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Leasing of Real Estate Property

Leasing land in the Philippines on a long-term basis is an option for foreigners, expats or foreign corporations with more than 40% foreign equity. Under the Investor’s Lease Act of the Philippines, they may enter into a lease agreement with Filipino landowners for an initial period of up to 50 years renewable once for an additional 25 years.

Land Ownership and Property Acquisition in the Philippines for Foreigners

For Foreigners

Ownership of land in the Philippines is highly-regulated and reserved for persons or entities legally defined as Philippine nationals or Filipino citizens. For this purpose, a corporation with 60% Filipino ownership is treated as a Philippine national.

Foreigners or expats interested in acquiring land or real property through aggressive ownership structures must consider the provisions of the Philippines’ Anti-Dummy Law to determine how to proceed. A major restriction in the law is the restriction on the number of foreign members on the Board of Directors of a landholding company (which is limited to 40% foreign participation). Another concern is the possible forfeiture of the property if the provisions of the law is breached.

Exceptions to the restriction on foreign acquisition of land in the Philippines are the following:

Acquisition before the 1935 Constitution
Acquisition through hereditary succession if the foreigner is a legal or natural heir
Purchase of not more than 40% interest in a condominium project
Purchase by a former natural-born Filipino citizen subject to the limitations prescribed by law (natural-born Filipinos who acquired foreign citizenship is entitled to own up to 5,000 sq.m. of residential land, and 1 hectare of agricultural or farm land).

Land Ownership as a Corporation

Foreign nationals, expats or corporations may completely own a condominium or townhouse in the Philippines. To take ownership of a private land, residential house and lot, and commercial building and lot, they may set up a domestic corporation in the Philippines. This means that the corporation owning the land has less than or up to 40% foreign equity and is formed by 5-15 natural persons of legal age as incorporators, the majority of which must be Philippine residents.

Leasing of Real Estate Property

Leasing land in the Philippines on a long-term basis is an option for foreigners, expats or foreign corporations with more than 40% foreign equity. Under the Investor’s Lease Act of the Philippines, they may enter into a lease agreement with Filipino landowners for an initial period of up to 50 years renewable once for an additional 25 years.

Owning Houses or Buildings

Foreign ownership of a house or building in the Philippines is legal as long as the foreigner or expat does not own the land on which the house was built.
Owning Condominiums or Townhouses

The Condominium Act of the Philippines (R.A. 4726) expressly allows foreigners to acquire condominium units and shares in condominium corporations up to 40% of the total and outstanding capital stock of a Filipino-owned or controlled condominium corporation.

However, there are a very few single-detached homes or townhouses in the Philippines with condominium titles. Most condominiums are high-rise buildings.

Being Married to a Filipino Citizen

If holding a title as an individual, a typical situation would be that a foreigner married to a Filipino citizen would hold title in the Filipino spouse’s name. The foreign spouse’s name cannot be on the Title but can be on the contract to buy the property. In the event of the death of the Filipino spouse, the foreign spouse is allowed a reasonable amount of time to dispose of the property and collect the proceeds or the property will pass to any Filipino heirs and/or relatives.

Land Ownership and Property Acquisition in the Philippines for Filipino

Property Purchase by a former natural-born Filipino citizen subject to the limitations prescribed by law (natural-born Filipinos who acquired foreign citizenship is entitled to own up to 5,000 sq.m. of residential land, and 1 hectare of agricultural or farm land).

Filipinos who are married to aliens and able to retain their Filipino citizenship (unless by their act or omission they have renounced their Filipino citizenship.

For Former Natural-Born Filipino Citizens

Any natural-born Philippine citizen who has lost their Philippine citizenship may still own private land in the Philippines (up to a maximum area of 5,000 square meters in the case of rural land). In the case of married couples, the total area that both couples are allowed to purchase should not exceed the maximum area mentioned above.
Former Filipino Citizens, Balikbayans, and OFWs

Former natural-born Filipinos who are now naturalized citizens of another country can buy and register, under their own name, land in the Philippines (but with limitations in land area). However, those who avail of the Dual Citizenship Law in the Philippines can buy as much as any other Filipino citizen.

Under the Dual Citizenship Law of 2003 (RA 9225), former Filipinos who became naturalized citizens of foreign countries are deemed not to have lost their Philippine citizenship, thus enabling them to enjoy all the rights and privileges of a Filipino citizen regarding land ownership in the Philippines.
How to Gain Dual Citizenship

If you are in the Philippines, file a Petition for Dual Citizenship and Issuance of Identification Certificate (pursuant to RA 9225) at the Bureau of Immigration (BI) and for the cancellation of your alien certificate of registration.
Those who are not BI-registered and overseas should file the petition at the nearest embassy or consulate.

Requirements:

Birth Certificate authenticated by the Philippine National Statistics Office (NSO)
Accomplish and submit a Petition for Dual Citizenship and Issuance of Identification Certificate to a Philippine embassy, consulate or the Bureau of Immigration
Pay a $50.00 processing fee, schedule, and take an “Oath of Allegiance” before a consular officer
The Bureau of Immigration in Manila receives the petition from the embassy or consular office. The BI issues and sends an Identification Certificate of citizenship to the embassy or consular office.

If a former Filipino who is now a naturalized citizen of a foreign country does not want to avail of the Dual Citizen Law in the Philippines, he or she can still acquire land based on Batas Pambansa (BP) 185 and RA 8179, but limited to the following:

For Residential Use (BP 185 – enacted in March 1982):

Up to 1,000 square meters of residential land
Up to one (1) hectare of agricultural of farmland

For Business/Commercial Use (RA 8179 – amended the Foreign Investment Act of 1991):

Up to 5,000 square meters of urban land
Up to three (3) hectares of rural land

Land Ownership as a Corporation

Foreign nationals, expats or corporations may completely own a condominium or townhouse in the Philippines. To take ownership of a private land, residential house and lot, and commercial building and lot, they may set up a domestic corporation in the Philippines. This means that the corporation owning the land has less than or up to 40% foreign equity and is formed by 5-15 natural persons of legal age as incorporators, the majority of which must be Philippine residents.

Limitations on Right of Ownership

1) Those imposed in general by the State in the exercise of the power of taxation, police power, and power of eminent domain.
2) Those imposed by law such as legal easement, requirement of legitimate succession, zoning, building code, rent control, urban and agrarian reform, subdivision regulations, escheat.
3) Those imposed by the grantor of the property on the grantee by contract, such as donation, last will, or usufruct.
4) Those imposed by the owner himself, such as voluntary easement, lease, mortgage.

SURFACE, SUBSURFACE AND AIR RIGHT
Land, in its legal signification, extends from the surface downwards to the center of the earth and extends upwards indefinitely to the skies. The surface and subsurface of rights of an owner entitle him to construct thereon any works or make any plantations and excavations without detriment to servitudes and special laws. Air right is the right of an owner to use and control the air space over his land subject to the requirements of aerial navigation, laws, or contract.

RIGHT TO HIDDEN TREASURE
Hidden treasure belongs to the owner of the land, building, other property on which it is found. When the discovery is made on the property of another, or of the State or any of its subdivisions, and by chance, one-half of the treasure shall be allowed to the finder. If the finder is a trespasser, he shall not be entitled to any share of the treasure. If the things found be of interest to science or arts, the State may acquire them at their just price, which shall be divided in conformity with the rule above stated. Hidden treasure, for legal purpose, is understood to be any hidden unknown deposit of money, jewelry, or other precious objects, the lawful ownership of which does not appear.

RIGHTS OF ACCESSION
1) In General – The ownership of property gives the right by accession to everything which is produced thereby, or which is incorporated or attached thereto, whether naturally or artificially.
2) With Respect to Produce of Property – To the Owner belongs the:
a) Natural fruits – the spontaneous product of the soil
b) Industrial fruits – those produced by land cultivation or labor
c) Civil fruits – the rental income of buildings and /or lands
3) With Respect to Immovable Property:
a) The owner of the land on which anything has been built, sown or planted in good faith shall have the right:
aa) To appropriate as his own the works, sowing or planting after payment of indemnity provided by law, or
bb) To oblige the builder or planter to pay the price of the land. However, the builder of planter cannot be obliged to pay for the land if its value is considerably more than that of the building or planting. In such case, he shall pay reasonable rent if the owner does not choose to appropriate the building after proper indemnity. The parties shall agree on the terms of the lease and in case of disagreement, the court shall fix the terms thereof.
b) The owner of the land on which anything has been built, planted or sown
In bad faith may:
aa) Demand the demolition of the work or removal of the planting or sowing at the expense of the builder or planter, or
bb) compel the builder or planter to pay the price of the land and the sower, the proper rent. The landowner is also entitled to damages from the builder planter or sower.
cc) To the owners of land adjoining the banks of rivers belong the accretion which they gradually receive from the effects of the current of the water.
dd) Whenever a river, changing its course by natural causes, opens a new bed through a private estate, the new bed shall become a public dominion.

Modes of acquiring title

Private Grant –voluntary transfer or conveyance of private property by a private owner, such as sale or donation.

Public Grant – acquisition of alienable lands of the public domain by homestead patent, free patent, sales patent, or other government awards.
Involuntary Grant – acquisition of private party against the consent of the former owners, such as foreclosure sale, execution sale, or tax sale
Inheritance – acquisition of private property through hereditary succession
Reclamation – filling of submerged land, subject to existing laws and government regulations.

Accretion – acquisition of more lands adjoining the banks of rivers due to the gradual deposit of soil as a result of the river current
Prescription – acquisition of title by actual, open, continuous, and uninterrupted possession in the concept of owner for the period required by law.

Regalian Doctrine of Property Ownership

REGALIAN DOCTRINE OF PROPERTY OWNERSHIP – is a legal principle that holds that all natural wealth – agricultural, forest, timber and mineral lands of the Public Domain and all other natural resources belong to the State. Thus, even if a private person owns the property where minerals are discovered, his ownership does not give him the right to extract or utilize said minerals without permission from the State to which such minerals belong.

“Regalian” comes from the root word “regal” – meaning royal or royalty. It is explained in the adage that: “Everything in the country without a registered owner is owned by the State.” It is closely related to the Latin term “Res Nullius” which got its roots from the term “res” meaning things and “nullius” which means without an owner. “Res Nullius” therefore means things without an owner. Examples: fish in the ocean, wild animals, plants in the wild forests, etc.

Since everything must have an owner, if there are no private claimants or owners, then that particular property is presumed to be owned by the State. Likewise, when a person dies without any heir, then the State succeeds to the estate of the deceased.

SOCIAL CONCEPT OF PROPERTY OWNERSHIP (Obligation of the Owner). Pertinent provisions related to this concept are:

1. The State shall promote social justice to ensure the dignity, welfare and security of all the people. Towards this end, the State shall regulate the acquisition, ownership, use, enjoyment, and disposition of private property, and equitably diffuse property ownership and profits.

2. The rights of the individual impose upon him the correlative duty to exercise them responsibly and with due regard for the rights of others.

Right of First Refusal

What is the Right of First Refusal?

In the event that a condominium unit owner (Selling Unit Owner) wishes to sell, assign or transfer his unit or rights thereto, he shall first offer such unit (Offered Unit) to the tenant (if unit is rented) and other owners of units in the project (Other Unit Owners) through a written notice to the Condominium Corporation addressed to the Corporate Secretary specifying the price, terms and conditions of his offer.

What is the legal basis of the Right of First Refusal?

The legal basis of the Right of First Refusal is the Articles of Incorporation and By Laws, and Republic Act No. 4726 (The Condominium Act). The Right of First Refusal is legal and binding.

What does the relevant provision in Republic Act No. 4726 (The Condominium Act) state?

The relevant provision of Republic Act No. 4726 (The Condominium Act) is Section 6, (g) and it states:

“SECTION 6. Unless otherwise expressly provided in the enabling or master deed or the declaration of restrictions, the incidents of a condominium grant are as follows:

(g) Each condominium owner has also the absolute right to sell or dispose of his condominium unless the master deed contains a requirements that the property be first offered to the condominium owners within a reasonable period of time before the same is offered to outside parties;”

Where are unit owners/members informed about the Right of First Refusal?

For the reference of the unit owners/members, the Right of First Refusal is contained in the condominium Handbook under the section on House Rule and Regulation on the Disposition of Units and Right of First Refusal.

Sources:

1.Articles of Incorporation and By Laws
2.Annex A of the Articles of Incorporation: Rights of First Refusal
3.Republic Act No. 4726 (The Condominium Act).

Real Estate Service Act of the Philippines

R.A. 9646 – Refers to Republic Act No. 9646 which is also known as the Real Estate Service Act of the Philippines

AN ACT REGULATING THE PRACTICE OF REAL ESTATE SERVICE IN THE PHILIPPINES, CREATING FOR THE PURPOSE A PROFESSIONAL REGULATORY BOARD OF REAL ESTATE SERVICE, APPROPRIATING FUNDS THEREFOR AND FOR OTHER PURPOSES
Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled::

ARTICLE I
TITLE, DECLARATION OF POLICY AND DEFINITION OF TERMS

Section 1. Title. – This Act shall be known as the. “Real Estate Service Act of the Philippines”.

Section 2. Declaration of Policy. – The State recognizes the vital role of real estate service practitioners in the social political, economic development and progress of the country by promoting the real estate market, stimulating economic activity and enhancing government income from real property-based transactions. Hence, it shall develop and nurture through proper and effective regulation and supervision a corps of technically competent, responsible and respected professional real estate service practitioners whose standards of practice and service shall be globally competitive and will promote the growth of the real estate industry.

Section 3. Definition of Terms. – As used in this Act, the following terms shall mean:

(a) “Appraiser” also known as valuer, refers to a person who conducts valuation/appraisal; specifically, one who possesses the necessary qualifications, license, ability and experience to execute or direct the valuation/appraisal of real property.

(b) “Assessor” refers to an official in the local government unit, who performs appraisal and assessment of real properties, including plants, equipment, and machineries, essentially for taxation purposes. This definition also includes assistant assessors.

(c) “Real estate” refers to the land and all those items which are attached to the land. It is the physical, tangible entity, together with all the additions or improvements on, above or below the ground.

(d) “Real estate development project” means the development of land for residential, commercial, industrial, agricultural, institutional or recreational purposes, or any combination of such including, but not limited to, tourist resorts, reclamation projects, building or housing projects, whether for individual or condominium ownership, memorial parks and others of similar nature.

(e) “Real estate developer” refers to any natural or juridical person engaged in the business of developing real estate development project for his/her or its own account and offering them for sale or lease.

(f) “Real property” includes all the rights, interests and benefits related to the ownership of real estate.

(g) “Real estate service practitioners” shall refer to and consist of the following:

(1) Real Estate Consultant – a duly registered and licensed -natural person who, for a professional fee, compensation or other valuable consideration, offers or renders professional advice and judgment on:

(i) the acquisition, enhancement, preservation, utilization or disposition of lands or improvements thereon; and

(ii) the conception, planning, management and development of real estate projects.

(2) Real Estate Appraiser- a duly registered and licensed natural person who, for a professional fee, compensation or other valuable consideration, performs or renders, or offers to perform services in estimating and arriving at an opinion of or acts as an expert on real estate values, such services of which shall be finally rendered by the preparation of the report in acceptable written form.

(3) Real Estate Assessor – a duly registered and licensed natural person who works in a local government unit and performs appraisal and assessment of real properties, including plants, equipment, and machineries, essentially for taxation purposes.

(4) Real Estate Broker – a duly registered and licensed natural person who, for a professional fee, commission or other valuable consideration, acts as an agent of a party in a real estate transaction to offer, advertise, solicit, list, promote, mediate, negotiate or effect the meeting of the minds on the sale, purchase, exchange, mortgage, lease or joint venture, or other similar transactions on real estate or any interest therein.

(5) Real Estate Salesperson – a duly accredited natural person who performs service for, and in behalf of. a real estate broker who is registered and licensed by the Professional Regulatory Board of Real Estate Service for or in expectation of a share in the commission, professional fee, compensation or other valuable consideration.

ARTICLE II
PROFESSIONAL REGULATORY BOARD OF REAL ESTATE SERVICE

Section 4. Creation and Composition of the Board. – There is hereby created a Professional Regulatory Board of Real Estate Service, hereinafter referred to as the Board, under the supervision and administrative control of the Professional Regulation Commission (PRC), hereinafter referred to as the Commission, composed of a chairperson and four (4) members who shall be appointed by the President of the Philippines from the three (3) recommendees chosen by the Commission from a list of five (5) nominees per position submitted by the accredited and integrated professional organization of real estate service practitioners: Provided, That two (2) of the members of the Board shall represent the government assessors and appraisers.

The first Board shall be organized within six (6) months from the effectivity of this Act.

Section 5. Powers and Functions of the Board. – The Board is hereby vested the following powers and functions:

(a) Provide comprehensive policy guidelines for the promotion and development of the real estate industry;

(b) Conduct licensure examinations for the practice of the real estate service profession and prescribe the appropriate, syllabi of the subjects for examination;

(c) Issue, suspend, revoke or reinstate, after due notice and hearing, certificates of registration or professional identification cards for the practice of real estate service;

(d) Maintain a comprehensive and updated register of licensed real estate service professionals;

(e) Monitor the conditions affecting the practice of real estate service and adopt such measures as may be proper for the enhancement of the profession and/or the maintenance of high professional, ethical and technical standards;

(f) Adopt a national Code of Ethics and Responsibilities to be strictly observed by all licensed real estate service practitioners;

(g) Hear or investigate any violation of this Act, its implementing rules and regulations, and the Code of Ethics and Responsibilities for real estate service practitioners and issue subpoena and subpoena duces tecum to secure the appearance of witnesses and the production of documents in connection therewith;

(h) Safeguard and protect legitimate and licensed real estate service practitioners and, in coordination with the accredited and integrated professional organization of real estate service practitioners, monitor all forms of advertisements, announcements, signboards, billboards, pamphlets, brochures and others of similar nature concerning real estate and, where necessary, exercise its quasi-judicial and administrative powers to finally and completely eradicate the pernicious practices of unauthorized or unlicensed individuals;

(i) Prescribe, in cooperation with the Commission on Higher Education (CHED) or the concerned state university or college, the essential requirements as to the curricula and facilities of schools, colleges or

universities seeking permission to open academic courses or already offering such courses in real estate service, and to see to it that these requirements, including the employment of qualified faculty members, are properly complied with;

(j) Promulgate, .administer and enforce rules and regulations necessary in carrying out the provisions of this Act;

(k) Supervise and regulate the registration, licensure and practice of real estate service in the Philippines;

(l) Assess and fix the rate of reasonable regulatory fees;

(m) Administer oaths and affirmations;

(n) Adopt an official seal of the Board;

(o) Evaluate periodically the status of real estate service education and profession, and recommend and/or adopt measures to upgrade and maintain its high standard;

(p) Prescribe guidelines and criteria for the Continuing Professional Education (CPE) program for real estate service practitioners in consultation with the accredited and integrated professional organization of real estate service practitioners;

(q) Screen, issue and monitor permits to organizations of real estate professionals in the conduct of seminars and accredit such seminars pursuant to the CPE program, as well as the instructors or lecturers therein, for the purpose of upgrading the quality and knowledge of the profession;

(r) Monitor and supervise the activities of the accredited and integrated professional organization and other associations of real estate service practitioners; and

(s) Discharge such other powers, duties and functions as the Commission may deem necessary to carry out the provisions of this Act.

The policies, resolutions and rules and regulations issued or promulgated by the Board shall be subject to the review and approval by the Commission. However, the Board’s decisions, resolutions or orders which are not interlocutory, rendered in an administrative case, shall be subject to review by the Commission only on appeal.

Section 6. Qualifications of the Chairperson and Members of the Board. – The chairperson and the members of the Board shall, at the time of their appointment, possess the following qualifications:

(a) A citizen and resident of the Philippines;

(b) A holder of a bachelor’s degree related to real estate;

(c) An active licensed practitioner of real estate service for at least ten (10) years prior to his/her appointment;

(d) A bona fide member in good standing of the accredited and integrated professional organization of real estate service practitioners but not an officer or trustee at the time of his/her appointment;

(e) Neither be a member of the faculty of an institute, school, college or university, nor have any pecuniary interest, direct or indirect, in any institution or association where review classes or lectures in preparation for the licensure examination are being offered or conducted; and

(f) Of good moral character, and must not have been convicted by final judgment by a competent court of a criminal offense involving moral turpitude.

Section 7. Term of Office. – The chairperson and the members of the Board shall hold office for a term of three (3) years from the date of their appointment and until their successor/s shall have been appointed: Provided, That the members of the first appointed Board shall hold office for the following terms: one (1) member as chairperson, to serve for three (3) years; two (2) members, to serve for two (2) years; and two (2) members, to serve for one (1) year.

The chairperson and the members of the Board may be reappointed for a second term but in no case shall he/she serve continuously for more than six (6) years. Any vacancy in the Board shall be filled for the unexpired portion of the term of the member who vacated the position. On the constitution of the first Board, the chairperson and the members of the Board shall automatically be registered and issued certificates of registration and professional identification cards. Each member of the Board shall take the proper oath of office prior to the assumption of duty.

Section 8. Compensation and Allowances of the Chairperson and Members of the Board. – The chairperson and the members of the Board shall receive compensation and allowances comparable to the compensation and allowances received by the chairman and the members of existing professional regulatory boards under the Commission, as provided for in the General Appropriations Act.

Section 9. Removal of the Chairperson and Members of the Board. – The chairperson or any member of the Board may be suspended or removed by the President of the Philippines, upon the recommendation of the Commission, for neglect of duty; abuse of power; oppression; incompetence; unprofessional, unethical, immoral or dishonorable conduct; commission or toleration of irregularities in the conduct of examination or tampering of the grades therein, or for any final judgment or conviction of any criminal offense involving moral turpitude.

Section 10. Supervision of the Board, Custodian of its Records, Secretariat and Support Services. – The Board shall be under the general supervision and administrative control of the Commission. All records of the Board, including applications for examination, examination papers and results, minutes of deliberations, administrative and other investigative cases involving real estate service practitioners, shall be kept by the Commission. The Commission shall designate the secretary of the Board and shall provide the secretariat and other support services to implement the provisions of this Act subject to the usual government accounting and auditing rules and regulations.

Section 11. Annual Report. – The Board shall, at the close of each calendar year, submit an annual report to the Commission, giving a detailed account of its proceedings and accomplishments during the year and recommending measures to be adopted with the end-in-view of upgrading and improving the conditions affecting the practice of real estate service in the Philippines.

ARTICLE III – LICENSURE EXAMINATION AND REGISTRATION

Section 12. Licensure Examination. – Every applicant seeking to be registered and licensed as a real estate service practitioner, except a real estate salesperson, shall undergo an examination as provided for in this Act. Examinations for the practice of real estate service in the Philippines shall be given by the Board at least once every year in such places and dates as the Commission may designate.

Section 13. Scope of Examination. – An examination shall be given to the licensure applicants for real estate brokers, real estate appraisers and real estate consultants which shall include, but not limited to, the following:

(a) For real estate consultants – fundamentals of real estate consulting; standards and ethics; consulting tools and techniques, which include project feasibility study and investment measurement tools; real estate finance and economics; real estate consulting and investment analyses; consulting for specific engagement, which includes consulting for commercial, industrial, recreation and resort and hotel properties, and consulting for government and corporate and financial institutions; land management system and real property laws; and any other related subjects as may be determined by the Board;

(b) For real estate appraisers – fundamentals of real estate principles and practices; standards and ethics; theories and principles in appraisal; human and physical geography; methodology of appraisal approaches; valuation procedures and research; appraisal of machinery and equipment; practical appraisal mathematics; appraisal report writing; real estate finance and economics; case studies; land management system and real property laws; and any other related subjects as may be determined by the Board; and

(c) For real estate brokers – fundamentals of property ownership; code of ethics and responsibilities; legal requirements for real estate service practice; real estate brokerage practice; subdivision development; condominium concept; real estate finance and economics; basic principles of ecology; urban and rural land use; planning, development and zoning; legal aspect of sale, mortgage and lease; documentation and registration; real property laws; and any other related subjects as may be determined by the Board. To conform with technological and modern developments, the Board may recluster, rearrange, modify, add to, or exclude any of the foregoing subjects as may be necessary.

Section 14. Qualification of Applicants for Examinations. – In order to be admitted to the licensure examination for real estate service, a candidate shall, at the time of filing his/her application, establish to the satisfaction of the Board that he/she possesses the following qualifications:

(a) A citizen of the Philippines;

(b) A holder of a relevant bachelor’s degree from a state university or college, or other educational institution duly recognized by the CHED: Provided, That as soon as a course leading to a Bachelor’s degree in Real Estate Service is implemented by the CHED, the Board shall make this course a requirement for taking the “licensure examination; and

(c) Of good moral character, and must not have been convicted of any crime involving moral turpitude:

Provided, That an applicant for the licensure examination for real estate consultants must show proof that he/she has at least ten (10) years experience as a licensed real estate broker or an assessor, or as a bank or institutional appraiser or an employed person performing real property valuation, or at least five (5) years experience as a licensed real estate appraiser. All applications for examination shall be filed with the Board which shall assess and approve said applications and issue to the qualified examinees the corresponding permits to take such examination.

Section 15. Ratings in the Examination. – In order that a candidate may be deemed to have successfully passed the examination, he/she must have obtained an average of at least seventy-five percent (75%) in all subjects, with no rating below fifty percent (50%) in any subject.

Section 16. Release of the Results of Examination. – The results of the licensure examination shall be released by the Board within ten (10) days from the last day of the examination.

Section 17. Issuance of the Certificate of Registration and Professional Identification Card. – A certificate of registration shall be issued to examinees who pass the licensure examination for real estate service subject to payment of fees prescribed by the Commission. The certificate of registration shall bear the signature of the chairperson of the Commission and the chairperson and the members of the Board, stamped with the official seal of the Commission, indicating that the person named therein is entitled to practice the profession with all the benefits and privileges appurtenant thereto.

This certificate of registration shall remain in full force and effect until revoked or suspended in accordance with this Act. A professional identification card bearing the registration number, date of issuance and expiry date, duly signed by the chairperson of the Commission, shall likewise be issued to every registrant upon payment of the required fees. The professional identification card shall be renewed every three (3) years and upon satisfying the requirements of the Board such as, but not limited to, attendance in the CPE program.

Section 18. Refusal to Register. – The Board shall not register and issue a certificate of registration to any successful examinee who has been convicted by a court of competent jurisdiction of any criminal offense involving moral turpitude or has been found guilty of immoral or dishonorable conduct after investigation by the Board, or has been found to be psychologically unfit.

Section 19. Revocation or Suspension of the Certificate of Registration and the Professional Identification Card or Cancellation of Special/Temporary Permit. – The Board may, after giving proper notice and hearing to the party concerned, revoke the certificate of registration and the professional identification card, or cancel the special/temporary permit of a real estate service practitioner, or suspend him/her from the practice of the profession on any of the following instances hereunder:

(a) Procurement of a certificate of registration and/or professional identification card, or special/temporary permit by fraud or deceit;

(b) Allowing an unqualified person to advertise or to practice the profession by using one’s certificate of registration or professional identification card, or special/temporary permit;

(c) Unprofessional or unethical conduct;

(d) Malpractice or violation of any of the provisions of this Act, its implementing rules and regulations, and the Code of Ethics and Responsibilities for real estate service practitioners; and

(e) Engaging in the practice of the profession during the period of one’s suspension.

Section 20. Registration Without Examination. – Upon application and payment of the required fees, the following shall be registered, and shall be issued by the Board and the Commission a certificate of registration and a professional identification card without taking the prescribed examination:

(a) Those who, on the date of the effectivity of this Act, are already licensed as real estate brokers, real estate appraisers or real estate consultants by the Department of Trade and Industry (DTI) by virtue of Ministry Order No. 39, as amended: Provided, That they are in active practice as real estate brokers, real estate appraisers and real estate consultants, and have undertaken relevant CPE to the satisfaction of the Board;

(b) Assessors and appraisers who, on the date of the effectivity of this Act, hold permanent appointments and are performing actual appraisal and assessment functions for the last five (5) years, have passed the Real Property Assessing Officer (RPAO) examination conducted and administered by the Civil Service Commission (CSC) in coordination with the Department of Finance (DOF), and have undertaken relevant CPE to the satisfaction of the Board; and

(c) Assessors and appraisers who, on the date of the effectivity of this Act, hold permanent appointments and have at least ten (10) years actual experience in real property appraisal or assessment and have completed at least one hundred twenty (120) hours of accredited training on real property appraisal conducted by national or international appraisal organizations or institutions/entities recognized by the Board and relevant CPE to the satisfaction of the Board.

Those falling under categories (b) and (c) shall register with the Board after they shall have complied with the requirements for registration as real estate appraisers: Provided, That those seeking to be licensed to a new credential level shall be required to take the pertinent licensure examination.

Those so exempt under the aforementioned categories shall file their application within two (2) years from the effectivity of this Act: Provided, That the renewal of the professional identification card is subject to the provisions of Section 17 hereof.

Section 21. Reinstatement, Reissuance or Replacement of Certificate of Registration, Professional Identification Card and Special/Temporary Permit. – The Board may, after the expiration of two (2) years from the date of revocation of a certificate of registration and/or professional identification card, and upon application, compliance with the required CPE units, and for reasons deemed proper and sufficient, reinstate any revoked certificate of registration and reissue a suspended professional identification card and in so doing, may, in its discretion, exempt the applicant from taking another examination. A new certificate of registration, professional identification card or special/temporary permit may be issued to replace lost, destroyed or mutilated ones, subject to the rules as may be promulgated by the Board.

Section 22. Roster of Real Estate Service Practitioners. – The Board, in coordination with the integrated professional organization of real estate service practitioners, shall prepare, update and maintain a roster of real estate service practitioners which shall contain the names of all registered real estate service practitioners, their residence and office addresses, license number, dates of registration or issuance of certificates, and other data which the Board may deem pertinent. Copies thereof shall be made available to the public upon request.

Section 23. Issuance of Special/Temporary Permit. – Upon application and payment of the required fees and. subject to the approval of the Commission, the Board may issue special/temporary permit to real estate service practitioners from foreign countries whose services are urgently needed in the absence or unavailability of local real estate service^ practitioners for the purpose of promoting or enhancing the practice of the profession in the Philippines.

Section 24. Foreign Reciprocity. – No foreign real estate service practitioner shall be admitted to the licensure examination or be given a certificate of registration or a professional identification card, or be entitled to any of the privileges under this Act unless the country of which he/she is a citizen specifically allows Filipino real estate service practitioners to practice within its territorial limits on the same basis as citizens of such foreign country.

ARTICLE IV
PRACTICE OF REAL ESTATE SERVICE

Section 25. Oath. – All successful examinees qualified for registration and all qualified applicants for registration without examination as well as accredited salespersons shall be required to take an oath before any member of the Board or any officer of the Commission duly authorized by the Commission to administer oaths prior to entering into the practice of real estate service in the Philippines.

Section 26. Professional Indemnity Insurance/Cash or Surety Bond. – All real estate brokers and private real estate appraisers shall, in addition to the oath referred to in the preceding section, be required to post a professional indemnity insurance/cash or surety bond, renewable every three (3) years, in an amount to be determined by the Board, which in no case shall be less than Twenty thousand pesos (P20,000.00), without prejudice to the additional requirement of the client.

Section 27. Acts Constituting the Practice of Real Estate Service. – Any single act or transaction embraced within the provisions of Section 3(g) hereof, as performed by real estate service practitioners, shall constitute an act of engaging in the practice of real estate service.

Section 28. Exemptions from the Acts Constituting the Practice of Real Estate Service. – The provisions of this Act and its rules and regulations shall not apply to the following”:

(a) Any person, natural or juridical, who shall directly perform by himself/herself the acts mentioned in Section 3 hereof with reference to his/her or its own property, except real estate developers;

(b) Any receiver, trustee or assignee in bankruptcy or insolvency proceedings;

(c) Any person acting pursuant to the order of any court of justice;

(d) Any person who is a duly constituted attorney-in-fact for purposes of sale, mortgage, lease or exchange, or other similar contracts of real estate, without requiring any form of compensation or remuneration; and

(e) Public officers in the performance of their official duties and functions, except government assessors and appraisers.

Section 29. Prohibition Against the Unauthorized Practice of Real Estate Service. – No person shall practice or offer to practice real estate service in the Philippines or offer himself/herself as real estate service practitioner, or use the title, word, letter, figure or any sign tending to convey the impression that one is a real estate service practitioner, or advertise or indicate in any manner whatsoever that one is qualified to practice the profession, or be appointed as real property appraiser or assessor in any national government entity or local government unit, unless he/she has satisfactorily passed the licensure examination given by the Board, except as otherwise provided in this Act, a holder of a valid certificate of registration, and professional identification card or a valid special/temporary permit duly issued to him/her by the Board and the Commission, and in the case of real estate brokers and private appraisers, they have paid the required bond as hereto provided.

Section 30. Positions in Government Requiring the Services of Registered and Licensed Real Estate ServicePractitioners. – Within three (3) years from the effectivity of this Act, all existing and new positions in the national and local governments, whether career, permanent, temporary or contractual, and primarily requiring the services of any real estate service practitioner, shall be filled only by registered and licensed real estate service practitioners.

All incumbent assessors holding permanent appointments shall continue to perform their functions without need for re appointment and without diminution of status, rank and salary grade, and shall enjoy security of tenure. However, they may not be promoted to a higher position until they meet the qualification requirements of that higher position as herein prescribed. Nothing in this Act shall be construed to reduce any benefit, interest, or right enjoyed by the incumbents at the time of the enactment of this Act. The appointing authority shall exercise his power to appoint the assessor in accordance with the provisions of this Act only when a vacancy occurs.

Section 31. Supervision of Real Estate Salespersons. – For real estate salespersons, no examination shall be given, but they shall be accredited by the Board: Provided, That they have completed at least two (2) years of college and have undergone training and seminars in real estate brokerage, as may be required by the Board. Real estate salespersons shall be under the direct supervision and accountability of a real estate broker. As such, they cannot by themselves be signatories to a written agreement involving a real estate transaction unless the real estate broker who has direct supervision and accountability over them is also a signatory thereto. No real estate salesperson, either directly or indirectly, can negotiate, mediate or transact any real estate transaction for and in behalf of a real estate broker without first securing an authorized accreditation as real estate salesperson for the real estate broker, as prescribed by the Board.

A real estate broker shall be guilty of violating this Act for employing or utilizing the services of a real estate salesperson when he/she has not secured the required accreditation from the Board prior to such employment. No salesperson shall be entitled to receive or demand a fee, commission or compensation of any kind from any person, other than the duly licensed real estate broker who has direct control and supervision over him, for any service rendered or work done by such salesperson in any real estate transaction. No violation of this provision shall be a cause for revocation or suspension of the certificate of registration of the real estate broker unless there was actual knowledge of such violation or the broker retains the benefits, profits or proceeds of a transaction wrongfully negotiated by the salesperson.

Section 32. Corporate Practice of the Real Estate Service.

(a) No partnership or corporation shall engage in the business of real estate service unless it is duly registered with the Securities and Exchange Commission (SEC), and the persons authorized to act for the partnership or corporation are all duly registered and licensed real estate brokers, appraisers or consultants, as the case may be. The partnership or corporation shall regularly submit a list of its real estate service practitioners to the Commission and to the SEC as part of its annual reportorial requirements. There shall at least be one (1) licensed real estate broker for every twenty (20) accredited salespersons.

(b) Divisions or departments of partnerships and corporations engaged in marketing or selling any real estate development project in the regular course of business must be headed by full-time registered and licensed real estate brokers.

(c) Branch offices of real estate brokers, appraisers or consultants must be manned by a duly licensed real estate broker, appraiser or consultant as the case may be.

In case of resignation or termination from employment of a real estate service practitioner, the same shall be reported by the employer to the Board within a period not to exceed fifteen (15) days from the date of effectivity of the resignation or termination.

Subject to the provisions of the Labor Code, a corporation or partnership may hire the services of registered and licensed real estate brokers, appraisers or consultants on commission basis to perform real estate services and the latter shall be deemed independent contractors and not employees of such corporations.

Section 33. Display of License in the Place of Business. – Every registered and licensed real estate service practitioner shall establish and maintain a principal place of business and such other branch offices as may be necessary, and shall conspicuously display therein the original and/or certified true copies of his/her certificate of registration as well as the certificates of registration of all the real estate service practitioners employed in such office.

Section 34. Accreditation and Integration of Real Estate Service Associations. – All real estate service associations shall be integrated into one (1) national organization, which shall be recognized by the Board, subject to the approval of the Commission, as the only accredited and integrated professional organization of real estate service practitioners. A real estate service practitioner duly registered with the Board shall automatically become a member of the accredited and integrated professional organization of real estate service practitioners, and shall receive the benefits and privileges appurtenant thereto. Membership in the accredited and integrated professional organization of real estate service practitioners shall not be a bar to membership in other associations of real estate service practitioners.

Section 35. Code of Ethics and Responsibilities for Real Estate Service Practitioners. – The Board shall adopt and promulgate the Code of Ethics and Responsibilities for real estate service practitioners which shall be prescribed and issued by the accredited and integrated professional organization of real estate service practitioners.

Section 36. Continuing Professional Education (CPE) Program. – The Board shall develop, prescribe and promulgate guidelines on CPE upon consultation with the accredited and integrated professional organization of real estate service practitioners, affiliated association of real estate service practitioners and other concerned sectors, and in accordance with such policies as may have been prescribed by the Board, subject to the approval of the Commission. The Board shall create a CPE Council that shall be composed of a chairperson coming from the Board, a member from the accredited and integrated professional organization of real estate service practitioners and a member from the academe.

Section 37. Enforcement Assistance to the Board. – The Board shall be assisted by the Commission in carrying out the provisions of this Act and its implementing rules and regulations and other policies. The lawyers of the Commission shall act as prosecutors against illegal practitioners and other violators of this Act and its rules. The duly constituted authorities of the government shall likewise assist the Board and the Commission in enforcing the provisions of this Act and its rules.

Section 38. Indication of the Certificate of Registration, Professional Identification Card/License Number, Privilege Tax Receipt (PTR) Number and Accredited Professional Organization (APO) Number. – Real estate service practitioners shall be required to indicate the certificate of registration, professional identification card, PTR number, and APO receipt number, and the date of issuance and the duration of validity on the documents he/she signs, uses or issues in connection with the practice of his/her profession.

ARTICLE V
PENAL AND FINAL PROVISIONS

Section 39. Penal Provisions. – Any violation of this Act, including violations of implementing rules and regulations, shall be meted the penalty of a fine of not less than One hundred thousand pesos (P100,000.00) or imprisonment of not less than two (2) years, or both such fine and imprisonment upon the discretion of the court. In case the violation is committed by an unlicensed real estate service practitioner, the penalty shall be double the aforesaid fine and imprisonment.

In case the violation is committed, by a partnership, corporation, association or any other juridical person, the partner, president, director or manager who has committed or consented to or knowingly tolerated such violation shall be held directly liable and responsible for the acts as principal or as a co-principal with the other participants, if any.

Section 40. Appropriations. – The chairperson of the Professional Regulation Commission shall immediately include in the Commission’s programs the implementation of this Act, the funding of which shall be included in the annual General Appropriations Act and thereafter.

Section 41. Transitory Provision. – Within ninety (90) days from the effectivity of this Act, the DTI – Bureau of Trade Regulation and Consumer Protection (BTRCP) shall transfer all pertinent records, documents and other materials to the Professional Regulatory Board of Real Estate Service.

Section 42. Implementing Rules and Regulations. – Within six (6) months after the effectivity of this Act, the Commission, together with the Board and the accredited and integrated professional organization of real estate service practitioners, the Department of Finance, and the CHED, shall prepare the necessary rules and regulations, including the Code of Ethics and Responsibilities for real estate service practitioners, needed to implement the provisions of this Act.

Section 43. Separability Clause. – If any clause, sentence, paragraph or part of this Act shall be declared unconstitutional or invalid, such judgment shall not affect, invalidate or impair any other part of this Act.

Section 44. Repealing Clause.

(a) Sections 3(e) and (ee) of Act No. 2728, as amended by Act No. 3715 and Act No. 3969, Sections 472 and 473 of the Local Government Code of 1991 (Republic Act No. 7160), and pertinent provisions of the Civil Service Law are hereby modified accordingly.

(b) All laws, decrees, executive orders, department or memorandum orders and other administrative issuances or parts thereof which are inconsistent with the provisions of this Act are hereby modified, superseded or repealed accordingly.

Section 45. Effectivity. – This Act shall take effect fifteen (15) days following its publication in the Official Gazette or in a major daily newspaper of general circulation in the Philippines.

Approved.

(Sgd.) JUAN PONCE ENRILE
President of the Senate

(Sgd.) PROSPERO C. NOGRALES
Speaker of the House of Representatives

This Act which is a consolidation of Senate Bill No. 2963 and House Bill No. 3514 was finally passed by the Senate and the House of epresentatives on May 12, 2009.

(Sgd.) EMMA LIRIO-REYES
Secretary of Senate

(Sgd.) MARILYN B. BARUA-YAP
Secretary General
House of Representatives

Approved: June 29, 2009

(Sgd.) GLORIA MACAPAGAL-ARROYO
President of the Philippines

Real Estate Transaction Costs in the Philippines

Purchases from Individuals

Capital Gains Tax – 6% of actual sale price. This is paid by the seller but in some cases, the buyer might be expected to be the one to pay depends on SELLER and BUYER agreement. This percentage could differ if the property assessed is being used by a business or is a title owned by a corporation, in this case, the percentage is 7.5%.
Brokers Fee 3% – 5% of actual sale price.
Document Stamp Tax – 1.5% of the actual sale price. This is paid by either the buyer or the seller upon agreement. Normally, however, it is the buyer who shoulders the cost.
Transfer Tax – 0.5% of the actual sale price
Registration Fee – 0.25% of the actual sale price

Purchases from Developers

Capital Gains Tax – 10% of actual sale price. This value might be expressed as part of the sale price.
Document Stamp Tax – 1.5% of the actual sale price
Transfer Tax – 0.5% of the actual sale price
Registration Fee – 0.25% of the actual sale price

Gross Price Vs. Net Price in Home Buying

Gross price and net price are two common terms when real estate is discussed. Understanding the difference of gross and net price.

Gross Price

The gross price in real estate is the how much the buyer will have to pay to purchase the property. This is not the amount that the seller will receive because the fees for attorneys and real estate brokers are not included. This is usually the advertised price of real estate.

Net Price

The net price of real estate is the other way that professionals discuss real estate prices. The net price in real estate is how much the seller will have in his pocket after the transaction is completed and all fees for attorneys and real estate brokers are deducted.

The way to calculate net price is to find the amount to be paid for the real estate property and find all of the fees and commissions that will have to be paid during the transaction. Then all of the fees and commissions are subtracted from the real estate price. Net price is left.

Stewardship Concept of Ownership

STEWARDSHIP CONCEPT OF OWNERSHIP. A legal document which holds that a property ownership presupposes concomitant obligations to the State and the community, and that property is supposed to be held by the individual only as trustee by people in general. As mere trustee, the property owner must exercise his rights to the property not just for his own exclusive and selfish interest but for the good and general welfare of the nation as a whole. It carries the following features and characteristics:

Ownership carries with it a distinct social obligation. As stewards of their lands, the owners are bound to use or utilize their properties in a manner that will promote not only their welfare and benefit but also those of the State.
Every citizen retains the right of private ownership. However, when his landholdings exceed the requirements for his essential necessities or its utilization is not conducive to the general welfare, the State may exercise its authority to control or regulate such right.
The right of the citizen to own land continues to be guaranteed by the New Constitution. The guarantee extends to the exercise of the so-called “Bundle of Rights” or attributes which are inherent in ownership, subject only to the limitations or restrictions imposed by law or government regulations. (to be continued next week)

Taxes & Other Expenses

The sale of real estate that is considered a capital asset will attract a capital gains tax equivalent to 6% of the purchase price or the zonal value of the property, whichever is higher. Where the real estate is an ordinary asset, the income of the seller or property owner is recognised as ordinary income subject.

The sale of real estate considered as an ordinary asset is also subject to value-added tax equivalent to 12% of the purchase price. The execution of the document evidencing the absolute sale of the real estate will attract a documentary stamp tax equivalent to approximately 1.5% of the purchase price.

In addition, local governments also impose a local transfer tax equivalent to 0.5% of the purchase price on the sale and transfer of the property. The registration and issuance of a new title in the name of a transferee of the real estate is subject to registration fees of approximately 0.25% of the purchase price.

Typical Transaction Structures

In light of the foregoing restrictions, a plain vanilla real estate transaction structure involving the entry of a foreign investor will typically involve a foreign national or foreign company taking a leasehold right over a parcel of land (with the maximum term permitted by law) and the full title to the buildings and other real property located on the land.

In some instances if the land is owned by a corporation that is a Philippine national, the foreign national or foreign company also takes the 40% ownership interest in the corporation that owns the land.

Foreign nationals and other foreign companies seeking to invest in real estate in the Philippines have a host of other structuring options for their investment. Construction of office buildings, for instance, may be constituted under the Condominium Act to allow foreign nationals and foreign entities to own specific areas in a building and at the same time, an aggregate of up to 40% ownership in the land.

Foreign investors intending to buy or lease property in the Philippines for purposes of establishing business or commercial operations in the Philippines are also required to obtain a “licence to do business” from the Securities and Exchange Commission.

Various investment vehicles are available to foreign investors and the appropriate investment vehicle will generally depend on the specific needs, the plans and the business model of the investor.
The Preliminary Step – Due Diligence

Foreign nationals and foreign companies are advised to seek legal representation and retain property advisors before entering into real estate transactions in the Philippines. Legal advisors can be retained to help identify legal risks and issues that may help foreign investors decide on whether or not to proceed with a particular real estate transaction.

Property advisors can help guide foreign investors on commercial issues such as the purchase price for a parcel of land or the lease rate.

Below are some key legal issues that a foreign investor faces when dealing with real estate and which a legal advisor can identify in the course of a due diligence examination.
Dealing With Registered Owners

Foreign investors should ensure that they are dealing with registered owners of the property. A person claiming ownership over land or other forms of real property should be able to present documents evidencing his or her title to such property.

Ideally, the ownership of private lands should be evidenced by a transfer certificate of title in the name of the registered owner. Registered owners retain an “owner’s duplicate copy” of the transfer certificate of title while the state, through the Philippine Land Registration Authority, retains the original copy of the title. The copy retained by the state is the controlling copy of the title, and it is advisable that a certified true copy of the title retained by the Land Registration Authority be inspected prior to undertaking any real estate transaction.

Condominium units in real estate constituted as a condominium project pursuant to the Condominium Act are covered by Condominium Certificates of Title issued by the Land Registration Authority.

Certain parcels of private land in the Philippines are not covered by transfer certificates of title. Possessors of these types of lands usually obtain a tax declaration (issued by the local government of the area where the land is situated) as proof of their ownership of the land.

The ownership of buildings and real property other than land is evidenced by a tax declaration setting out such buildings and machineries owned by the registered owner. Typically, where the land and the buildings are owned by the same person or the same entity, only one tax declaration is obtained for both the land and the buildings standing on the land.
Liens & Encumbrances Attached To Property

A foreign investor that purchases real estate takes title thereon subject to the liens and encumbrances that have been previously registered or annotated in the transfer certificate of title covering the land. For instance, a mortgage over the land constituted by the previous owner may be foreclosed even where, in the meantime, title to the land had passed on to a new owner. The term of registered real estate leases must also be respected by a transferee or buyer of the land.

In addition to being the most reliable proof of ownership of private lands, the copy of the Land Registration Authority’s transfer certificate of title covering a parcel of land will also contain all registered encumbrances affecting the land. However, certain liens and encumbrances may be registered without the consent of the owner of the land. Therefore, the owner’s duplicate copy may not contain all registered liens and encumbrances that affect the land.

In some instances, liens and encumbrances are additionally registered and annotated in the tax declaration that covers the real estate.

Property owners may have agreed to certain contractual restrictions with respect to property registered in their name. Contractual restrictions which have been annotated in the transfer certificate of title are binding on the subsequent owner of the land. Typically, certain financing arrangements will require property owners to obtain the prior consent of banks before transferring or selling encumbered or mortgaged property. Building height and use restrictions are also registered on titles to the land. The technical description of the land or the condominium unit appears in the transfer certificate of title or in the condominium certificate of title, respectively.
Other Requirements For Transfer Of Land

Other legal requirements may affect the ability of an owner to sell or transfer real estate or the ability of the buyer to obtain registered title to the land. Generally, this depends on the nature of the real estate.

Legal requirements that may apply in some instances are as follows:

Philippine law requires the consent of both spouses before property considered as conjugal in nature is encumbered or alienated. As a general rule, the sale or encumbrance of property without the consent of one of the spouses is void;
Transactions which will result in the sale of all or substantially all of the property of a Philippine company require shareholder consent;
Buildings designed and/or constructed by a Philippine national artist and buildings which are at least 50 years old are presumptively classified as Philippine cultural property and, under the National Cultural Heritage Act, may not be sold without prior clearance from Philippine cultural authorities;
The sale of condominium units must be accompanied by a condominium certificate of management issued by the condominium corporation that holds title to the land. The certificate attests that the sale of the unit to a foreign investor will not result in a breach of the ownership limitations for corporations owning lands in the Philippines; and
Lands previously covered by the Comprehensive Agrarian Reform Act (as amended) and which have been awarded to farmer beneficiaries cannot be sold for a period of 10 years from the date of the issuance of the certificate of land ownership award.

Such lands are classified as agricultural and cannot be used for other purposes unless reclassified by the Philippine Department of Agrarian Reform. No person can own more than 5 ha of lands that are classified as agricultural. Transferees of lands will be required to present a real property tax clearance, which has been issued by the local government of the place where the property is located before a new title is issued by the Land Registration Authority. The registration of the transfer of the land will not be allowed unless all unpaid realty taxes have been paid.
Documenting The Transaction

Certain formalities are required to be observed in the sale of real estate. The absolute sale of real property should be made through a public instrument.

In addition, Philippine law also mandates a specific form of notarial acknowledgement where the real property subject of the sale is covered by two or more transfer certificates of title. Documents of sale that have been executed and acknowledged outside of the Philippines should be presented to a Philippine embassy for authentication.

A certificate authorising registration issued by the Philippine Bureau of Internal Revenue will be required before the Land Registration Authority can issue a new transfer certificate of title in the name of the transferee.

Urban Development and Housing Act

R.A. 7279 – Urban Development and Housing Act

Republic Act No. 7279
AN ACT TO PROVIDE FOR A COMPREHENSIVE AND CONTINUING URBAN DEVELOPMENT AND HOUSING PROGRAM, ESTABLISH THE MECHANISM FOR ITS IMPLEMENTATION, AND FOR OTHER PURPOSES

Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled:

ARTICLE I
TITLE, POLICY, PROGRAM AND DEFINITION OF TERMS

Section 1. Title. – This Act shall be known as the “Urban Development and Housing Act of 1992.”

Section 2. Declaration of State Policy and Program Objectives. – It shall be the policy of the State to undertake, in cooperation with the private sector, a comprehensive and continuing Urban Development and Housing Program, hereinafter referred to as the Program, which shall:
a) Uplift the conditions of the underprivileged and homeless citizens in urban areas and in resettlement areas by making available to them decent housing at affordable cost, basic services, and employment opportunities;
b) Provide for the rational use and development of urban land in order to bring about the following:

(1) Equitable utilization of residential lands in urban and urbanizable areas with particular attention to the needs and requirements of the privileged and homeless citizens and not merely on the basis of market forces;
(2) Optimization of the use and productivity of land and urban resources; (3) Development of urban areas conducive to commercial and industrial activities which can generate more economic opportunities for the people;
(4) Reduction in urban dysfunctions, particularly those that adversely affect public health, safety and ecology; and
(5) Access to land and housing by the underprivileged and homeless citizens.

c) Adopt workable policies to regulate and direct urban growth and expansion towards a dispersed urban net and more balanced urban-rural interdependence;
d) Provide for an equitable land tenure system that shall guarantee security of tenure to Program beneficiaries but shall respect the rights of small property owners and ensure the payment of just compensation;
e) Encourage more effective people’s participation in the urban development process; and
f) Improve the capability of local government units in undertaking urban development and housing programs and projects.

Section 3. Definition of Terms. – For purposes of this Act:
a) “Affordable cost” refers to the most reasonable price of land and shelter based on the needs and financial capability of Program beneficiaries and appropriate financing schemes;
b) “Areas for priority development” refers to those areas declared as such under existing statutes and pertinent executive issuances;
c) “Blighted areas” refers to the areas where the structures are dilapidated, obsolete and unsanitary, tending to depreciate the value of the land and prevent normal development and use of the area;
d) “Consultation” refers to the constitutionally mandated process whereby the public on their own or through people’s organizations, is provided an opportunity to be heard and to participate in the decision-making process on matters involving the protection and promotion of its legitimate collective interests, which shall include appropriate documentation and feedback mechanisms;
e) “Idle hands” refers to non-agricultural lands in urban and urbanizable areas on which no improvements, as herein defined, have been made by the owner, as certified by the city, municipal or provincial assessor’
f) “Improvements” refers to all types of buildings and residential units, walls, fences, structures or construction of all kinds of a foxed character or which are adhered to the soil but shall not include trees, plants and growing fruits, and other fixtures that are mere superimpositions on the land, and the value of improvements shall not be less than fifty percent (50%) of the assessed value of the property;
g) “Joint venture” refers to the commitment or agreement by two (2) or more persons to carry out a specific or single business enterprise for their mutual benefit, for which purpose they combine their funds, land resource, facilities and services;
h) “Land assembly or consolidation” refers to the acquisition of lots or varying ownership through purchase or expropriation for the purpose of planned and rational development and socialized housing programs without individual property boundary restrictions;
i) “Land banking” refers to the acquisition of land at values based on existing use in advance of actual need to promote planned development and socialized housing programs;
j) “Land swapping” refers to the process of land ac quisition by exchanging land for another piece of land of equal value, or for shares of stock in a government or quasi-government corporation whose book value is of equal value to the land being exchanged, for the purpose of planned and rational development and provision for socialized housing where land values are determined based on land classification, market value and assessed value taken from existing tax declarations: Provided, That more valuable lands owned by private persons may be exchanged with less valuable lands to carry out the objectives of this Act;
k) “Land use plan” refers to the rational approach of allocating available land resources as equitably as possible among competing user groups and for different functions consistent with the development plan area and the Program under this Act;
l) “On-site development” refers to the process of upgrading and rehabilitation of bighted and slum urban areas with a view of minimizing displacement of dwellers in said areas, and with provisions for basic services as provided for in Section 21 hereof;
m) “Professional squatters” refers to individuals or groups who occupy lands without the express consent of the landowner and who have sufficient income for legitimate housing. The term shall also apply to persons who have previously been awarded homelots or housing units by the Government but who sold, leased or transferred the same to settle illegally in the same place or in another urban area, and non-bona fide occupants and intruders of lands reserved for socialized housing. The term shall not apply to individuals or groups who simply rent land and housing from professional squatters or squatting syndicates;
n) “Resettlement areas” refers to areas identified by the appropriate national agency or by the local government unit with respect to areas within its jurisdiction, which shall be used for the relocation of the underprivileged and homeless citizens;
o) “Security of tenure” refers to the degree of protection afforded to qualified Program beneficiaries against infringement or unjust, unreasonable and arbitrary eviction or disposition, by virtue of the right of ownership, lease agreement, usufruct and other contractual arrangements;
p) “Slum Improvement and Resettlement Program or SIR” refers to the program of the National Housing Authority of upgrading and improving blighted squatter areas outside of Metro Manila pursuant to existing statutes and pertinent executive issuances;
q) “Small property owners” refers to those whose only real property consists of residential lands not exceeding three hundred square meters (300 sq. m.) in highly urbanized cities and eight hundred square meters (800 sq. m. ) in other urban areas;
r) “Socialized housing” refers to housing programs and projects covering houses and lots or homelots only undertaken by the Government or the private sector for the underprivileged and homeless citizens which shall include sites and services development, long-term financing, liberalized terms on interest payments, and such other benefits in accordance with the provisions of this Act;
s) “Squatting syndicates” refers to groups of persons engaged in the business of squatter housing for profit or gain;
t) “Underprivileged and homeless citizens” refers to the beneficiaries of this Act and to individuals or families residing in urban and urbanizable areas whose income or combined household income falls within the poverty threshold as defined by the National Economic and Development Authority and who do not own housing facilities. This shall include those who live in makeshift dwelling units and do not enjoy security of tenure;
u) “Unregistered or abandoned lands” refers to lands in urban and urbanizable areas which are not registered with the Register of Deeds, or with the city or municipal assessor’s office concerned, or which are uninhabited by the owner and have not been developed or devoted for any useful purpose, or appears unutilized for a period of three (3) consecutive years immediately prior to the issuance and receipt or publication of notice of acquisition by the Government as provided under this Act. It does not include land which has been abandoned by reason of force majeure or any fortuitous event; Provided, that prior to such event, such land was previously used for some useful or economic purpose;
v) “Urban areas” refers to all cities regardless of their population density and to municipalities with a population density of at least five hundred (500) persons per square kilometer;
w) “Urbanizable areas” refers to sites and lands which, considering present characteristics and prevailing conditions, display marked and great potential of becoming urban areas within the period of five (5) years; and
x) “Zonal Improvement Program or ZIP” refers to the program of the National Housing Authority of upgrading and improving blighted squatter areas within the cities and municipalities of Metro Manila pursuant to existing statutes and pertinent executive issuances.

ARTICLE II
COVERAGE AND EXEMPTIONS

Section 4. Coverage. – The Program shall cover all lands in urban and urbanizable areas, including existing areas for priority development, zonal improvement sites, slum improvement and resettlement sites, and in other areas that may be identified by the local government units as suitable for socialized housing.

Section 5. Exemptions. – The following lands shall be exempt from the coverage of this Act:
a) Those included in the coverage of Republic Act No. 6657, otherwise known as the Comprehensive Agrarian Reform Law;
b) Those actually used for national defense and security of the Stare;
c) Those used, reserved or otherwise set aside for government offices, facilities and other installations, whether owned by the National Government, its agencies and instrumentalities, including government-owned or controlled corporations, or by the local government units: Provided, however, That the lands herein mentioned, or portions thereof, which have not been used for the purpose for which they have been reserved or set aside for the past ten (10) years from the effectivity of this Act, shall be covered by this Act;
d) Those used or set aside for parks, reserves for flora and fauna, forests and watersheds, and other areas necessary to maintain ecological balance or environmental protection, as determined and certified to by the proper government agency; and
e) Those actually and primarily used for religious, charitable, or educational purposes, cultural and historical sites, hospitals and health centers, and cemeteries or memorial parks.

The exemptions herein provided shall not apply when the use or purpose of the above mentioned lands has ceased to exist.

ARTICLE III
NATIONAL URBAN DEVELOPMENT AND HOUSING FRAMEWORK

Section 6. Framework for Rational Development. – There shall be a National Urban Development and Housing Framework to be formulated by the Housing and Land Use Regulatory Board under the direction of the Housing and Urban Development Coordinating Council in coordination with all local government units and other concerned public and private sectors within one (1) year from the effectivity of this Act. The Framework shall refer to the comprehensive plan for urban and urbanizable areas aimed at achieving the objectives of the Program. In the formulation of the framework, a review and rationalization of existing town and land use plans, housing programs, and all other projects and activities of government agencies and the private sector which may substantially affect urban land use patterns, transportation and public utilities, infrastructure, environment and population movements shall be undertaken with the concurrence of the local government units concerned.

ARTICLE IV
LAND USE, INVENTORY, ACQUISITION AND DISPOSITION

Section 7. Inventory of Lands. – Within one (1) year from the effectivity of this Act, all city and municipal governments shall conduct an inventory of all lands and improvements thereon within their respective localities. The inventory shall include the following:
a) Residential lands;
b) Government-owned lands, whether owned by the National Government or any of its subdivisions, instrumentalities, or agencies, including government-owned or controlled corporations and their subsidiaries;
c) Unregistered or abandoned and idle lands; and
d) Other lands.

In conducting the inventory, the local government units concerned, in coordination with the Housing and Land Use Regulatory Board and with the assistance of the appropriate government agencies, shall indicate the type of land use and the degree of land utilization, and other data or information necessary to carry out the purposes of this Act.
For planning purposes, the Housing and Urban Development Coordinating Council shall be furnished by each local government unit a copy of its inventory which shall be updated every three (3) years.

Section 8. Identification of Sites for Socialized Housing. – After the inventory, the local government units, in coordination with the National Housing Authority, the Housing and Land Use Regulatory Board, the National Mapping Resource Information Authority, and the Land Management Bureau, shall identify lands for socialized housing and resettlement areas for the immediate and future needs of the underprivileged and homeless in the urban areas, taking into consideration the degree of availability of basic services and facilities, their accessibility and proximity to job sites and other economic opportunities, and the actual number of registered beneficiaries.

Government-owned lands under paragraph (b) of the preceding section which have not been used for the purpose for which they have been reserved or set aside for the past ten (10) years from the effectivity of this Act and identified as suitable for socialized housing, shall immediately be transferred to the National Housing Authority subject to the approval of the President of the Philippines or by the local government unit concerned, as the case may be, for proper disposition in accordance with this Act.

Section 9. Priorities in the Acquisition of Land. – Lands for socialized housing shall be acquired in the following order:
a) Those owned by the Government or any of its subdivisions, instrumentalities, or agencies, including government-owned or controlled corporations and their subsidiaries;
b) Alienable lands of the public domain;
c) Unregistered or abandoned and idle lands;
d) Those within the declared Areas for Priority Development, Zonal Improvement Program sites, and Slum Improvement and Resettlement Program sites which have not yet been acquired;
e) Bagong Lipunan Improvement of Sites and Services or BLISS sites which have not yet been acquired; and
f) Privately-owned lands.

Where on-site development is found more practicable and advantageous to the beneficiaries, the priorities mentioned in this section shall not apply. The local government units shall give budgetary priority to on-site development of government lands.

Section 10. Modes of Land Acquisition. – The modes of acquiring lands for purposes of this Act shall include, among others, community mortgage, land swapping, land assembly or consolidation, land banking, donation to the Government, joint-venture agreement, negotiated purchase, and expropriation: Provided, however, That expropriation shall be resorted to only when other modes of acquisition have been exhausted. Provided, further, That where expropriation is resorted to, parcels of land owned by small property owners shall be exempted for purposes of this Act: Provided, finally, That abandoned property, as herein defined, shall be reverted and escheated to the State in a proceeding analogous to the procedure laid down in Rule 91 of the Rules of Court.

For the purpose of socialized housing, government-owned and foreclosed properties shall be acquired by the local government units, or by the National Housing Authority primarily through negotiated purchase: Provided, That qualified beneficiaries who are actual occupants of the land shall be given the right of first refusal.

Section 11. Expropriation of Idle Lands. – All idle lands in urban and urbanizable areas, as defined and identified in accordance with this Act, shall be expropriated and shall form part of the public domain. These lands shall be disposed of or utilized by the Government for such purposes that conform with their land use plans. Expropriation proceedings shall be instituted if, after the lapse of one (1) year following receipt of notice of acquisition, the owner fails to introduce improvements as defined in Section 3(f) hereof, except in the case of force majeure and other fortuitous events. Exempted from this ownership of which is subject of a pending litigation.

Section 12. Disposition of Lands for Socialized Housing. – The National Housing Authority, with respect to lands belonging to the National Government, and the local government units with respect to other lands within their respective localities, shall coordinate with each other to formulate and make available various alternative schemes for the disposition of lands to the beneficiaries of the Program. These schemes shall not be limited to those involving transfer of ownership in fee simple but shall include lease, with option to purchase, usufruct or such other variations as the local government units or the National Housing Authority may deem most expedient in carrying out the purposes of this Act.
Consistent with this provision, a scheme for public rental housing may be adopted.

Section 13. Valuation of Lands for Socialized Housing. – Equitable land valuation guidelines for socialized housing shall be set by the Department of Finance on the basis of the market value reflected in the zonal valuation, or in its absence, on the latest real property tax declaration.
For sites already occupied by qualified Program beneficiaries, the Department of Finance shall factor into the valuation the blighted status of the land as certified by the local government unit or the National Housing Authority.

Section 14. Limitations on the Disposition of Lands for Socialized Housing. – No land for socialized housing, including improvements or rights thereon, shall be sold, alienated, conveyed, encumbered or leased by any beneficiary of this Program except to qualified Program beneficiaries as determined by the government agency concerned.
Should the beneficiary unlawfully sell, transfer, or otherwise dispose of his lot or any right thereon, the transaction shall be null and void. He shall also lose his right to the land, forfeit the total amortization paid thereon, and shall be barred from the benefits under this Act for a period of ten (10) years from the date of violation.

In the event the beneficiary dies before full ownership of the land is vested on him, transfer to his heirs shall take place only upon their assumption of his outstanding obligations. In case of failure by the heirs to assume such obligations, the land shall revert to the Government for disposition in accordance with this Act.

ARTICLE V
SOCIALIZED HOUSING

Section 15. Policy. – Socialized housing, as defined in Section 3 hereof, shall be the primary strategy in providing shelter for the underprivileged and homeless. However, if the tenurial arrangement in a particular socialized housing program is in the nature of leasehold or usufruct, the same shall be transitory and the beneficiaries must be encouraged to become independent from the Program within a given period of time, to be determined by the implementing agency concerned.

Section 16. Eligibility Criteria for Socialized Housing Program Beneficiaries. – To qualify for the socialized housing program, a beneficiary:
a) Must be a Filipino citizen;
b) Must be an underprivileged and homeless citizen, as defined in Section 3 of this Act;
c) Must not own any real property whether in the urban or rural areas; and
d) Must not be a professional squatter or a member of squatting syndicates.

Section 17. Registration of Socialized Housing Beneficiaries. – The Housing and Urban Development Coordinating Council, in coordination with the local government units, shall design a system for the registration of qualified Program beneficiaries in accordance with the Framework. The local government units, within one (1) year from the effectivity of this Act, shall identify and register all beneficiaries within their respective localities.

Section 18. Balanced Housing Development. – The Program shall include a system to be specified in the Framework plan whereby developers of proposed subdivision projects shall be required to develop an area for socialized housing equivalent to at least twenty percent (20%) of the total subdivision area or total subdivision project cost, at the option of the developer, within the same city or municipality, whenever feasible, and in accordance with the standards set by the Housing and Land Use Regulatory Board and other existing laws. The balanced housing development as herein required may also be complied with by the developers concerned in any of the following manner:

a) Development of new settlement;
b) Slum upgrading or renewal of areas for priority development either through zonal improvement programs or slum improvement and resettlement programs;
c) Joint-venture projects with either the local government units or any of the housing agencies; or
d) Participation in the community mortgage program.

Section 19. Incentives for the National Housing Authority. – The National Housing Authority, being the primary government agency in charge of providing housing for the underprivileged and homeless, shall be exempted from the payment of all fees and charges of any kind, whether local or national, such as income and real taxes. All documents or contracts executed by and in favor of the National Housing Authority shall also be exempt from the payment of documentary stamp tax and registration fees, including fees required for the issuance of transfer certificates of titles.

Section 20. Incentives for Private Sector Participating in Socialized Housing. – To encourage greater private sector participation in socialized housing and further reduce the cost of housing units for the benefit of the underprivileged and homeless, the following incentives shall be extended to the private sector:
a) Reduction and simplification of qualification and accreditation requirements for participating private developers;
b) Creation of one-stop offices in the different regions of the country for the processing, approval and issuance of clearances, permits and licenses: Provided, That clearances, permits and licenses shall be issued within ninety (90) days from the date of submission of all requirements by the participating private developers;
c) Simplification of financing procedures; and
d) Exemption from the payment of the following:
1) Project-related income taxes;
2) Capital gains tax on raw lands use for the project;
3) Value-added tax for the project concerned;
4) Transfer tax for both raw and completed projects; and
5) Donor’s tax for both lands certified by the local government units to have been donated for socialized housing purposes.

Provided, that upon application for exemption, a lien on that title of the land shall be annotated by the Register of Deeds: Provided, further, That the socialized housing development plan has already been approved by the appropriate government agencies concerned: Provided, finally, That all the savings acquired by virtue of this provision shall accrue in favor of the beneficiaries subject to the implementing guidelines to be issued by the Housing and Urban Development Coordinating Council.

Appropriate implementing guidelines shall be prepared by the Department of Finance, in consultation with the Housing and Urban Development Coordinating Council, for the proper implementation of the tax exemption mentioned in this section within one (1) year after the approval of this Act. Property owners who voluntarily provide resettlement sites to illegal occupants of their lands shall be entitled to a tax credit equivalent to the actual non-recoverable expenses incurred in the resettlement, subject to the implementing guidelines jointly issued by the Housing and Urban Development Coordinating Council and the Department of Finance.

Section 21. Basic Services. – Socialized housing or resettlement areas shall be provided by the local government unit or the National Housing Authority in cooperation with the private developers and concerned agencies with the following basic services and facilities:
a) Potable water;
b) Power and electricity and an adequate power distribution system;
c) Sewerage facilities and an efficient and adequate solid waste disposal system; and
d) Access to primary roads and transportation facilities.

The provision of other basic services and facilities such as health, education, communication, security, recreation, relief and welfare shall be planned and shall be given priority for implementation by the local government unit and concerned agencies in cooperation with the private sector and the beneficiaries themselves.
The local government unit, in coordination with the concerned national agencies, shall ensure that these basic services are provided at the most cost-efficient rates, and shall set a mechanism to coordinate operationally the thrusts, objectives and activities of other government agencies concerned with providing basic services to housing projects.

Section 22. Livelihood Component. – To the extent feasible, socialized housing and resettlement projects shall be located near areas where employment opportunities are accessible. The government agencies dealing with the development of livelihood programs and grant of livelihood loans shall give priority to the beneficiaries of the Program.

Section 23. Participation of Beneficiaries. – The local government units, in coordination with the Presidential Commission for the Urban Poor and concerned government agencies, shall afford Program beneficiaries or their duly designated representatives an opportunity to be heard and to participate in the decision-making process over matters involving the protection and promotion of their legitimate collective interests which shall include appropriate documentation and feedback mechanisms. They shall also be encouraged to organize themselves and undertake self-help cooperative housing and other livelihood activities. They shall assist the Government in preventing the incursions of professional squatters and members of squatting syndicates into their communities.
In instances when the affected beneficiaries have failed to organize themselves or form an alliance within a reasonable period prior to the implementation of the program or projects affecting them, consultation between the implementing agency and the affected beneficiaries shall be conducted with the assistance of the Presidential Commission for the Urban Poor and the concerned non-government organization.

Section 24. Consultation with Private Sector. – Opportunities for adequate consultation shall be accorded to the private sector involved in socialized housing project pursuant to this Act.

ARTICLE VI
AREAS FOR PRIORITY DEVELOPMENT, ZONAL IMPROVEMENT PROGRAM, SITES AND SLUM IMPROVEMENT AND RESETTLEMENT PROGRAM SITES

Section 25. Benefits. – In addition to the benefits provided under existing laws and other related issuances to occupants of areas for priority development, zonal improvement program sites and slum improvement and resettlement program site, such occupants shall be entitled to priority in all government projects initiated pursuant to this Act. They shall also be entitled to the following support services:
a) Land surveys and titling at minimal cost;
b) Liberalized terms on credit facilities and housing loans and one hundred percent (100%) deduction from every homebuyer’s gross income tax of all interest payments made on documented loans incurred for the construction or purchase of the homebuyer’s house;
c) Exemption from the payment of documentary stamp tax, registration fees, and other fees for the issuance of transfer certificate of titles;
d) Basic services as provided for in Section 21 of this Act; and
e) Such other benefits that may arise from the implementation of this Act.

ARTICLE VII
URBAN RENEWAL AND RESETTLEMENT

Section 26. Urban Renewal and Resettlement. – This shall include the rehabilitation and development of blighted and slum areas and the resettlement of Program beneficiaries in accordance with the provisions of this Act. On-site development shall be implemented whenever possible in order to ensure minimum movement of occupants of blighted lands and slum areas. The resettlement of the beneficiaries of the Program from their existing places of occupancy shall be undertaken only when on-site development is not feasible and after compliance with the procedures laid down in Section 28 of this Act.

Section 27. Action Against Professional Squatters and Squatting Syndicates. – The local government units, in cooperation with the Philippine National Police, the Presidential Commission for the Urban Poor (PCUP), and the PCUP-accredited urban poor organization in the area, shall adopt measures to identify and effectively curtail the nefarious and illegal activities of professional squatters and squatting syndicates, as herein defined. Any person or group identified as such shall be summarily evicted and their dwellings or structures demolished, and shall be disqualified to avail of the benefits of the Program. A public official who tolerates or abets the commission of the abovementioned acts shall be dealt with in accordance with existing laws.
For purposes of this Act, professional squatters or members of squatting syndicates shall be imposed the penalty of six (6) years imprisonment or a fine of not less than Sixty thousand pesos (P60,000) but not more than One hundred thousand pesos (P100,000), or both, at the discretion of the court.

Section 28. Eviction and Demolition. – Eviction or demolition as a practice shall be discouraged. Eviction or demolition, however, may be allowed under the following situations:
(a) When persons or entities occupy danger areas such as esteros, railroad tracks, garbage dumps, riverbanks, shorelines, waterways, and other public places such as sidewalks, roads, parks, and playgrounds;
(b) When government infrastructure projects with available funding are about to be implemented; or
(c) When there is a court order for eviction and demolition.
In the execution of eviction or demolition orders involving underprivileged and homeless citizens, the following shall be mandatory:
(1) Notice upon the effected persons or entities at least thirty (30) days prior to the date of eviction or demolition;
(2) Adequate consultations on the matter of resettlement with the duly designated representatives of the families to be resettled and the affected communities in the areas where they are to be relocated;
(3) Presence of local government officials or their representatives during eviction or demolition;
(4) Proper identification of all persons taking part in the demolition;
(5) Execution of eviction or demolition only during regular office hours from Mondays to Fridays and during good weather, unless the affected families consent otherwise;
(6) No use of heavy equipment for demolition except for structures that are permanent and of concrete materials;
(7) Proper uniforms for members of the Philippine National Police who shall occupy the first line of law enforcement and observe proper disturbance control procedures; and (8) Adequate relocation, whether temporary or permanent: Provided, however, That in cases of eviction and demolition pursuant to a court order involving underprivileged and homeless citizens, relocation shall be undertaken by the local government unit concerned and the National Housing Authority with the assistance of other government agencies within forty-five (45) days from service of notice of final judgment by the court, after which period the said order shall be executed: Provided, further, That should relocation not be possible within the said period, financial assistance in the amount equivalent to the prevailing minimum daily wage multiplied by sixty (60) days shall be extended to the affected families by the local government unit concerned.
The Department of the Interior and Local Government and the Housing an Urban Development Coordinating Council shall jointly promulgate the necessary rules and regulations to carry out the above provision.

Section 29. Resettlement. – Within two (2) years from the effectivity of this Act, the local government units, in coordination with the National Housing Authority, shall implement the relocation and resettlement of persons living in danger areas such as esteros, railroad tracks, garbage dumps, riverbanks, shorelines, waterways, and in other public places such as sidewalks, roads, parks and playgrounds. The local government unit, in coordination with the National Housing Authority, shall provide relocation or resettlement sites with basic services and facilities and access to employment and livelihood opportunities sufficient to meet the basic needs of the affected families.

Section 30. Prohibition Against New Illegal Structures. – It shall be unlawful for any person to construct any structure in areas mentioned in the preceding section.
After the effectivity of this Act, the barangay, municipal or city government units shall prevent the construction of any kind or illegal dwelling units or structures within their respective localities. The head of any local government unit concerned who allows, abets or otherwise tolerates the construction of any structure in violation of this section shall be liable to administrative sanctions under existing laws and to penal sanctions provided for in this Act.

ARTICLE VIII
COMMUNITY MORTGAGE PROGRAM

Section 31. Definition. – The Community Mortgage Program (CMP) is a mortgage financing program of the National Home Mortgage Finance Corporation which assists legally organized associations of underprivileged and homeless citizens to purchase and develop a tract of land under the concept of community ownership. The primary objective of the program is to assist residents of blighted or depressed areas to own the lots they occupy, or where they choose to relocate to, and eventually improve their neighborhood and homes to the extent of their affordability.

Section 32. Incentives. – To encourage its wider implementation, participants in the CMP shall be granted with the following privileges or incentives:
(a) Government-owned or controlled corporations and local government units, may dispose of their idle lands suitable for socialized housing under the CMP through negotiated salt at prices based on acquisition cost plus financial carrying costs;
(b) Properties sold under the CMP shall be exempted from the capital gains tax; and
(c) Beneficiaries under the CMP shall not be evicted nor dispossessed of their lands or improvements unless they have incurred arrearages in payments of amortizations for three (3) months.

Section 33. Organization of Beneficiaries. – Beneficiaries of the Program shall be responsible for their organization into associations to manage their subdivisions or places of residence, to secure housing loans under existing Community Mortgage Program and such other projects beneficial to them. Subject to such rules and regulations to be promulgated by the National Home Mortgage Finance Corporation, associations organized pursuant to this Act may collectively acquire and own lands covered by this Program. Where the beneficiaries fail to form an association by and among themselves, the National Home Mortgage Finance Corporation shall initiate the organization of the same in coordination with the Presidential Commission for the Urban Poor and the local government units concerned. No person who is not a bona fide resident of the area shall be a member or officer of such association.

ARTICLE IX
RELATED STRATEGIES

Section 34. Promotion of Indigenous Housing Materials and Technologies. – The local government units, in cooperation with the National Housing Authority, Technology and Livelihood Resource Center, and other concerned agencies, shall promote the production and use of indigenous, alternative, and low-cost construction materials and technologies for socialized housing.

Section 35. Transport System. – The local government units, in coordination with the Departments of Transportation and Communications, Budget and Management, Trade and Industry, Finance, and Public Works and Highways, the Home Insurance Guaranty Corporation, and other concerned government agencies, shall device a set of mechanisms including incentives to the private sector so that a viable transport system shall evolve and develop in the urban areas. It shall also formulate standards designed to attain these objectives:
(a) Smooth flow traffic;
(b) Safety and convenience of travel;
(c) Minimum use of land space;
(d) Minimum damage to the physical environment; and
(e) Adequate and efficient transport service to the people and goods at minimum cost.

Section 36. Ecological Balance. – The local government units shall coordinate with the Department of Environment and Natural Resources in taking measures that will plan and regulate urban activities for the conservation and protection of vital, unique and sensitive ecosystems, scenic landscapes, cultural sites and other similar resource areas.
To make the implementation of this function more effective, the active participation of the citizenry in environmental rehabilitation and in decision-making process shall be promoted and encouraged. The local government units shall recommend to the Environment and Management Bureau the immediate closure of factories, mines and transport companies which are found to be causing massive pollution.

Section 37. Population Movements. – The local government units shall set up an effective mechanism, together with the appropriate agencies like the Population Commission, the National Economic and Development Authority and the National Statistics Office, to monitor trends in the movements of population from rural to urban, urban to urban, and urban to rural areas. They shall identify measures by which such movements can be influenced to achieve balance between urban capabilities and population, to direct appropriate segments of the population into areas where they can have access to opportunities to improve their lives and to contribute to national growth and recommend proposed legislation to Congress, if necessary.
The Population Commission, the National Economic and Development Authority, and the National Statistics Office shall likewise provide advanced planning information to national and local government planners on population projections and the consequent level of services needed in particular urban and urbanizable areas. This service will include early-warning systems on expected dysfunctions in a particular urban area due to population increases, decreases, or age structure changes.

Section 38. Urban-rural Interdependence. – To minimize rural to urban migration and pursue urban decentralization, the local government units shall coordinate with the National Economic and Development Authority and other government agencies in the formulation of national development programs that will stimulate economic growth and promote socioeconomic development in the countryside.

ARTICLE X
PROGRAM IMPLEMENTATION

Section 39. Role of Local Government Units. – The local government units shall be charged with the implementation of this Act in their respective localities, in coordination with the Housing and Urban Development Coordinating Council, the national housing agencies, the Presidential Commission for the Urban Poor, the private sector and other non-government organizations.
They shall prepare a comprehensive land use plan for their respective localities in accordance with the provisions of this Act.

Section 40. Role of Government Housing Agencies. – In addition to their respective existing powers and functions, and those provided for in this Act, the hereunder mentioned housing agencies shall perform the following:
(a) The Housing and Urban Development Coordinating Council shall, through the key housing agencies, provide local government units with necessary support such as:
(1) Formulation of standards and guidelines as well as providing technical support in the preparation of town and land use plans;
(2) In coordination with the National Economic and Development Authority and the National Statistics Office, provide data and information for forward-planning by the local government units in their areas, particularly on projections as to the population and development trends in their localities and the corresponding investment programs needed to provide appropriate types and levels of infrastructure, utilities, services and land use patterns; and
(3) Assistance in obtaining funds and other resources needed in the urban development and housing programs in their areas or responsibility.
(b) The National Housing Authority, upon request of local government units, shall provide technical and other forms of assistance in the implementation of their respective urban development and housing programs with the objective of augmenting and enhancing local government capabilities in the provision of housing benefits to their constituents;
(c) The National Home Mortgage Finance Corporation shall administer the Community Mortgage Program under this Act and promulgate rules and regulations necessary to carry out the provisions of this Act; and
(d) The Home Insurance Guaranty Corporation shall design an appropriate guarantee scheme to encourage financial institutions to go into direct lending for housing.

Section 41. Annual Report. – The Housing and Urban Development Coordinating Council and the local government units shall submit a detailed annual report with respect to the implementation of this Act to the President and the Congress of the Republic of the Philippines.

ARTICLE XI
FUNDING

Section 42. Funding. – Funds for the urban development and housing program shall come from the following sources:
(a) A minimum of fifty percent (50%) from the annual net income of the Public Estates Authority, to be used by the National Housing Authority to carry out its programs of land acquisition for resettlement purposes under this Act;
(b) Proceeds from the disposition of ill-gotten wealth, not otherwise previously set aside for any other purpose, shall be applied to the implementation of this Act and shall be administered by the National Home Mortgage Finance Corporation;
(c) Loans, grants, bequests and donations, whether from local or foreign sources;
(d) Flotation of bonds, subject to the guidelines to be set by the Monetary Board;
(e) Proceeds from the social housing tax and, subject to the concurrence of the local government units concerned, idle lands tax as provided in Section 236 of the Local Government Code of 1991 and other existing laws;
(f) Proceeds from the sale of disposition of alienable public lands in urban areas; and
(g) Domestic and foreign investment or financing through appropriate arrangements like the build-operate-and-transfer scheme.

Section 43. Socialized Housing Tax. – Consistent with the constitutional principle that the ownership and enjoyment pf property bear a social function and to raise funds from the Program, all local government units are hereby authorized to impose an additional one-half percent (0.5%) tax on the assessed value of all lands in urban areas in excess of Fifty thousand pesos (P50,000).

ARTICLE XII
TRANSITORY PROVISIONS

Section 44. Moratorium on Eviction and Demolition. – There shall be a moratorium on the eviction of all program beneficiaries and on the demolition of their houses or dwelling units for a period of three (3) years from the effectivity of this Act: Provided, That the moratorium shall not apply to those persons who have constructed their structures after the effectivity of this Act and for cases enumerated in Section 28 hereof.

ARTICLE XIII
COMMON PROVISIONS

Section 45. Penalty Cause. – Any person who violates any provision of this Act shall be imposed the penalty of not more than six (6) years of imprisonment or a fine of not less than Five thousand pesos (P5,000) but not more than One hundred thousand pesos (P10,000), or both, at the discretion of the court: Provided, That, if the offender is a corporation, partnership, association or other juridical entity, the penalty shall be imposed on the officer or officers of said corporation, partnership, association or juridical entity who caused the violation.

Section 46. Appropriations. – The amount necessary to carry out the purposes of this Act shall be included in the annual budget of implementing agencies in the General Appropriations Act of the year following its enactment into law and every year thereafter.

Section 47. Separability Clause. – If for any reason, any provision of this Act is declared invalid or unconstitutional, the remaining provisions not affected thereby shall continue to be in full force and effect.
Section 48. Repealing Clause. – All laws, decrees, executive orders, proclamations, rules and regulations, and other issuances, or parts thereof which are inconsistent with the provisions of this Act, are hereby repealed or modified accordingly.

Section 49. Effectivity Clause. – This Act shall take effect upon its publication in at least two (2) national newspapers of general circulation.