DISCLAIMER: This article does not create an attorney-client relationship between the author and the reader.  The answer of the author on the issue is just an expression of his general opinion based on Philippine law and hence does not constitute legal advice.

The price of an untitled lot is quite lower than the price of a titled lot.  I have personally experienced this sometime in 2012 when I received an offer to buy a property somewhere in Aurora province. Because of the price difference, especially if the area is quite significant, you might be enticed to buy an untitled lot over a titled lot. 

Take the case below to discuss how one can protect his interest in buying untitled lot.

The Seller is selling two untitled lots (8,700 sqm) at PHP2,400 per sqm to the Company.  The Seller has presented the following documents to the Company:

a)    Current tax declaration

b)    History of previous tax declarations (issued starting from 1953)

c)    Technical description

d)    Certification from the CENRO

e)    Sketch plan signed by the Assessor.

The Seller is asking for a downpayment to facilitate the titling of the lots in his name and thereafter sell these to the Company.  The Company is interested. How can the Company go about it while protecting its interest?

To protect its interest and considering the amount of the selling price is substantial, the Company must conduct due diligence to check the following:

a)    Seller’s right over the two lots

b)    Registrability of the two lots under the Torrens System

c)    Assuming the two untitled lots are registrable, can these be acquired subsequently by the Company.

Except on the limitations imposed by law or contract, one has the right to dispose a thing if he is an owner thereof (Article 427 of the Civil Code). One of the documents presented to the Company as proof of ownership by the Seller is tax declaration (including its history starting in 1953).  In a catena of cases decided by the Supreme Court, tax declaration alone (no matter how long it has been issued) is not a competent proof of ownership.

Tax declarations and payment of real property tax are not conclusive evidence of ownership, nevertheless, they are good indicia of the possession in the concept of owner (Republic vs. Gielczyk, G.R. No. 179990, October 23, 2013).  It is only when these tax declarations are coupled with proof of actual possession of the property that they may become the basis of a claim of ownership.  To qualify as competent proof of the required possession, the possession must be open, continuous, exclusive and notorious (Republic vs. Northern Cement Corporation, 861 SCRA 50, G.R. No. 200256 April 11, 2018).

Possession is open when it is patent, visible, apparent, notorious and not clandestine. It is continuous when uninterrupted, unbroken and not intermittent or occasional; exclusive when the adverse possessor can show exclusive dominion over the land and an appropriation of it to his own use and benefit; and notorious when it is so conspicuous that it is generally known and talked of by the public or the people in the neighborhood. The phrase “adverse, continuous, open, public, and in concept of owner,” is a conclusion of law. The burden of proof is on the person seeking original registration of land to prove by clear, positive and convincing evidence that his possession and that of his predecessors-in-interest was of the nature and duration required by law (Republic vs. Northern Cement Corporation, 861 SCRA 50, G.R. No. 200256 April 11, 2018). 

Administrative legalization of imperfect title (or the agricultural free patent) is one of the modes of acquiring public lands.  Compared to judicial confirmation of imperfect title, administrative legalization is simpler as lawyer’s assistance may be dispensed with. Under this mode, the required possession must be at least 20 years of continuous occupation and cultivation, either personally or though his predecessors-in-interest (Section 44, CA 141, as amended by RA 11573).

For the Company in the instant case to validate whether the two untitled lots qualify for administrative legalization, it must require the Seller, in compliance with Section 44, CA 141, as amended by RA 11573, to submit the following:

a)    Proof that the two lots are alienable and disposable

b)    Proof that the applicant (Seller) is a natural-born citizen of the Philippines

c)    Proof that the applicant (Seller) has been at least 20 years of continuous occupation and cultivation of the two lots, either personally or through his predecessors-in-interest at the time the application is filed.

d)    Proof that the applicant (Seller)’s land holding does not exceed 12 hectares (including the area applied for when added)

e)    Proof of payment real property tax

The DENER, in its website (DENR.GOV.PH), has a checklist of requirements for the application of agricultural free patent.    The Seller must complete the documents stated in the checklist and must submit these to the Company to complete its evaluation on the Seller’s right to sell the two untitled lots and their registrability under the Torrens System.

The Company must conduct due diligence on the title or right of the Seller over the two lots to determine whether the requirements laid down by law are complied with.  Non-compliance of the requirements renders the grant of the free patent subject to attack.  The Supreme Court, in Heirs of Gregorio Lopez vs DBP (GR No. 193551, November 19, 2014) and in several other related cases, has consistently upheld the principle “No one can give what one does not have. A seller can only sell what he or she owns, or that which he or she does not own but has authority to transfer, and a buyer can only acquire what the seller can legally transfer.” 

Once it has been determined, based on the due diligence, that the Seller has the right to sell the two untitled lots and that these are registrable under the Torrens System, can these two lots be purchased by the Company after the grant of agricultural free patent? The answer is YES.  Section 3 of RA 11231 lifted previous restrictions under CA 141 on the encumbrance and alienation of land granted under free patent including restriction for corporations to acquire the same.  Agricultural free patent shall now be considered as title in fee simple and shall not be subject to any restriction on encumbrance or alienation. Hence, the company may later acquire the two lots.

As to the amount that the Seller is asking as downpayment, the Company may want to consider the amount of fee for the application of free patent and other expenses that the Seller might incur to facilitate the titling.  In the checklist of the DENR, the fee is only minimal.  Application fee of PHP50 and transfer fee of PHP10 per hectare but not less than PHP100, if applicable. 

(March 30, 2024)