Can a foreigner legally buy and own land (house or apartment) in the Philippines?
As frequently asked a question as they get. Due to its natural beauty the Philippines is a country one is often quickly captivated by. Given the relatively low real estate prices, especially in the provinces, many visitors to these stunning islands spontaneously declare a will to return, buy land, build a house or invest in a holiday resort. As a result of a level headed verification such statements most often remain what they semantically are – mere declarations – for various reasons. One of the fundamental ones being legal regulations and formal obstacles associated with real estate transactions.
It turns out that the purchase of land in the Philippines is not a straightforward matter. The Government is well aware how appealing the local offer may be to foreign investors and so to control massive sale of privately owned land to foreigners some far-reaching restrictions are in place.
The basic regulation is that the exclusive right to own land in the Philippines is reserved solely for the Filipino citizens and Philippine corporations. Such reservation is the provision of the Philippine Constitution adopted in 1987. This means that foreign nationals and foreign companies have no right to buy and own land in the Philippines in their own name. Potential investors from abroad need to realize that attempts to circumvent this fundamental principle will be associated with greater or lesser risk depending on their closeness to legality. Willful violations of the above prohibitions are a criminal offence.
Please note: We are not lawyers nor have we ever bought or attempted to purchase real estate property in the Philippines. Please treat the below as a set of personal observations and casually acquired knowledge. Before taking steps into the field of real estate I recommend consultations with trusted lawyers as well as a thorough independent study of the real estate law and inheritance law in the Philippines.
4 ways to buy real estate property in the Philippines
1. Purchase of land in the Philippines in someone else’s name.
Simple as it may sound, this method carries significant risk. You arrive at an attorney’s office with a trustworthy Filipino who buys the property outright with your money but in their name. Then on the basis of a gentlemen’s agreement you are allowed to utilize land that is formally theirs as your own. Not recommended – apart from legal issues, like anywhere else you can too easily be taken to the cleaners.
You may try to reduce the risk if your long-term girlfriend or wife acts as a dummy but even then the scheme is not fail proof. The Philippine inheritance law is ambiguous and in the event of an unfortunate incident resulting in the necessity of succession your dummy’s inheritance may be split between many members of the often large families, which spells complications.
As a means of security for themselves actual buyers may attempt to convince the substitute to sign a blank contract of sale of subject land in hope it will facilitate transfer of ownership to a more reliable and cooperative dummy in case of problems. Again, legality of such a document will be highly questionable.
Some are prepared to take this calculated risk to purchase inexpensive property fully aware of possible and likely adverse ramifications. But the method is essentially dodgy – The Philippine Anti-Dummy Law prohibits such arrangements and violators risk steep fines or even imprisonment.
Noteworthy exception: the purchase of land on behalf of own child, especially if a foreign buyer remains in a happy relationship (best if marital) with the child’s mother and has successfully dealt with permanent residence issues. Such an arrangement seems the most reasonable in this section and as a legit solution should not raise alarm at any office. (edit: some comments received rule out this option as buyer needs to be of legal age)
2. Lease of land in the Philippines. Renting land in the Philippines
The second option is a long-term lease of land in the Philippines. Formally a foreign leaseholder does not become the owner of the property but a kind of long-term tenant with the right to develop the land provided building permit, fencing permit and other necessary documentation is obtained.
Lease agreement can in theory extend for as long as 25 or even 50 years for certain commercial endeavors and there are legal provisions in place for further contract renewals. Please note however that lease is also covered by legislation and the law is ambiguous here. A suspiciously long lease agreement may be regarded as bearing the marks of actual transfer of property ownership rights and as such declared void by the court.
3. How to buy of land in the Philippines by a company or corporation. Taking minority interest in Philippine corporations.
This option seems to make a lot of sense. I recently had the pleasure of speaking to a foreigner residing here for several years who just happened to be a small time developer and entrepreneur rightly proud of his work. In the course of a few years he bought, built, sold, leased and rented several properties and yet sharing knowledge regarding the matter was not a revelation of insider secrets as it is often is for the likes of him.
So how can you buy land in the Philippines? Well, according to my interlocutor’s informed testimony ownership of land in the Philippines is legally restricted to citizens of the country, period. Except that we already know this much. However foreign nationals and foreign companies can own minority interest of up to 40% in companies considered Philippine nationals thus creating a corporation.
As long as Philippine ownership constitutes at least 60% of the company, it is considered a Philippine national and can legally own land even if the said 60% is divided between a number of partners. Of course the law here provides for a legitimate business enterprises and not fake legal identities established barely in order to circumnavigate property law. Otherwise an investor is threading on thin ice again.
4. How to buy a condominium unit or apartment in the Philippines. Philippine Condominium Act.
Finally some encouraging information here. A foreign national can legally purchase and own a flat, condo or apartment in apartment buildings or condominium projects throughout the Philippines.
A residential condominium is a multifamily complex built on land jointly owned by residents and usually managed by an association of owners. Apart from individually owned units it usually comprises communal areas such as parking, recreational space, swimming pool etc. In the Philippines condominiums are often modern high rise apartment buildings or luxurious gated and guarded communities consisting of detached single family houses. Condominium ownership can also be used for non-residential land uses such as offices, hotels or retail outlets.
According to Philippine Condominium Act if 60% of a condominium is owned by Philippine nationals or companies the remaining 40% may be purchased by foreigners with full property rights (land registry title deed). A simple and elegant option outside of murky waters or legal break dance. Worth considering.
This is not a jerry-written entry but as I mentioned above we are not experts. Your comments are most welcome particularly if you are familiar with any of the above practices or would like to share your insight. Also, if factual errors or inaccuracies need rectifying, please do. Please share if you find this post useful.