If you are a foreigner or expat currently living in the Philippines or have plans of establishing residence in the Philippines, buying property is an option that you may want to seriously explore. Given the significantly improved state of the Philippine economy, the extensive increase in business activity and the continuing influx of foreign nationals in the country as a result of these activities, investing in Philippine properties may be an alternative that you may want to take to leverage on the excellent earnings potential your investment can bring.
But before undertaking any property investments, are you well-informed of the different rules covering property ownership by foreigners in the Philippines?
Not a few foreign nationals, both expats based here and those living in their home countries, have asked us about the rules governing property ownership by foreigners in the Philippines. A lot of them would like to take advantage of the excellent investment opportunity presented by the Philippine real estate market but most of them would first like to have some guidelines and be aware of any restrictions that we may have with regards to property ownership by foreign nationals.
Following are some of the more important aspects of property ownership that foreigners or expats should be aware of and be guided with:
Foreigners cannot own land in the Philippines. Foreigners married to a Filipina/Filipino who want to acquire land usually have their Filipino spouse purchase the land instead. Title to the land cannot, however, be placed in the name of the foreigner but must be placed under the name of the Filipino spouse. Please take note that lands purchased before the 1935 constitution are not covered by the land ownership restriction.
Corporations that are at least 60% Filipino-owned are allowed to buy land in the Philippines. Foreigners may set up a Philippine corporation in the Philippines to be able to own land, residential house and lot and commercial buildings. However, foreigners contemplating the acquisition of real estate through this route must consider the provisions of the Philippines Anti-Dummy Law. A major restriction in this Law is the limitation on the membership on the Board of Directors to 40% alien participation. At risk when the law is breached is the possible forfeiture of the properties owned by the corporation.
Foreigners can purchase condominium units. The Condominium Act of the Philippines, R.A. 4726, expressly allows foreigners to acquire condominium units and shares in condominium corporations up to not more than 40 % of the total and outstanding capital stock of a Filipino-owned or controlled condominium corporation.
A foreigner who is a legal or natural heir may acquire property through hereditary succession. Let’s take the example of a foreigner who is married to a Filipino spouse. If his/her spouse dies, the foreigner as natural heir will inherit the deceased spouse’s properties and shall be given a reasonable amount of time to dispose of the property and collect the proceeds. Otherwise, the property will be passed on to any Filipino heirs and/or relatives.
Purchase of property by natural-born Filipinos who have already acquired foreign citizenship shall be subject to the limitations prescribed by law. They are entitled to own only up to 1,000 square meters of land and up to 1 hectare agricultural or farm land in the Philippines. In case of married couples, one or both of the spouses may avail of the privilege provided that the total acquisition does not exceed the maximum area allowed by law. However, those who acquire dual citizenship under the provisions of Republic Act 9225 will enjoy the same full property ownership rights and privileges enjoyed by Filipinos.
Filipinos who are married to foreigners and who retain their Filipino citizenship are allowed to buy land in the Philippines. However once these Filipinos renounce their Filipino citizenship they shall lose this privilege and be subject to the property ownership laws governing foreigners.
Foreigners or foreign corporations investing in the Philippines are allowed to lease land on a long term basis. Under the Investor’s Lease Act of the Philippines, a foreigner or a foreign corporation with more than 40% foreign ownership may lease land for up to 50 years, with an option to renew for another 25 years.
Foreigners may legally own a house or building in the Philippines as long as the land on which the house or building is built is not owned by the foreigner. The foreigner may instead lease the land as mentioned above, and build a house or building on the leased land.
If you are a foreign national or expat considering the acquisition of property in the Philippines, now is the time to do it so as to take advantage of the excellent investment opportunity the country now offers. It will serve you best, though, to be aware of the various laws governing Philippine property ownership by foreigners to ensure that any real estate transaction you get into is legitimate and will not pose any legal problems for you later on. We advise you to undertake due diligence and consult with property specialists and/or legal counsel, if necessary, before you proceed with a particular real estate transaction in order to protect your interests.