Owning Real Estate In The Philippines
By Nick Tan, Fri Dec 9th

Who doesn't want to retire in paradise? Whiling the days away ina land of sun-drenched beaches, palm trees, and a relaxedculture is a dream many aspire to. And the dream can be a made areality by moving to an island in the Philippines. There is,however, the not-so-minor matter of owning the property you willlive on.

Like many countries that emerged from colonial rule in the 20thcentury, the Philippines is sensitive about foreign acquisitionof domestic assets, and has passed laws limiting land ownershipto Filipino citizens. While this has prevented foreignmega-corporations from snapping up prime real estate, it hasalso made things a little complicated for individuals seeking topurchase property for their own individual use.

Nonetheless, expatriates - who are welcomed by the government -can become de facto owners of land in the Philippines. So howdoes it work?

First, consider the limitations. The law stipulates that foreigninterests (be it individuals or corporations) may not own morethan 40 percent of Philippine land.

But for most individuals, owning 40 percent of a plot of land isnot good enough; you want to control all of your land. So how doyou get your hands on the remaining 60 percent?

The most common way around this problem is to put the propertyin the name of your spouse, partner, or friend. In particular,many male expats put their real assets into the names of theirFilipina wives and girlfriends. While doubtlessly easy andquick, this is not a wise option to pursue. Quite often, couplesor friends end up on bad terms, due to cultural differences,communication problems, or simply mutual incompatibility thatwasn't apparent at first (especially since many couples nowadaystend to meet via the Internet).

When that happens, the foreign party is left at the mercy of theFilipino party, which legally controls the property. You mightend up losing your wife, your house, and a place to stay all inone go. Hence I do not recommend putting the property in yourpartners name unless you have been married for at least tenyears.

A safer option is to form a paper company. A corporation can ownland, and you can own up to 40 percent of the corporation. Ifthe corporation is set up carefully, you can easily exercisecontrol over the corporation, thereby effectively controllingand owning the land. One person alone cannot incorporate acompany, and you will need Filipino incorporators who willtechnically own sixty percent of your company. Although you willbe providing all of the capital for the corporation, on paper itwill look as if your friends invested 60 percent to form thecompany.

The foreign national must ensure that the incorporators who ownsixty percent of the company are not only friendly to him/her,but - and this is very important - that they do not know eachother. If you get your friend and his or her relatives to signup for the entire sixty percent, you might end up with nothing,just as is the case when you put 100 percent of the property insomeone else's name. To prevent those who own 60 percent fromganging up on you and putting their clout together andsidelining you in your own company, it is critical that you askonly friends with no mutual

contact to become incorporators ofyour company. In addition, you can ask your acquaintance topre-sign a blank deed of sale for his/her shares in yourcompany. That way, if you have an eventual falling out, or youracquaintance moves abroad, you can easily transfer his/hershares to another friend.

The incorporation of a company can be handled by any competentattorney and costs about US $500, not including the show moneyrequired for the capitalization (which will have to sit in abank account for about a week). Perhaps the greatest difficultywill be the task of finding six people who know you well enoughto be willing to sign up as partial owners of your company.Since incorporators are liable for the activities of thecorporation they own, it is natural for people to be reluctantto sign up for ownership of a company controlled by anacquaintance whom one they know well.

A third loophole often exploited is to lease the property ratherthan to buy it. A perpetual lease can be arranged and, providedthe legal documentation has been handled by an experienced andable attorney, is a good way of controlling property. The onlyproblem is that it may feel somewhat insecure about living onland one doesn't technically own. It should be noted, however,that buildings can be owned irrespective of who owns the landthe building is on.

In addition to these methods, it is also possible to own realestate in the Philippines legally.

Foreigners may own 100 percent of a condominium unit - providedthe total foreign ownership of the condominium building does notexceed 40 percent. It's a little tricky since you will berelying on the developer to maintain the legality of yourownership by restricting the foreign ownership of thedevelopment to 40 percent. And there is the question of whathappens when individual owners of condo units start sellingtheir condos on the aftermarket.

One may own legally if one makes use of an offer by thePhilippine government. Foreign nationals may come to thePhilippines as an officially sanctioned immigrant, either aretiree, or an investor. The main drawback is that, in eithercase, a substantial amount of cash has to be placed in a dollartime deposit in the Philippines.

Details are available at the ThePhilippine Retirement Authority website; essentially you areallowed to own some land if you avail of a SRRVisa (SpecialResident Retiree's Visa). Under this program the foreignimmigrant is allowed to own up to 1,000 square meters of urban(residential) land or one hectare of rural (agricultural) land,but must be able to place USD 50,000 in a dollar-denominatedtime deposit in a bank in the Philippines. The SSRVisa is a goodprogram, but unfortunately there is a lot of paperwork toprocess and one must be able to put a big chunk of money on icewithout missing it.

In conclusion, while there are official restrictions in place, aserious buyer can easily avail of any number of methods toeffectively own land in the Philippines, and a future inparadise.

About the author:This article was written by consultant Nick Tan, an associatewith Zion Cebu RealEstate, a real estate brokerage based in Cebu City,Philippines. Feedback and comments are welcome; please go to theZion Cebu website for contact details.