for any other reason.

A contract of sale is different from a contract to sell.

While in a contract of sale, the title to the property passes to the buyer upon delivery thereof, in a contract to sell, ownership is reserved in the seller and is not to pass to the buyer until full payment of the purchase price. Thus, despite the execution of a contract to sell, as well as the full payment of the purchase price, the prospective buyer cannot seek the reconveyance of the subject property sold by the prospective seller to a third person.

The seller does not need to be the owner of the subject property at the time of the perfection of the contract of sale.

In Alcantara-Daus v. De Leon, the Supreme Court held that it is during the delivery of said property that the law requires the seller to have the right to transfer ownership thereof. Thus, a perfected contract of sale cannot be challenged on the ground of the seller’s non-ownership of the thing sold at the time of the perfection of the contract.