Common ways of Conveying Real Properties

Conveyance refers to the act of transferring property, including real estate, from one party to another. This transfer can be voluntary or mandated by law.

There are various methods of conveying real properties. Let's discuss three of the most common methods used in the Philippines.

Sale: The most common way to transfer real property is through a sale, executed by a Deed of Absolute Sale (DoAS) between the seller and the buyer.

In this process, the seller transfers their rights over the property to the buyer in exchange for an agreed amount or obligations, granting the buyer full ownership and rights over the property.

The agreement must clearly state the property’s details, such as the Transfer Certificate of Title (TCT) or Condominium Certificate of Title (CCT) number, technical description, lot area, floor area of improvements (e.g., house or condo unit), property address/location, and any other relevant terms and conditions to avoid any ambiguity.

According to Article 1490 of the Civil Code of the Philippines, spouses cannot sell their share of the property to each other unless a separation of property was agreed upon in their marriage settlement or there is a judicial separation of property under Article 191.

Donation: Another method of conveying real property is through donation. For a donation to be considered valid under the Civil Code, certain legal conditions must be met. These conditions include:

1. The recipient of the property (donee) must accept the donation either personally or through an authorized representative with a special power of attorney or a general and sufficient power.
2. The notarized deed must specify the property and the value of any charges the donee must satisfy.
3. Acceptance must occur during the lifetimes of both the donor and the donee. This acceptance must be documented in the same or separate notarized documents, with the donor being notified and this notification noted in both instruments.

Succession: Ownership of real property can be transferred to heirs or third parties upon the decedent's death.

1. Legal or Intestate Succession: If there is no Will, or the Will is void or incomplete, the estate is divided among legitimate and illegitimate children, relatives, the spouse, or the State. Legitimate children and the surviving spouse are primary heirs, with illegitimate children receiving half the share of legitimate children.
2. Testamentary Succession: If the deceased prepared a Will, the estate is distributed according to the designated heirs. If only part of the estate is covered by the Will, it results in mixed succession.
3. Estate Distribution:

• Legitimate children receive half the estate, equally divided, with the other half (the "free portion") available for non-compulsory heirs.
• The surviving spouse gets one-fourth if there is one legitimate child, or an equal share to each child if there are multiple children, taken from the free portion.
• Illegitimate children receive half the share of legitimate children from the free portion.
• Parents or ascendants receive half the estate if there are no legitimate children or descendants.

Tax Comparison

The taxable value is based on the selling price, fair market or zonal values, net of allowable deductions, whichever is higher.

The current rate is pegged at six percent for both capital gains tax (for sales) and donor’s tax (donation) except if the latter’s total net gift value during the same calendar year is P250,000 or less, in which case the transaction is tax exempt. Tax on donation to relatives and non-relatives/strangers are no longer distinguished by law, i.e. uniform tax rate applies, since the effectivity of the TRAIN Law in January 1, 2018.

The Estate Tax rate is based at the time of the decedent’s death, but since the above same date, is set at six percent. Prior to that however, different tax rates were set during varying periods.

Given the above complexities, it is best to tap the services of an experienced lawyer, tax advisor and or broker.?

Are you a property owner who has properties for sale in Metro Manila? List with me. Contact me at +639175998085 or you may email at [email protected]