REPUBLIC ACT No.

9646 (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
AN ACT REGULATING THE PRACTICE OF REAL ESTATE the additions or improvements on, above or below the ground.
SERVICE IN THE PHILIPPINES, CREATING FOR THE PURPOSE A (d) "Real estate development project" means the development of land
PROFESSIONAL REGULATORY BOARD OF REAL ESTATE for residential, commercial, industrial, agricultural, institutional or
SERVICE, APPROPRIATING FUNDS THEREFOR AND FOR OTHER recreational purposes, or any combination of such including, but not
PURPOSES limited to, tourist resorts, reclamation projects, building or housing
projects, whether for individual or condominium ownership, memorial
Be it enacted by the Senate and House of Representatives of the parks and others of similar nature.
Philippines in Congress assembled:: (e) "Real estate developer" refers to any natural or juridical person
engaged in the business of developing real estate development project
ARTICLE I for his/her or its own account and offering them for sale or lease.
TITLE, DECLARATION OF POLICY AND DEFINITION OF TERMS (f) "Real property" includes all the rights, interests and benefits related
Section 1. Title. - This Act shall be known as the. "Real Estate to the ownership of real estate.
Service Act of the Philippines". (g) "Real estate service practitioners" shall refer to and consist of the
Section 2. Declaration of Policy. - The State recognizes the vital role following:
of real estate service practitioners in the social political, economic (1) Real estate consultant - a duly registered and licensed -natural
development and progress of the country by promoting the real estate person who, for a professional fee, compensation or other valuable
market, stimulating economic activity and enhancing government consideration, offers or renders professional advice and judgment on: (i)
income from real property-based transactions. Hence, it shall develop the acquisition, enhancement, preservation, utilization or disposition of
and nurture through proper and effective regulation and supervision a lands or improvements thereon; and (ii) the conception, planning,
corps of technically competent, responsible and respected professional management and development of real estate projects.
real estate service practitioners whose standards of practice and (2) Real estate appraiser- a duly registered and licensed natural person
service shall be globally competitive and will promote the growth of the who, for a professional fee, compensation or other valuable
real estate industry. consideration, performs or renders, or offers to perform services in
Section 3. Definition of Terms. - As used in this Act, the following estimating and arriving at an opinion of or acts as an expert on real
terms shall mean: estate values, such services of which shall be finally rendered by the
(a) "Appraiser" also known as valuer, refers to a person who conducts preparation of the report in acceptable written form.
valuation/appraisal; specifically, one who possesses the necessary (3) Real estate assessor - a duly registered and licensed natural person
qualifications, license, ability and experience to execute or direct the who works in a local government unit and performs appraisal and
valuation/appraisal of real property. assessment of real properties, including plants, equipment, and
(b) "Assessor" refers to an official in the local government unit, who machineries, essentially for taxation purposes.
performs appraisal and assessment of real properties, including plants, (4) Real estate broker - a duly registered and licensed natural person
equipment, and machineries, essentially for taxation purposes. This who, for a professional fee, commission or other valuable consideration,
definition also includes assistant assessors. acts as an agent of a party in a real estate transaction to offer,
advertise, solicit, list, promote, mediate, negotiate or effect the meeting (d) Maintain a comprehensive and updated register of licensed real
of the minds on the sale, purchase, exchange, mortgage, lease or joint estate service professionals;
venture, or other similar transactions on real estate or any interest (e) Monitor the conditions affecting the practice of real estate service
therein. and adopt such measures as may be proper for the enhancement of
(5) Real estate salesperson - a duly accredited natural person who the profession and/or the maintenance of high professional, ethical and
performs service for, and in behalf of. a real estate broker who is technical standards;
registered and licensed by the Professional Regulatory Board of Real (f) Adopt a national Code of Ethics and Responsibilities to be strictly
Estate Service for or in expectation of a share in the commission, observed by all licensed real estate service practitioners;
professional fee, compensation or other valuable consideration. (g) Hear or investigate any violation of this Act, its implementing rules
ARTICLE II and regulations, and the Code of Ethics and Responsibilities for real
PROFESSIONAL REGULATORY BOARD OF REAL ESTATE estate service practitioners and issue subpoena and subpoena duces
SERVICE tecum to secure the appearance of witnesses and the production of
Section 4. Creation and Composition of the Board. - There is documents in connection therewith;
hereby created a Professional Regulatory Board of Real Estate Service, (h) Safeguard and protect legitimate and licensed real estate service
hereinafter referred to as the Board, under the supervision and practitioners and, in coordination with the accredited and integrated
administrative control of the Professional Regulation Commission professional organization of real estate service practitioners, monitor all
(PRC), hereinafter referred to as the Commission, composed of a forms of advertisements, announcements, signboards, billboards,
chairperson and four (4) members who shall be appointed by the pamphlets, brochures and others of similar nature concerning real
President of the Philippines from the three (3) recommendees chosen estate and, where necessary, exercise its quasi-judicial and
by the Commission from a list of five (5) nominees per position administrative powers to finally and completely eradicate the pernicious
submitted by the accredited and integrated professional organization of practices of unauthorized or unlicensed individuals;
real estate service practitioners: Provided, That two (2) of the members (i) Prescribe, in cooperation with the Commission on Higher Education
of the Board shall represent the government assessors and appraisers. (CHED) or the concerned state university or college, the essential
The first Board shall be organized within six (6) months from the requirements as to the curricula and facilities of schools, colleges or
effectivity of this Act. universities seeking permission to open academic courses or already
Section 5. Powers and Functions of the Board. - The Board is offering such courses in real estate service, and to see to it that these
hereby vested the following powers and functions: requirements, including the employment of qualified faculty members,
(a) Provide comprehensive policy guidelines for the promotion and are properly complied with;
development of the real estate industry; (j) Promulgate, .administer and enforce rules and regulations necessary
(b) Conduct licensure examinations for the practice of the real estate in carrying out the provisions of this Act;
service profession and prescribe the appropriate, syllabi of the subjects (k) Supervise and regulate the registration, licensure and practice of
for examination; real estate service in the Philippines;
(c) Issue, suspend, revoke or reinstate, after due notice and hearing, (l) Assess and fix the rate of reasonable regulatory fees;
certificates of registration or professional identification cards for the (m) Administer oaths and affirmations;
practice of real estate service; (n) Adopt an official seal of the Board;
(o) Evaluate periodically the status of real estate service education and preparation for the licensure examination are being offered or
profession, and recommend and/or adopt measures to upgrade and conducted; and
maintain its high standard; (f) Of good moral character, and must not have been convicted by final
(p) Prescribe guidelines and criteria for the Continuing Professional judgment by a competent court of a criminal offense involving moral
Education (CPE) program for real estate service practitioners in turpitude.
consultation with the accredited and integrated professional Section 7. Term of Office. - The chairperson and the members of the
organization of real estate service practitioners; Board shall hold office for a term of three (3) years from the date of
(q) Screen, issue and monitor permits to organizations of real estate their appointment and until their successor/s shall have been
professionals in the conduct of seminars and accredit such seminars appointed: Provided, That the members of the first appointed Board
pursuant to the CPE program, as well as the instructors or lecturers shall hold office for the following terms: one (1) member as chairperson,
therein, for the purpose of upgrading the quality and knowledge of the to serve for three (3) years; two (2) members, to serve for two (2) years;
profession; and two (2) members, to serve for one (1) year.
(r) Monitor and supervise the activities of the accredited and integrated The chairperson and the members of the Board may be reappointed for
professional organization and other associations of real estate service a second term but in no case shall he/she serve continuously for more
practitioners; and than six (6) years. Any vacancy in the Board shall be filled for the
(s) Discharge such other powers, duties and functions as the unexpired portion of the term of the member who vacated the position.
Commission may deem necessary to carry out the provisions of this Act. On the constitution of the first Board, the chairperson and the members
The policies, resolutions and rules and regulations issued or of the Board shall automatically be registered and issued certificates of
promulgated by the Board shall be subject to the review and approval registration and professional identification cards. Each member of the
by the Commission. However, the Board's decisions, resolutions or Board shall take the proper oath of office prior to the assumption of duty.
orders which are not interlocutory, rendered in an administrative case, Section 8. Compensation and Allowances of the Chairperson and
shall be subject to review by the Commission only on appeal. Members of the Board. - The chairperson and the members of the
Section 6. Qualifications of the Chairperson and Members of the Board shall receive compensation and allowances comparable to the
Board. - The chairperson and the members of the Board shall, at the compensation and allowances received by the chairman and the
time of their appointment, possess the following qualifications: members of existing professional regulatory boards under the
(a) A citizen and resident of the Philippines; Commission, as provided for in the General Appropriations Act.
(b) A holder of a bachelor's degree related to real estate; Section 9. Removal of the Chairperson and Members of the
(c) An active licensed practitioner of real estate service for at least ten Board. - The chairperson or any member of the Board may be
(10) years prior to his/her appointment; suspended or removed by the President of the Philippines, upon the
(d) A bona fide member in good standing of the accredited and recommendation of the Commission, for neglect of duty; abuse of
integrated professional organization of real estate service practitioners power; oppression; incompetence; unprofessional, unethical, immoral
but not an officer or trustee at the time of his/her appointment; or dishonorable conduct; commission or toleration of irregularities in the
(e) Neither be a member of the faculty of an institute, school, college or conduct of examination or tampering of the grades therein, or for any
university, nor have any pecuniary interest, direct or indirect, in any final judgment or conviction of any criminal offense involving moral
institution or association where review classes or lectures in turpitude.
Section 10. Supervision of the Board, Custodian of its Records, management system and real property laws; and any other related
Secretariat and Support Services. - The Board shall be under the subjects as may be determined by the Board;
general supervision and administrative control of the Commission. All (b) For real estate appraisers - fundamentals of real estate principles
records of the Board, including applications for examination, and practices; standards and ethics; theories and principles in appraisal;
examination papers and results, minutes of deliberations, administrative human and physical geography; methodology of appraisal approaches;
and other investigative cases involving real estate service practitioners, valuation procedures and research; appraisal of machinery and
shall be kept by the Commission. The Commission shall designate the equipment; practical appraisal mathematics; appraisal report writing;
secretary of the Board and shall provide the secretariat and other real estate finance and economics; case studies; land management
support services to implement the provisions of this Act subject to the system and real property laws; and any other related subjects as may
usual government accounting and auditing rules and regulations. be determined by the Board; and
Section 11. Annual Report. - The Board shall, at the close of each (c) For real estate brokers - fundamentals of property ownership; code
calendar year, submit an annual report to the Commission, giving a of ethics and responsibilities; legal requirements for real estate service
detailed account of its proceedings and accomplishments during the practice; real estate brokerage practice; subdivision development;
year and recommending measures to be adopted with the end-in-view condominium concept; real estate finance and economics; basic
of upgrading and improving the conditions affecting the practice of real principles of ecology; urban and rural land use; planning, development
estate service in the Philippines. and zoning; legal aspect of sale, mortgage and lease; documentation
ARTICLE III and registration; real property laws; and any other related subjects as
LICENSURE EXAMINATION AND REGISTRATION may be determined by the Board.
Section 12. Licensure Examination. - Every applicant seeking to be To conform with technological and modern developments, the Board
registered and licensed as a real estate service practitioner, except a may recluster, rearrange, modify, add to, or exclude any of the
real estate salesperson, shall undergo an examination as provided for foregoing subjects as may be necessary.
in this Act. Examinations for the practice of real estate service in the Section 14. Qualification of Applicants for Examinations. - In order
Philippines shall be given by the Board at least once every year in such to be admitted to the licensure examination for real estate service, a
places and dates as the Commission may designate. candidate shall, at the time of filing his/her application, establish to the
Section 13. Scope of Examination. - An examination shall be given to satisfaction of the Board that he/she possesses the following
the licensure applicants for real estate brokers, real estate appraisers qualifications:
and real estate consultants which shall include, but not limited to, the (a) A citizen of the Philippines;
following: (b) A holder of a relevant bachelor's degree from a state university or
(a) For real estate consultants - fundamentals of real estate consulting; college, or other educational institution duly recognized by the
standards and ethics; consulting tools and techniques, which include CHED: Provided, That as soon as a course leading to a Bachelor's
project feasibility study and investment measurement tools; real estate degree in Real Estate Service is implemented by the CHED, the Board
finance and economics; real estate consulting and investment analyses; shall make this course a requirement for taking the "licensure
consulting for specific engagement, which includes consulting for examination; and
commercial, industrial, recreation and resort and hotel properties, and (c) Of good moral character, and must not have been convicted of any
consulting for government and corporate and financial institutions; land crime involving moral turpitude: Provided, That an applicant for the
licensure examination for real estate consultants must show proof that offense involving moral turpitude or has been found guilty of immoral or
he/she has at least ten (10) years experience as a licensed real estate dishonorable conduct after investigation by the Board, or has been
broker or an assessor, or as a bank or institutional appraiser or an found to be psychologically unfit.
employed person performing real property valuation, or at least five (5) Section 19. Revocation or Suspension of the Certificate of
years experience as a licensed real estate appraiser. Registration and the Professional Identification Card or
All applications for examination shall be filed with the Board which shall Cancellation of Special/Temporary Permit. - The Board may, after
assess and approve said applications and issue to the qualified giving proper notice and hearing to the party concerned, revoke the
examinees the corresponding permits to take such examination. certificate of registration and the professional identification card, or
Section 15. Ratings in the Examination. - In order that a candidate cancel the special/temporary permit of a real estate service practitioner,
may be deemed to have successfully passed the examination, he/she or suspend him/her from the practice of the profession on any of the
must have obtained an average of at least seventy-five percent (75%) following instances hereunder:
in all subjects, with no rating below fifty percent (50%) in any subject. (a) Procurement of a certificate of registration and/or professional
Section 16. Release of the Results of Examination. - The results of identification card, or special/temporary permit by fraud or deceit;
the licensure examination shall be released by the Board within ten (10) (b) Allowing an unqualified person to advertise or to practice the
days from the last day of the examination. profession by using one's certificate of registration or professional
Section 17. Issuance of the Certificate of Registration and identification card, or special/temporary permit;
Professional Identification Card. - A certificate of registration shall be (c) Unprofessional or unethical conduct;
issued to examinees who pass the licensure examination for real estate (d) Malpractice or violation of any of the provisions of this Act, its
service subject to payment of fees prescribed by the Commission. The implementing rules and regulations, and the Code of Ethics and
certificate of registration shall bear the signature of the chairperson of Responsibilities for real estate service practitioners; and
the Commission and the chairperson and the members of the Board, (e) Engaging in the practice of the profession during the period of one's
stamped with the official seal of the Commission, indicating that the suspension.
person named therein is entitled to practice the profession with all the Section 20. Registration Without Examination, - Upon application
benefits and privileges appurtenant thereto. This certificate of and payment of the required fees, the following shall be registered, and
registration shall remain in full force and effect until revoked or shall be issued by the Board and the Commission a certificate of
suspended in accordance with this Act. registration and a professional identification card without taking the
A professional identification card bearing the registration number, date prescribed examination:
of issuance and expiry date, duly signed by the chairperson of the (a) Those who, on the date of the effectivity of this Act, are already
Commission, shall likewise be issued to every registrant upon payment licensed as real estate brokers, real estate appraisers or real estate
of the required fees. The professional identification card shall be consultants by the Department of Trade and Industry (DTI) by virtue of
renewed every three (3) years and upon satisfying the requirements of Ministry Order No. 39, as amended: Provided, That they are in active
the Board such as, but not limited to, attendance in the CPE program. practice as real estate brokers, real estate appraisers and real estate
Section 18. Refusal to Register. - The Board shall not register and consultants, and have undertaken relevant CPE to the satisfaction of
issue a certificate of registration to any successful examinee who has the Board;
been convicted by a court of competent jurisdiction of any criminal
(b) Assessors and appraisers who, on the date of the effectivity of this mutilated ones, subject to the rules as may be promulgated by the
Act, hold permanent appointments and are performing actual appraisal Board.
and assessment functions for the last five (5) years, have passed the Section 22. Roster of Real Estate Service Practitioners. - The Board,
Real Property Assessing Officer (RPAO) examination conducted and in coordination with the integrated professional organization of real
administered by the Civil Service Commission (CSC) in coordination estate service practitioners, shall prepare, update and maintain a roster
with the Department of Finance (DOF), and have undertaken relevant of real estate service practitioners which shall contain the names of all
CPE to the satisfaction of the Board; and registered real estate service practitioners, their residence and office
(c) Assessors and appraisers who, on the date of the effectivity of this addresses, license number, dates of registration or issuance of
Act, hold permanent appointments and have at least ten (10) years certificates, and other data which.the Board may deem pertinent.
actual experience in real property appraisal or assessment and have Copies thereof shall be made available to the public upon request.
completed at least one hundred twenty (120) hours of accredited Section 23. Issuance of Special/Temporary Permit. - Upon
training on real property appraisal conducted by national or application and payment of the required fees and. subject to the
international appraisal organizations or institutions/entities recognized approval of the Commission, the Board may issue special/temporary
by the Board and relevant CPE to the satisfaction of the Board. permit to real estate service practitioners from foreign countries whose
Those falling under categories (b) and (c) shall register with the Board services are urgently needed in the absence or unavailability of local
after they shall have complied with the requirements for registration as real estate service^ practitioners for the purpose of promoting or
real estate appraisers: Provided, That those seeking to be licensed to a enhancing the practice of the profession in the Philippines.
new credential level shall be required to take the pertinent licensure Section 24. Foreign Reciprocity. - No foreign real estate service
examination. practitioner shall be admitted to the licensure examination or be given a
Those so exempt under the aforementioned categories shall file their certificate of registration or a professional identification card, or be
application within two (2) years from the effectivity of this Act: Provided, entitled to any of the privileges under this Act unless the country of
That the renewal of the professional identification card is subject to the which he/she is a citizen specifically allows Filipino real estate service
provisions of Section 17 hereof. practitioners to practice within its territorial limits on the same basis as
Section 21. Reinstatement, Reissuance or Replacement of citizens of such foreign country.
Certificate of Registration, Professional Identification Card and ARTICLE IV
Special/Temporary Permit. - The Board may, after the expiration of PRACTICE OF REAL ESTATE SERVICE
two (2) years from the date of revocation of a certificate of registration Section 25. Oath. - All successful examinees qualified for registration
and/or professional identification card, and upon application, and all qualified applicants for registration without examination as well
compliance with the required CPE units, and for reasons deemed as accredited salespersons shall be required to take an oath before any
proper and sufficient, reinstate any revoked certificate of registration member of the Board or any officer of the Commission duly authorized
and reissue a suspended professional identification card and in so by the Commission to administer oaths prior to entering into the
doing, may, in its discretion, exempt the applicant from taking another practice of real estate service in the Philippines.
examination. Section 26. Professional Indemnity Insurance/Cash or Surety
A new certificate of registration, professional identification card or Bond. - All real estate brokers and private real estate appraisers shall,
special/temporary permit may be issued to replace lost, destroyed or in addition to the oath referred to in the preceding section, be required
to post a professional indemnity insurance/cash or surety bond, identification card or a valid special/temporary permit duly issued to
renewable every three (3) years, in an amount to be determined by the him/her by the Board and the Commission, and in the case of real
Board, which in no case shall be less than Twenty thousand pesos estate brokers and private appraisers, they have paid the required bond
(P20,000.00), without prejudice to the additional requirement of the as hereto provided.
client. Section 30. Positions in Government Requiring the Services of
Section 27. Acts Constituting the Practice of Real Estate Service. - Registered and Licensed Real Estate Service Practitioners. - Within
Any single act or transaction embraced within the provisions of Section three (3) years from the effectivity of this Act, all existing and new
3(g) hereof, as performed by real estate service practitioners, shall positions in the national and local governments, whether career,
constitute an act of engaging in the practice of real estate service. permanent, temporary or contractual, and primarily requiring the
Section 28. Exemptions from the Acts Constituting the Practice of services of any real estate service practitioner, shall be filled only by
Real Estate Service. - The provisions of this Act and its rules and registered and licensed real estate service practitioners.
regulations shall not apply to the following": All incumbent assessors holding permanent appointments shall
(a) Any person, natural or juridical, who shall directly perform by continue to perform their functions without need for re appointment and
himself/herself the acts mentioned in Section 3 hereof with reference to without diminution of status, rank and salary grade, and shall enjoy
his/her or its own property, except real estate developers; security of tenure. However, they may not be promoted to a higher
(b) Any receiver, trustee or assignee in bankruptcy or insolvency position until they meet the qualification requirements of that higher
proceedings; position as herein prescribed. Nothing in this Act shall be construed to
(c) Any person acting pursuant to the order of any court of justice; reduce any benefit, interest, or right enjoyed by the incumbents at the
(d) Any person who is a duly constituted attorney-in-fact for purposes of time of the enactment of this Act. The appointing authority shall
sale, mortgage, lease or exchange, or other similar contracts of real exercise his power to appoint the assessor in accordance with the
estate, without requiring any form of compensation or remuneration; provisions of this Act only when a vacancy occurs.
and Section 31. Supervision of Real Estate Salespersons. - For real
(e) Public officers in the performance of their official duties and estate salespersons, no examination shall be given, but they shall be
functions, except government assessors and appraisers. accredited by the Board: Provided, That they have completed at least
Section 29. Prohibition Against the Unauthorized Practice of Real two (2) years of college and have undergone training and seminars in
Estate Service. - No person shall practice or offer to practice real real estate brokerage, as may be required by the Board. Real estate
estate service in the Philippines or offer himself/herself as real estate salespersons shall be under the direct supervision and accountability of
service practitioner, or use the title, word, letter, figure or any sign a real estate broker. As such, they cannot by themselves be signatories
tending to convey the impression that one is a real estate service to a written agreement involving a real estate transaction unless the
practitioner, or advertise or indicate in any manner whatsoever that one real estate broker who has direct supervision and accountability over
is qualified to practice the profession, or be appointed as real property them is also a signatory thereto. No real estate salesperson, either
appraiser or assessor in any national government entity or local directly or indirectly, can negotiate, mediate or transact any real estate
government unit, unless he/she has satisfactorily passed the licensure transaction for and in behalf of a real estate broker without first securing
examination given by the Board, except as otherwise provided in this an authorized accreditation as real estate salesperson for the real
Act, a holder of a valid certificate of registration, and professional 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 Subject to the provisions of the Labor Code, a corporation or
estate salesperson when he/she has not secured the required partnership may hire the services of registered and licensed real estate
accreditation from the Board prior to such employment. brokers, appraisers or consultants on commission basis to perform real
No salesperson shall be entitled to receive or demand a fee, estate services and the latter shall be deemed independent contractors
commission or compensation of any kind from any person, other than and not employees of such corporations.
the duly licensed real estate broker who has direct control and Section 33. Display of License in the Place of Business. - Every
supervision over him, for any service rendered or work done by such registered and licensed real estate service practitioner shall establish
salesperson in any real estate transaction. and maintain a principal place of business and such other branch
No violation of this provision shall be a cause for revocation or offices as may be necessary, and shall conspicuously display therein
suspension of the certificate of registration of the real estate broker the original and/or certified true copies of his/her certificate of
unless there was actual knowledge of such violation or the broker registration as well as the certificates of registration of all the real estate
retains the benefits, profits or proceeds of a transaction wrongfully service practitioners employed in such office.
negotiated by the salesperson. Section 34. Accreditation and Integration of Real Estate Service
Section 32. Corporate Practice of the Real Estate Service. - Associations. - All real estate service associations shall be integrated
(a) No partnership or corporation shall engage in the business of real into one (1) national organization, which shall be recognized by the
estate service unless it is duly registered with the Securities and Board, subject to the approval of the Commission, as the only
Exchange Commission (SEC), and the persons authorized to act for the accredited and integrated professional organization of real estate
partnership or corporation are all duly registered and licensed real service practitioners.
estate brokers, appraisers or consultants, as the case may be. The A real estate service practitioner duly registered with the Board shall
partnership or corporation shall regularly submit a list of its real estate automatically become a member of the accredited and integrated
service practitioners to the Commission and to the SEC as part of its professional organization of real estate service practitioners, and shall
annual reportorial requirements. There shall at least be one (1) licensed receive the benefits and privileges appurtenant thereto. Membership in
real estate broker for every twenty (20) accredited salespersons. the accredited and integrated professional organization of real estate
(b) Divisions or departments of partnerships and corporations engaged service practitioners shall not be a bar to membership in other
in marketing or selling any real estate development project in the associations of real estate service practitioners.
regular course of business must be headed by full-time registered and Section 35. Code of Ethics and Responsibilities for Real Estate
licensed real estate brokers. Service Practitioners. - The Board shall adopt and promulgate the
(c) Branch offices of real estate brokers, appraisers or consultants must Code of Ethics and Responsibilities for real estate service practitioners
be manned by a duly licensed real estate broker, appraiser or which shall be prescribed and issued by the accredited and integrated
consultant as the case may be. professional organization of real estate service practitioners.
In case of resignation or termination from employment of a real estate Section 36. Continuing Professional Education (CPE) Program. -
service practitioner, the same shall be reported by the employer to the The Board shall develop, prescribe and promulgate guidelines on CPE
Board within a period not to exceed fifteen (15) days from the date of upon consultation with the accredited and integrated professional
effectivity of the resignation or termination. 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 Section 40. Appropriations. - The chairperson of the Professional
Board, subject to the approval of the Commission. The Board shall Regulation Commission shall immediately include in the Commission's
create a CPE Council that shall be composed of a chairperson coming programs the implementation of this Act, the funding of which shall be
from the Board, a member from the accredited and integrated included in the annual General Appropriations Act and thereafter.
professional organization of real estate service practitioners and a Section 41. Transitory Provision. - Within ninety (90) days from the
member from the academe. effectivity of this Act, the DTI - Bureau of Trade Regulation and
Section 37. Enforcement Assistance to the Board. - The Board shall Consumer Protection (BTRCP) shall transfer all pertinent records,
be assisted by the Commission in carrying out the provisions of this Act documents and other materials to the Professional Regulatory Board of
and its implementing rules and regulations and other policies. The Real Estate Service.
lawyers of the Commission shall act as prosecutors against illegal Section 42. Implementing Rules and Regulations. - Within six (6)
practitioners and other violators of this Act and its rules. The duly months after the effectivity of this Act, the Commission, together with
constituted authorities of the government shall likewise assist the Board the Board and the accredited and integrated professional organization
and the Commission in enforcing the provisions of this Act and its rules. of real estate service practitioners, the Department of Finance, and the
Section 38. Indication of the Certificate of Registration, CHED, shall prepare the necessary rules and regulations, including the
Professional Identification Card/License Number, Privilege Tax Code of Ethics and Responsibilities for real estate service practitioners,
Receipt (PTR) Number and Accredited Professional Organization needed to implement the provisions of this Act.
(APO) Number. - Real estate service practitioners shall be required to Section 43. Separability Clause. - If any clause, sentence, paragraph
indicate the certificate of registration, professional identification card, or part of this Act shall be declared unconstitutional or invalid, such
PTR number, and APO receipt number, and the date of issuance and judgment shall not affect, invalidate or impair any other part of this Act.
the duration of validity on the documents he/she signs, uses or issues Section 44. Repealing Clause. -
in connection with the practice of his/her profession. (a) Sections 3(e) and (ee) of Act No. 2728, as amended by Act No.
ARTICLE V 3715 and Act No. 3969, Sections 472 and 473 of the Local Government
PENAL AND FINAL PROVISIONS Code of 1991 (Republic Act No. 7160), and pertinent provisions of the
Section 39. Penal Provisions, - Any violation of this Act, including Civil Service Law are hereby modified accordingly.
violations of implementing rules and regulations, shall be meted the (b) All laws, decrees, executive orders, department or memorandum
penalty of a fine of not less than One hundred thousand pesos orders and other administrative issuances or parts thereof which are
(P100,000.00) or imprisonment of not less than two (2) years, or both inconsistent with the provisions of this Act are hereby modified,
such fine and imprisonment upon the discretion of the court. In case the superseded or repealed accordingly.
violation is committed by an unlicensed real estate service practitioner, Section 45. Effectivity. - This Act shall take effect fifteen (15) days
the penalty shall be double the aforesaid fine and imprisonment. following its publication in the Official Gazette or in a major daily
In case the violation is committed, by a partnership, corporation, newspaper of general circulation in the Philippines.
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.
11 November 2012 Prepared By: Fatima O. Dalangin
Notes on Implementing Rules and Regulations
Republic Act No. 9646  Residential Members:
Real Estate Service Act Law (RESA Law)  Commercial  Ho. Ramon C. Cuervo
 Industrial  Hon. Bansan C. Choa
“AN ACT REGULATING THE PRACTICE OF RE o Renders professional advice  Agricultural  Hon. Rafael M. Fajardo
SERVICE IN THE PHILIPPINES, CREATING FOR and judgment on  Institutional  Hon. Florencio C. Dino II
THE PURPOSE A PRB-RES, APPROPRIATING  Acquisition,  Recreational
FUNDS THEREFORE AND FOR OTHER enhancement,  Or combinations  Appointed by the President from the
PURPOSES” preservation, utilization
three recommenders chosen by PRC
or disposition of lands  Real Estate Developer from a list of five nominees per position
Beginning Date: 28 July 2008 and or improvements o Juridical or natural person submitted by AIPO
Declaration of Policy:  Conception, planning, o Engaged in the business of  2 members of the board must be
 Vital role of RE service practitioners in management and developing RE development government assessors or appraisers,
social, political, economic development development of real projects for his/her or its own who are both in active service.
and progress of the country estate projects account and offering then for Qualifications of the Chairperson and Members
o by contributing to the taxes sale or lease of the Board:
such as withholding/capital gain  RE Appraiser/Valuer
 Citizen and resident of the Philippines
tax, transfer tax and real o Duly registered and licensed Accredited and Integrated Professional  Holder of BS degree duly related to real
property tax natural person with ability and Organization (AIPO) – PHILRES estate
o Good economy = political and experience o PRBRES Resolution No. 19  A bona fide member in good standing of
social stability o Expert in real estate values series 2011 AIPO but not an officer or trustee at the
o Hence, there Is a need to o Services of which shall be finally o Date of publication Official time of his/her appointment
develop through proper and rendered by preparation of Gazette: 14 November 2011
effective regulations and report in an acceptable written  Neither a member of the faculty of an
o Date Effective: 30 November institution, nor have any pecuniary
supervision a corps of form 2011
technically competent, interest, direct or indirect, in any
o 2 petitioners as AIPO: institution or association where review
responsible and respected  RE Assessor  Federation of Real
professional RE service classes or lectures are being offered or
o Duly registered and licensed Association, Inc (FRESA)
practitioners whose standards conducted
natural person  Philippine Institute of
of practice and service shall be Terms of Office:
o Works in a local government Real Estate Service
globally competitive and will unit  3 years from the date of their
Practitioners (PHILRES)
promote the growth of the RE o Performs appraisal and appointment and until their successor
o Resolution states that: All duly
industry assessment of real estate has been appointed
registered RE practitioners shall
properties, including plants,  Reappointment: may be reappointed
automatically become
Definition of Terms: equipment and machineries for for a second term
members of AIPO
 Real Property taxation purposes  Not more than six years
o The board shall issue a
o RE + Rights, interests and (continuously)
Resolution on the membership
benefits and obligations of  RE Broker  Any vacancies in the board shall be
and payment of fess for as a
owning a real estate property o Duly registered and licensed filled for the unexpired portion of the
requirement for the renewal of
natural person term of the member that vacated the
PRC IDs
 Real Estate o Agent of a party in a real estate position.
o Membership to AIPO shall not
o Land and all those attached to transaction  All the members of the board shall
be a bar to membership in
the land automatically be registered and issued
other assocications of RESPs
o Physical, tangible entity  RE Salesperson Certificates of Registration and
o See attachment for more details
together with the additions and o Duly accredited natural person Professional ID cards
improvements on, above or o Performs on behalf of a PROFESSIONAL REGULATORY BOARD OF REAL  Each Member shall take the proper
below the ground. registered and licensed RE ESTATE SERVICE (PRB-RES) oath of office prior to the assumption of
broker duties.
 RE Consultant Chairperson: Hon. EDURADO G. ONG
o Duly registered and licensed  Real Estate Development Project
natural person o Development of land for:
  Members of the 1st appointed Board  Supervise and regulate registration, o Abuse of power estate subjects and training from
shall hold office for the following terms: license and practice of RES in the o Oppression accredited service providers. Provided
 Chairperson: 3years Philippines o Incompetence further, as soon as BS in RE is
 2Members: 2years  Assess and fix rate of reasonable o Unprofessional, unethical implemented, the said course will be a
 2Members: 1year regulatory fees conduct requirement for taking the licensure
DUTIES:  Administer oaths and affirmations o Immoral, dishonourable examination
 Provides guidelines for RE service  Prescribe guidelines and criteria for the conduct  GMC
practice CPE (Continuing Professional Education) o Commission and toleration of  RE Consultants: at least years
 Conducts licensure examinations program in consultation with AIPO irregularities in the examination experience as RE broker, assessor, or as
 Prescribe syllabi for examination  Screen, issue and monitor permits to o Moral turpitude a bank or institutional appraiser, or at
 Issue, suspend, revoke or reinstate after organizations conducting seminars least 5 years experience as a licensed
due notice and hearing, certificates of  Monitor and supervise AIPO and other Supervising of the Board appraiser.
registration or professional ID cards associations of RESP  The board shall be under the general
 Maintain comprehensive and updated  Discharge such powers, duties and supervision and administration control Required Documents (ORIGINAL and
register of licensed RE service functions as the commission may deem of PRC PHOTOCOPY)
professionals necessary to carry out the provisions of  All records shall be kept by PRC  NSO Birth Certificate or valid Philippine
 Monitor conditions affecting the RA 9646  PRC will designate the secretary of the Passport, or any proofs of citizenship
practice of RES and adopt measures for Board at the office, and shall provide  TOR and/or diploma – with scanned
the enhancement of profession and/or **NOTE: policies, resolutions, rules and secretariat and other support services picture, and noted “FOR BOARD EXAM
maintenance of high professional, regulations issued or promulgated by the subject to usual government accounting PURPOSE”
ethical and technical standards. BOARD shall be subject to the review and and auditing rules and regulations  NBI Clearance (6months validity)
 Adopt national code of ethics issued by approval by the COMMISSION. However, the  Community Tax Certificate (Cedula)
AIPO to be strictly followed by all Board’s decision, resolutions or order which are Annual Report  4pcs Passport sized colored pictures
licensed RES practitioners not interlocutory, rendered in administrative  At the close of each calendar year (with full name tag and white
 Hear or investigate any violations of RA case, shall be subject to review by the  Submitted to PRC background)
9646, national code of ethics, and COMMISSION only on appeal, in accordance to  Includes detailed account of its  Notarized accredited seminar and/or
responsibilities of RESP, and issue RA 8981 and its IRR proceedings and accomplishments training certificate
subpoena to secure appearance of during the year, recommending  notarized certificate by employer of
witnesses and the production of Compensation and allowances of Chairperson measures to be adopted his/her years of experience or pre-
documents in connection therewith and Members requisite Certification of Registration
 Safeguard and protect legitimate and  Compensation and allowances are LICENSURE EXAMINATION AND REGISTRATION (COR) and/or Professional ID Card (PIC)
licensed RESP in coordination with comparable to the compensation and Scope of Examination: or DTI license (for RE Consultants)
AIPO, and exercise its quasi-judicial and allowances received by the chairman  Consultants and Appraisers:
administrative powers to eradicate the and the members of existing PRB under o COMMON SCOPE: Standards Rating in Examination
practice of unauthorized or unlicensed PRC as provided by General and Ethics  average of 75% in all subjects, with no
individuals Appropriations Act, Salary  Appraisers and Brokers: rating below 50% in any subject
 Prescribe in cooperation with CHED the Standardization Law, Joint Circular o COMMON SCOPE: Real Estate  Reports of rating may be distributed
essential requirements as to curriculum issued by PRC and DBM and Economics during mass oath taking
and facilities of schools or universities Removal of Chairperson and Members of the
seeking permission to open academic Board **NOTE: The Board may re-cluster, rearrange, Release of Results
courses in real estate service, and to  May be suspended or removed by the modify, add to, or exclude as may be necessary  Within 10 days form the last day of
see that these requirements including President upon the recommendation of examination
the employment of qualified faculty PRC and after due notice and hearing in Qualification of applicants for Examination
members are properly complied with proper administrative investigation  A citizen of Philippines
 Promulgate, administer and enforce conducted by PRC on the following  Holder of relevant BS degree recognized
rules and regulations in carrying out RA grounds: by CHED, Provided, he/she has
9646 o Neglect of duty completed 120 credit units of real
Certificate of Registration and Professional ID o Malpractice or violation of RA with DOF, and have undertaken  Original and Photocopy of NSO
Cards 9646, Code of Ethics and relevant CPE Marriage Certificate/Contract of
 Certificate of Registration Responsibilities for RESP  Assessors and appraisers who, on the Marriage
o Shall be issued to passed o Engaging in practice during date of the effectivity of RA 9646 or as  4 passport size colored photos with
examinees suspension of 30 July 2009, hold permamnent complete nametag in white background
o Subject to fees prescribed by appointments and have at least 10  Original and Photocopy of community
the PRC Registration without Examination years actual experience in real property tax certificate (CTC)
o Shall bear the signature of the  As of 30 July 2009, or on the date of the appraisal and assessment and have  Surety bond (RE brokers and private RE
Chairperson OF PRC and effectivity of RA 9646, already licensed completed 120 hours of accredited appraisers)
Chairperson indicating that the RE practitioners by DTI. Provided, they training on real property appraisal
person named therein is are in active practice and have conducted by international or national Reinstatement, Re-issuance or replacement of
entitled to practice the undertaken relevant CPE or Continuing appraisal organizations or institution, Certificate of Registration, Personal ID Card,
profession with all the benefits Education Program (CEP). Provided duly accredited by DOF, GOCC and Special Temporary Permit
and privileges appurtenant further, (Government Owned and Controlled  After expiration of 2years from the date
thereto o Any holder of valid DTI licensed Corporations) of revocation of a certificate of
 Professional ID Cards who has earned 15 CEP or CPE **shall register with the Board after they have registration or professional ID card, and
o Bears the registration Number, credit units complied with the requirements for registration upon application and compliance with
date of issuance and expiry o Failed to renew their DTI license and have completed 24 CPE credit units. required CPE units, reinstate and
date prior 30 July 2009 but have Provided, those seeking to be licensed to a new revoked certificate of registration and
o Duly signed by the Chairperson earned 24 CEP credit units from credential level shall be required to take the reissue a suspended professional ID
of PRC accredited service provider licensure examination card, exempt the applicant from taking
o Shall be renewed every 3years (MO. 39) or CPE credit units another examination. Provided that,
and upon satisfying the from CPE Council Accredited Documents to be submitted for application for the Board shall issue a resolution
requirements and of satisfying Provider from 2007 to 30 July registration without examination subject to the approval of PRC in
the requirements of the Board 2011  Original and Photocopy of NSO Birth granting a petition for reinstatement to
(CPE Program) o Passed the 2008 and 2009 certificate or valid Philippine Passport the practice of RES profession
licensure examination given by  Original and Photocopy of COR  NEW CERTICATE OF REGISTRATION AND
Refusal to Register DTI but who had to obtain (Certificate of Registration) and/or PROFESSIONAL ID CARD/ SPECIAL
 Convicted of moral turpitude or has license, and who have earned Professional ID Card (PIC) or DTI TEMPORARY PERMIT: may be issued in
been found guilty of immoral or 15 CEP or CPE credit units Licenses place of lost, destroyed, mutilated ones
dishonourable conduct, or has been o Passed the DTI licensed and  DTI Certification of Rating (for those upon payment of the required fees
found out to be psychologically unfit who have earned 120 CPE or who passed the exams but without
CEP credit units their license) Roster of RESP
Revocation/Suspension of Certificate of **RE practitioners falling above-described  Original and photocopy of NBI  The board together with AIPO shall
Registration and Professional ID Cards or categories who failed to comply with the clearance prepare and update roster
Cancellation of Special/Temporary Permit necessary CPE requirements within 2 years after  Duly notarized CEP/CPE certification o Contains: names, residence and
 After due notice and hearing effectivity of RA 9646, on or before 30 July 2011,  Civil Service Commission Certification, office address, license numbers,
 Grounds: shall be required to take the Board licensure DOF, or any other national government date of registration or issuance
o Fake Certificate of Registration examination agencies or GOCC Certification of certifications
and or professional ID Cards  Assessors and appraisers who, on the (Assessors or government appraisers), o Shall be available to the public
o Unprofessional or unethical date of the effectivity of RA 9646 or as or any certification of accredited upon request
conduct of 30 July 2009, hold permamnent seminar/training provider
o Allowing unqualified person to appointments and are performing  Appointment papers and service Issuance of Special/Temporary Permit
advertise/practice by using actual appraisal and assessment records to prove appraisal and  RESP from foreign countries whose
one’s certificate of functions for the last 5 years, have assessment experience (assessors or service is urgently needed in the
registration/professional ID passed RPAO (Real Property Assessing government appraisers) absence or unavailability of local RESP
card/special/temporary permit Officer) exam conducted by CSC (Civil
Service Commission) in coordination
  Purpose: promote or enhance the RESP Prohibition Against Unauthorized Practice of wrongfully negotiated by the o May hire RE broker, appraiser,
practice in the Philippines RES salesperson consultants on commission basis to
 No person shall practice or offer to  Registered with DTI/HLURB or other perform real estate services
Foreign Reciprocity practice RES in the Philippines or offer salesperson who are in active practice o Re consultants shall be deemed
 No foreign RESP shall be admitted to himself as RES practitioner without for at least 3 years, as may be certified independent contractors and not
licensure examination, given a passing the licensure examination by a licensed broker or RE developer employees of such corporations
certificate of registration or o Undergo 120 training hours in
professional ID cards, be issued a Positions in Government Requiring the real estate brokerage Display of License in Place of Business
special/temporary permit unless the Services of Registered and Licensed RESP o Have submitted original NDO o Every registered and licensed RESP shall
country of which he/she is a citizen of  Within 3years from the effectivity of RA birth certificate, NBI clearance, establish and maintain a principal place
allows Filipino RESP to practice within 9646 certificate of educational of business and shall conspicuously
its territorial limits on the same basis as  All existing and new positions (career, attainment, notarized display therein the original and/or
the citizens of such foreign country permanent, temporary or contractual certificate of training/seminar, certified true copies of his certificate of
shall be filled only by registered and notarized certificate of their registration and professional ID cards as
Practice of RES Practice licensed RESPs supervising licensed brokers well as of those employed in t=such
Oath  All incumbent assessors holding  Shall be accredited by the Board: office
 All qualified examines for registration, permanent appointments shall continue o 2 years of college
all qualified applicants for registration to perform their duties without need o 12 credit units in real estate Code of Ethics and Responsibilities of
without examination and accredited for reappointment and diminution of brokerage RESPs
salesperson status, rank, salary grade, and shall o Board shall adopt and promulgate the
 Mass oath taking may be initiated and enjoy security of tenure. However, they Corporate Practice of Real Estate Service Code of Ethics and Responsibilities for
supervised by the board in coordination may not be promoted to a higher o Partnership and corporation shall be RESPs
with AIPO position until they meet the duly registered with SEC (securities and o Prescribed and issued by AIPO
Professional Indemnity Insurance Cash/Surety requirements of that higher position Exchange Commission)
Bond o Persons authorized to act for the Continuing Education Program
 For RE brokers and appraisers Supervision of Real Estate Salesperson partnership or corporation are all duly o The board shall create CPE Council
 20,000.00 without prejudice to the  Cannot be signatories to a written registered and licensed RE brokers, o shall be composed of:
additional requirement of the client agreement involving real estate appraisers or consultants  chairperson coming
 Renewable every 3 years transactions unless the broker who has o Shall regularly submit a list of its RES from the board
direct supervision over them is also a practitioners bot the PRC and SEC as  member of AIPO
Exemption form the Acts Constituting the signatory part of its annual reportorial  Member of Academe
practice of RES  Need to secure authorized accreditation requirements
 Any natural/juridical person who shall as a real estate salesperson for the RE o 1 licensed broker for every 20 Enforcement Assistance of the Board
directly perform by himself the acts broker before negotiation, mediating, accredited salesperson o Lawyers of PRC shall act as prosecutors
with reference to his own property transacting any real estate transaction o 1 full-time registered and licensed RE against illegal practitioners and other
(except RE developers who are for and in behalf of the broker broker for divisions or departments violators
regulated by Housing and Land Use  Is not entitled to receive or demand a engaged in marketing or selling any RE o The duly constitute authorities of the
Regulatory Board (HLURB)) fee, commission or competition of any DEVELOPMENT PROJECT government shall likewise assist the
 Receiver, trustee or assignee in kind from any person other than the o Branch offices of RE brokers, appraisers, Board and PRC in enforcing the
bankruptcy or insolvency proceedings duly licensed RE broker who has direct consultants must be manned by a duly provisions
 Attorney-in-fact without requiring any control and supervision over him licensed RE broker, appraiser or
 No violation of this provision shall be a consultant, as the case may be Indication of the Certificate of Registration,
form of compensation or remuneration
o Resignation of RESP from employment, Professional ID Card/License Number, PTR
 Public officers in the performance of cause for revocation or suspension of
registration of RE broker unless there the employer must report it to the (privilege Tax Receipt) Number, AIPO
their public duties and functions, except
was actual knowledge of such violations Board within 15days from the date of Membership Number
government assessors and appraisers
or the broker retains the benefits, effectivity of the o And/or the date of issuance and
profits or proceeds of a transaction resignation/termination duration of validity on the
documentation he signs, uses, issues in
 connection with the practice of his
profession

Penal Provision
o Fine: 100,000.00 and/ or imprisonment
of 2years (Licensed practitioners)
o Fine: 200,000.00 and/or imprisonment
of 4years (unlicensed person)
o In case of partnership, corporation,
association or any other juridical person
o Partner, president, director or
manager shall be held liable
and responsible for the acts as
principal or as a co-principal
with the other participants
Appropriation
o PRC chairperson shall include in the
Commission’s programs the funding
o Included in the annual General
Appropriation Act

Transitory Provision
o Ninety days from the effectivity of RA
9646, DTI-BTRCP (Bureau of Trade and
Regulation and Consumer Protection)
shall transfer all pertinent records,
documents and other materials to
PRBRES
 This web page contains the Book II of
Republic Act No. 386
June 18, 1949
The Civil Code of the Philippines
AN ACT TO ORDAIN AND INSTITUTE THE CIVIL CODE OF THE
PHILIPPINES

BOOK II

PROPERTY, OWNERSHIP, AND ITS MODIFICATIONS

Home Title I. - CLASSIFICATION OF PROPERTY PRELIMINARY

PROVISIONS
Main Index
Art. 414. All things which are or may be the object of appropriation are
Law Library
considered either:
Laws, Statutes & Codes
(1) Immovable or real property; or

Supreme Court Decisions

(2) Movable or personal property. (333)

CHAPTER 1
IMMOVABLE PROPERTY

PHILIPPINE CIVIL LAW Art. 415. The following are immovable property:

(1) Land, buildings, roads and constructions of all kinds adhered

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to the soil;
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(2) Trees, plants, and growing fruits, while they are attached to
BOOK II (FULL TEXT) : CIVIL CODE OF THE PHILIPPINES : the land or form an integral part of an immovable;
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(3) Everything attached to an immovable in a fixed manner, in
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such a way that it cannot be separated therefrom without
breaking the material or deterioration of the object;
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 (4) Statues, reliefs, paintings or other objects for use or (2) Real property which by any special provision of law is
ornamentation, placed in buildings or on lands by the owner of the considered as personal property;
immovable in such a manner that it reveals the intention to attach
(3) Forces of nature which are brought under control by science;
them permanently to the tenements;
and
(5) Machinery, receptacles, instruments or implements intended
(4) In general, all things which can be transported from place to
by the owner of the tenement for an industry or works which may
place without impairment of the real property to which they are
be carried on in a building or on a piece of land, and which tend
fixed. (335a)
directly to meet the needs of the said industry or works;

Art. 417. The following are also considered as personal property:

(6) Animal houses, pigeon-houses, beehives, fish ponds or
breeding places of similar nature, in case their owner has placed (1) Obligations and actions which have for their object movables
them or preserves them with the intention to have them or demandable sums; and
permanently attached to the land, and forming a permanent part
of it; the animals in these places are included; (2) Shares of stock of agricultural, commercial and industrial
entities, although they may have real estate. (336a)
(7) Fertilizer actually used on a piece of land;
Art. 418. Movable property is either consumable or nonconsumable. To
(8) Mines, quarries, and slag dumps, while the matter thereof
the first class belong those movables which cannot be used in a manner
forms part of the bed, and waters either running or stagnant;
appropriate to their nature without their being consumed; to the second

(9) Docks and structures which, though floating, are intended by class belong all the others. (337)

their nature and object to remain at a fixed place on a river, lake,

or coast;
CHAPTER 3

(10) Contracts for public works, and servitudes and other real PROPERTY IN RELATION TO THE PERSON TO WHOM IT BELONGS

rights over immovable property. (334a)

CHAPTER 2 Art. 419. Property is either of public dominion or of private ownership.

(338)
MOVABLE PROPERTY

Art. 420. The following things are property of public dominion:

Art. 416. The following things are deemed to be personal property:

(1) Those intended for public use, such as roads, canals, rivers,

(1) Those movables susceptible of appropriation which are not torrents, ports and bridges constructed by the State, banks,

included in the preceding article; shores, roadsteads, and others of similar character;
 (2) Those which belong to the State, without being for public use, things enumerated in Chapter 1 and Chapter 2.
and are intended for some public service or for the development
Whenever the word "muebles," or "furniture," is used alone, it shall not
of the national wealth. (339a)
be deemed to include money, credits, commercial securities, stocks and
Art. 421. All other property of the State, which is not of the character bonds, jewelry, scientific or artistic collections, books, medals, arms,
stated in the preceding article, is patrimonial property. (340a) clothing, horses or carriages and their accessories, grains, liquids and
merchandise, or other things which do not have as their principal object
Art. 422. Property of public dominion, when no longer intended for
the furnishing or ornamenting of a building, except where from the
public use or for public service, shall form part of the patrimonial
context of the law, or the individual declaration, the contrary clearly
property of the State. (341a)
appears. (346a)

Art. 423. The property of provinces, cities, and municipalities is divided

Title II. - OWNERSHIP
into property for public use and patrimonial property. (343)

Art. 424. Property for public use, in the provinces, cities, and CHAPTER 1

municipalities, consist of the provincial roads, city streets, municipal OWNERSHIP IN GENERAL

streets, the squares, fountains, public waters, promenades, and public

works for public service paid for by said provinces, cities, or Art. 427. Ownership may be exercised over things or rights. (n)
municipalities.
Art. 428. The owner has the right to enjoy and dispose of a thing,
All other property possessed by any of them is patrimonial and shall be
without other limitations than those established by law.
governed by this Code, without prejudice to the provisions of special
laws. (344a) The owner has also a right of action against the holder and possessor of
the thing in order to recover it. (348a)
Art. 425. Property of private ownership, besides the patrimonial
property of the State, provinces, cities, and municipalities, consists of Art. 429. The owner or lawful possessor of a thing has the right to
all property belonging to private persons, either individually or exclude any person from the enjoyment and disposal thereof. For this
collectively. (345a) purpose, he may use such force as may be reasonably necessary to
repel or prevent an actual or threatened unlawful physical invasion or
usurpation of his property. (n)
PROVISIONS COMMON TO THE THREE PRECEDING CHAPTERS
Art. 430. Every owner may enclose or fence his land or tenements by
means of walls, ditches, live or dead hedges, or by any other means
Art. 426. Whenever by provision of the law, or an individual declaration,
without detriment to servitudes constituted thereon. (388)
the expression "immovable things or property," or "movable things or
property," is used, it shall be deemed to include, respectively, the Art. 431. The owner of a thing cannot make use thereof in such manner
as to injure the rights of a third person. (n) Art. 438. Hidden treasure belongs to the owner of the land, building, or
other property on which it is found.
Art. 432. The owner of a thing has no right to prohibit the interference
of another with the same, if the interference is necessary to avert an Nevertheless, when the discovery is made on the property of another,
imminent danger and the threatened damage, compared to the damage or of the State or any of its subdivisions, and by chance, one-half
arising to the owner from the interference, is much greater. The owner thereof shall be allowed to the finder. If the finder is a trespasser, he
may demand from the person benefited indemnity for the damage to shall not be entitled to any share of the treasure.
him. (n)
If the things found be of interest to science of the arts, the State may
Art. 433. Actual possession under claim of ownership raises disputable acquire them at their just price, which shall be divided in conformity
presumption of ownership. The true owner must resort to judicial with the rule stated. (351a)

process for the recovery of the property. (n)

Art. 439. By treasure is understood, for legal purposes, any hidden and
Art. 434. In an action to recover, the property must be identified, and unknown deposit of money, jewelry, or other precious objects, the
the plaintiff must rely on the strength of his title and not on the lawful ownership of which does not appear. (352)

weakness of the defendant's claim. (n)

CHAPTER 3
Art. 435. No person shall be deprived of his property except by RIGHT OF ACCESSION GENERAL PROVISIONS
competent authority and for public use and always upon payment of
just compensation.
Art. 440. The ownership of property gives the right by accession to
Should this requirement be not first complied with, the courts shall everything which is produced thereby, or which is incorporated or
protect and, in a proper case, restore the owner in his possession. (349a) attached thereto, either naturally or artificially. (353)

Art. 436. When any property is condemned or seized by competent SECTION 1. - Right of Accession with Respect to What is
authority in the interest of health, safety or security, the owner thereof Produced by Property
shall not be entitled to compensation, unless he can show that such
condemnation or seizure is unjustified. (n)
Art. 441. To the owner belongs:
Art. 437. The owner of a parcel of land is the owner of its surface and
(1) The natural fruits;
of everything under it, and he can construct thereon any works or make
any plantations and excavations which he may deem proper, without (2) The industrial fruits;
detriment to servitudes and subject to special laws and ordinances. He
(3) The civil fruits. (354)
cannot complain of the reasonable requirements of aerial navigation.
(350a)
Art. 442. Natural fruits are the spontaneous products of the soil, and
the young and other products of animals. or works being destroyed. However, if the landowner acted in bad faith,
the owner of the materials may remove them in any event, with a right
Industrial fruits are those produced by lands of any kind through
to be indemnified for damages. (360a)
cultivation or labor.
Art. 448. The owner of the land on which anything has been built, sown
Civil fruits are the rents of buildings, the price of leases of lands and
or planted in good faith, shall have the right to appropriate as his own
other property and the amount of perpetual or life annuities or other
the works, sowing or planting, after payment of the indemnity provided
similar income. (355a)
for in Articles 546 and 548, or to oblige the one who built or planted to

Art. 443. He who receives the fruits has the obligation to pay the pay the price of the land, and the one who sowed, the proper rent.

expenses made by a third person in their production, gathering, and However, the builder or planter cannot be obliged to buy the land if its

preservation. (356)
value is considerably more than that of the building or trees. In such
case, he shall pay reasonable rent, if the owner of the land does not
Art. 444. Only such as are manifest or born are considered as natural choose to appropriate the building or trees after proper indemnity. The
or industrial fruits. parties shall agree upon the terms of the lease and in case of
disagreement, the court shall fix the terms thereof. (361a)
With respect to animals, it is sufficient that they are in the womb of the
mother, although unborn. (357) Art. 449. He who builds, plants or sows in bad faith on the land of
another, loses what is built, planted or sown without right to indemnity.
SECTION 2. - Right of Accession with Respect to Immovable
(362)
Property

Art. 450. The owner of the land on which anything has been built,
planted or sown in bad faith may demand the demolition of the work, or
Art. 445. Whatever is built, planted or sown on the land of another and
that the planting or sowing be removed, in order to replace things in
the improvements or repairs made thereon, belong to the owner of the
their former condition at the expense of the person who built, planted
land, subject to the provisions of the following articles. (358)
or sowed; or he may compel the builder or planter to pay the price of
Art. 446. All works, sowing, and planting are presumed made by the the land, and the sower the proper rent. (363a)

owner and at his expense, unless the contrary is proved. (359)

Art. 451. In the cases of the two preceding articles, the landowner is
Art. 447. The owner of the land who makes thereon, personally or entitled to damages from the builder, planter or sower. (n)

through another, plantings, constructions or works with the materials of

Art. 452. The builder, planter or sower in bad faith is entitled to
another, shall pay their value; and, if he acted in bad faith, he shall also
reimbursement for the necessary expenses of preservation of the land.
be obliged to the reparation of damages. The owner of the materials
(n)
shall have the right to remove them only in case he can do so without
injury to the work constructed, or without the plantings, constructions Art. 453. If there was bad faith, not only on the part of the person who
built, planted or sowed on the land of another, but also on the part of another estate, the owner of the land to which the segregated portion
the owner of such land, the rights of one and the other shall be the belonged retains the ownership of it, provided that he removes the
same as though both had acted in good faith. same within two years. (368a)

It is understood that there is bad faith on the part of the landowner Art. 460. Trees uprooted and carried away by the current of the waters
whenever the act was done with his knowledge and without opposition belong to the owner of the land upon which they may be cast, if the
on his part. (354a)
owners do not claim them within six months. If such owners claim
them, they shall pay the expenses incurred in gathering them or
Art. 454. When the landowner acted in bad faith and the builder,
putting them in a safe place. (369a)
planter or sower proceeded in good faith, the provisions of article 447
shall apply. (n)
Art. 461. River beds which are abandoned through the natural change
in the course of the waters ipso facto belong to the owners whose lands
Art. 455. If the materials, plants or seeds belong to a third person who
are occupied by the new course in proportion to the area lost. However,
has not acted in bad faith, the owner of the land shall answer
the owners of the lands adjoining the old bed shall have the right to
subsidiarily for their value and only in the event that the one who made
acquire the same by paying the value thereof, which value shall not
use of them has no property with which to pay.
exceed the value of the area occupied by the new bed. (370a)

This provision shall not apply if the owner makes use of the right
Art. 462. Whenever a river, changing its course by natural causes,
granted by article 450. If the owner of the materials, plants or seeds
opens a new bed through a private estate, this bed shall become of
has been paid by the builder, planter or sower, the latter may demand
public dominion. (372a)
from the landowner the value of the materials and labor. (365a)

Art. 463. Whenever the current of a river divides itself into branches,
Art. 456. In the cases regulated in the preceding articles, good faith
leaving a piece of land or part thereof isolated, the owner of the land
does not necessarily exclude negligence, which gives right to damages
retains his ownership. He also retains it if a portion of land is separated
under article 2176. (n)
from the estate by the current. (374)

Art. 457. To the owners of lands adjoining the banks of rivers belong
Art. 464. Islands which may be formed on the seas within the
the accretion which they gradually receive from the effects of the
jurisdiction of the Philippines, on lakes, and on navigable or floatable
current of the waters. (336)
rivers belong to the State. (371a)

Art. 458. The owners of estates adjoining ponds or lagoons do not

Art. 465. Islands which through successive accumulation of alluvial
acquire the land left dry by the natural decrease of the waters, or lose
deposits are formed in non-navigable and non-floatable rivers, belong
that inundated by them in extraordinary floods. (367)
to the owners of the margins or banks nearest to each of them, or to
Art. 459. Whenever the current of a river, creek or torrent segregates the owners of both margins if the island is in the middle of the river, in
from an estate on its bank a known portion of land and transfers it to which case it shall be divided longitudinally in halves. If a single island
thus formed be more distant from one margin than from the other, the damages he may have suffered.
owner of the nearer margin shall be the sole owner thereof. (373a)
If the one who has acted in bad faith is the owner of the principal thing,
SECTION 3. - Right of Accession with Respect to Movable the owner of the accessory thing shall have a right to choose between
Property the former paying him its value or that the thing belonging to him be
separated, even though for this purpose it be necessary to destroy the
principal thing; and in both cases, furthermore, there shall be
Art. 466. Whenever two movable things belonging to different owners
indemnity for damages.
are, without bad faith, united in such a way that they form a single
object, the owner of the principal thing acquires the accessory, If either one of the owners has made the incorporation with the
indemnifying the former owner thereof for its value. (375) knowledge and without the objection of the other, their respective
rights shall be determined as though both acted in good faith. (379a)
Art. 467. The principal thing, as between two things incorporated, is
deemed to be that to which the other has been united as an ornament, Art. 471. Whenever the owner of the material employed without his
or for its use or perfection. (376) consent has a right to an indemnity, he may demand that this consist in
the delivery of a thing equal in kind and value, and in all other respects,
Art. 468. If it cannot be determined by the rule given in the preceding to that employed, or else in the price thereof, according to expert
article which of the two things incorporated is the principal one, the appraisal. (380)
thing of the greater value shall be so considered, and as between two
things of equal value, that of the greater volume. Art. 472. If by the will of their owners two things of the same or
different kinds are mixed, or if the mixture occurs by chance, and in the
In painting and sculpture, writings, printed matter, engraving and
latter case the things are not separable without injury, each owner shall
lithographs, the board, metal, stone, canvas, paper or parchment shall
acquire a right proportional to the part belonging to him, bearing in
be deemed the accessory thing. (377)
mind the value of the things mixed or confused. (381)

Art. 469. Whenever the things united can be separated without injury,
Art. 473. If by the will of only one owner, but in good faith, two things
their respective owners may demand their separation.
of the same or different kinds are mixed or confused, the rights of the

Nevertheless, in case the thing united for the use, embellishment or owners shall be determined by the provisions of the preceding article.

perfection of the other, is much more precious than the principal thing,
If the one who caused the mixture or confusion acted in bad faith, he
the owner of the former may demand its separation, even though the
shall lose the thing belonging to him thus mixed or confused, besides
thing to which it has been incorporated may suffer some injury. (378)
being obliged to pay indemnity for the damages caused to the owner of

Art. 470. Whenever the owner of the accessory thing has made the the other thing with which his own was mixed. (382)

incorporation in bad faith, he shall lose the thing incorporated and shall
Art. 474. One who in good faith employs the material of another in
have the obligation to indemnify the owner of the principal thing for the
whole or in part in order to make a thing of a different kind, shall
be in possession of said property.
appropriate the thing thus transformed as his own, indemnifying the
owner of the material for its value. Art. 478. There may also be an action to quiet title or remove a cloud
therefrom when the contract, instrument or other obligation has been
If the material is more precious than the transformed thing or is of
extinguished or has terminated, or has been barred by extinctive
more value, its owner may, at his option, appropriate the new thing to
prescription.
himself, after first paying indemnity for the value of the work, or
demand indemnity for the material. Art. 479. The plaintiff must return to the defendant all benefits he may
have received from the latter, or reimburse him for expenses that may
If in the making of the thing bad faith intervened, the owner of the have redounded to the plaintiff's benefit.
material shall have the right to appropriate the work to himself without
paying anything to the maker, or to demand of the latter that he Art. 480. The principles of the general law on the quieting of title are
indemnify him for the value of the material and the damages he may hereby adopted insofar as they are not in conflict with this Code.
have suffered. However, the owner of the material cannot appropriate
Art. 481. The procedure for the quieting of title or the removal of a
the work in case the value of the latter, for artistic or scientific reasons,
cloud therefrom shall be governed by such rules of court as the
is considerably more than that of the material. (383a)
Supreme Court shall promulgated.

Art. 475. In the preceding articles, sentimental value shall be duly

CHAPTER 4
appreciated. (n)
RUINOUS BUILDINGS AND TREES IN DANGER OF FALLING

CHAPTER 3
QUIETING OF TITLE (n)
Art. 482. If a building, wall, column, or any other construction is in
danger of falling, the owner shall be obliged to demolish it or to execute
the necessary work in order to prevent it from falling.
Art. 476. Whenever there is a cloud on title to real property or any
interest therein, by reason of any instrument, record, claim, If the proprietor does not comply with this obligation, the
encumbrance or proceeding which is apparently valid or effective but is administrative authorities may order the demolition of the structure at
in truth and in fact invalid, ineffective, voidable, or unenforceable, and the expense of the owner, or take measures to insure public safety.
may be prejudicial to said title, an action may be brought to remove (389a)
such cloud or to quiet the title.
Art. 483. Whenever a large tree threatens to fall in such a way as to
An action may also be brought to prevent a cloud from being cast upon
cause damage to the land or tenement of another or to travelers over a
title to real property or any interest therein.
public or private road, the owner of the tree shall be obliged to fell and

Art. 477. The plaintiff must have legal or equitable title to, or interest in remove it; and should he not do so, it shall be done at his expense by

the real property which is the subject matter of the action. He need not order of the administrative authorities. (390a)
 REPUBLIC ACT No. 9856 (e) "Commission" or "SEC" means the Securities and Exchange Commission of
the Philippines.
AN ACT PROVIDING THE LEGAL FRAMEWORK FOR REAL ESTATE (f) "Constitutive Documents" means the articles of incorporation and bylaws of a
INVESTMENT TRUST AND FOR OTHER PURPOSES REIT.
(g) "Control" exists in favor of a parent corporation when it has the power to
Be it enacted by the Senate and House of Representatives of the Philippines in direct or govern the financial and operating3 policies of an enterprise so as to
Congress assembled: obtain benefits from Its activities. Control is presumed to exist when the parent
owns, directly or indirectly, through subsidiaries, more than one - half (112) of
ARTICLE I the voting power of an enterprise, unless m exceptional circumstances, it can
GENERAL PROVISIONS clearly be demonstrated that such ownership does not constitute control. Control
Section 1. Short Title. - This Act shall be known as "The Real Estate also exists even when the parent owns one - half (112) or less of the voting
Investment Trust (REIT) Act of 2009". power of an enterprise when there is power
Section 2. Declaration of Policy. - It IS the policy of the State to promote the i. Over more than one - half (1/2) of the voting rights by virtue of an agreement
development of the capital market, democratize wealth by broadening the with investors;
participation of Filipinos in the ownership of real estate in the Philippines, use ii. To direct or govern the financial and operating policies of the enterprise under
the2 capital market as an instrument to help finance and develop infrastructure a statute or an agreement;
projects, and protect the investing public by providing an enabling regulatory iii. To appoint or remove the majority of the members of the board of directors or
framework and environment under which real estate investment trusts, through equivalent governing body; or
certain incentives granted herein, may assist in achieving the objectives of this iv. To cast the majority votes at meetings of the board of directors of equivalent
policy. governing body.
Section 3. Definition of Terms. - For the purposes of this Act, the term: (h) "Corporation Code" refers to Batas Pambansa Bilang 68, otherwise known
(a) "Adviser" means a lawyer, accountant, auditor, financial or business as the Corporation Code of the Philippines.
consultant, and such other persons rendering professional advisory services to (i) "Deposited Property" means the total value of the REIT's assets based on the
the real estate investment trust. latest valuation determined m accordance with the rules and regulations
(b) "Affiliate" means a corporation that directly or indirectly, through one or more promulgated by the Commission.
intermediaries, is controlled by, or is under the common control of another (j) "Distributable Income" means net income as adjusted for unrealized gains
corporation, which thereby becomes its parent corporation. and losses/expenses and impairment losses and other items in accordance with
(c) "Associate" of a person includes: internationally accepted accounting standards. Distributable income excludes
i. Any relative of such person within the fourth (4th) degree of consanguinity or proceeds from the sale of the REIT's assets that are re - invested in the REIT
affinity; and within one (1) year from the date of the sale.
ii. Any company in which he/she and his/her relative within the fourth (4th) (k) "Exchange" means any entity registered with the Commission as a stock
degree of consanguinity or affinity, directly or indirectly, has an interest of twenty exchange pursuant to the Securities Regulation Code.
- five percent (25%) or more. (l) "Fund Manager" refers to the person responsible for the allocation of the
(d) "Cash Equivalent Items" means instruments or investments that are highly deposited property to the allowable investment outlets and selection of income -
liquid and marketable and are considered good as cash as determined in generating real4 estate. It shall execute investment strategies for the REIT and
accordance with the rules and regulations prescribed by the Commission. oversee and coordinate all of the following activities: property acquisition;
property management; leasing; operational and financial reporting (including iii. Agreement between the REIT and property manager;
operating budgets); appraisals; audits; market review; accounting and reporting iv. Agreements between and among shareholders such as voting trust
procedures, as well as refinancing and asset disposition plans. For clarity, a agreements, pooling agreements, joint venture agreements or other shareholder
fund manager is considered independent from the REIT and its agreements as may be determined by the Commission;
sponsors/promoters under this Act if it is in compliance with the independence, v. Any acquisition or disposition of real estate by the REIT;
corporate governance (including the fit and proper rule) and other requirements vi. Contracts relating to investments of the REIT under Section 8.3 hereof;
prescribed by this Act, its implementing rules and regulations and the vii. Any contract creating mortgages, encumbrances, liens or rights on the real
Commission. estate of the REIT;
(m) "Income - generating Real Estate" means real property which is held for the viii. Contract of any nature that limits the declaration or distribution of dividends
purpose of generating a regular stream of income such as rentals, toll fees, by the REIT;
user's fees and the like, as may be further defined and identified by the ix. Any contract relating to joint venture, spin - off, consolidation or merger
Commission. The Commission may promulgate rules to include real rights over involving the REIT;' and
real property, provided they generate interest or other regular payments to the x. Any contract that may be expected to materially affect the market activity
REIT. and/or the price of the investor securities issued by the REIT as may be
(n) "Independent Director" means a director who has the qualifications and none determined by the Commission.
of the disqualifications of an independent director specified in the Securities (u) "Net Asset Value" or "NAV" means the total '1ssets less total liabilities as
Regulation Code and its implementing rules and regulations. determined by the implementing rules and regulations (lRR) of the Commission.
(o) "IRR" refers to the Implementing rules and regulations promulgated to (v) "Net Income" means net income as determined under the Philippine
implement the provisions of this Act. Financial Reporting Standards (PFRS).
(p) "Investible Funds" refer to funds of the REIT that can be placed in investment (w) "Overseas Filipino Investor" refers to an individual citizen of the Philippines
vehicles other than income generating real estate such as real estate - related who is working abroad, including one who has retained or reacquired his
assets, managed funds, government securities, and cash and cash equivalents. Philippine citizenship under Republic Act No. 9225, otherwise known as the
(q) "Investor" means the owner of investor securities or investor shares. "Citizenship Retention and Re - acquisition Act of 2003".
(r) "Investor Securities" or "Investor Shares" mean shares of stock issued by a (x) "Parent' means a corporation which has control over another corporation,
REIT or derivatives thereof. directly or indirectly, through one or more intermediaries.
(s) "Managed Funds" mean any arrangement whereby funds are solicited from (y) "Principal Officer" means the chairman of the board of directors, president,
the investing public and pooled for the purpose of Investing in securities duly chi(,'!f executive officer - , chief operating officer. treasurer, chief financial officer
registered with and/or approved by the appropriate regulatory agency of the corporate secretary, vice president, their equivalent positions, or such other
government for investment by the REIT. officers occupying positions of significant influence in a company as may be
(t) "Material Contract" refers to an agreement or arrangement where the amount determined by the Commission.
involved is at least five percent (5%) of the deposited property of the REIT or (z) "Principal Stockholder" means a stockholder who is directly or indirectly the
which is not entered into in the ordinary course of business of the beneficial owner of more than ten percent (10%) of any class of security of the
REIT: Provided, however, That the following shall be deemed a material contract REIT.
regardless of the amount: (aa) "Public Shareholder" means a shareholder of a REIT other than the
i. Related party transactions under Section 8.11 hereof; following persons (non - public shareholders):
ii. Contract between the REIT and fund manager; i. The sponsor/promoter of the REIT;
ii. A director, principal officer or principal shareholder of the sponsor/promoter of i. The director, officer or principal stockholder. of the REIT or associate of such
the REIT; persons;
iii. A director, principal officer or principal shareholder of the REIT; ii. The sponsor/promoter of the REIT;
iv. An associate of a director, principal officer or principal shareholder of the iii. The fund manager of the REIT;
REIT or its sponsor/promoter; iv. The adviser of the REIT;
v. A related corporation to the REIT or its sponsor promoter; and v. The property manager of the REIT;
vi. Any person who holds legal title to the shares of stock of the REIT for the vi. A director, principal shareholder or principal officer of the sponsor/promoter of
benefit of another for the purpose of circumventing the provisions of this Act. the REIT, REIT's fund manager or property manager, or associate of any such
(bb) "Property Manager" refers to a professional administrator of real properties persons; and 1avvp h!1

who IS engaged by the REIT to provide property management services, lease vii. Related corporation to the REIT.
management services, marketing services, project management services, (ii) "Securities Regulation Code" or "SRC" refers to the Securities Regulation
including rent collection, tenant services, care of the physical plant, security, Code of 2000 and its implementing rules and regulations.
leasing, marketing of the property to outside prospects, and other similar (jj) ,"Sponsor/Promoter" means any person who, acting alone or in conjunction
services pertaining to the property under administration. For clarity, a property with one or more other persons, directly or indirectly, contributes cash or
manager IS considered independent from the REIT and its property in incorporating a REIT.
sponsor(s)/promoter(s) under this Act if it is in compliance with the (kk) "Subsidiary" means a corporation more than fifty percent (50%) of the voting
independence, corporate governance (including the fit and proper rule) and stock of which is owned or controlled, directly or indirectly, through one or more
other requirements prescribed by this Act, its IRR and the Commission. intermediaries, by another corporation, which thereby becomes its parent
(cc) "Real Estate Investment Trust' or "RElT' IS a stock corporation established corporation.
in accordance with the Corporation Code of the Philippines and the rules and (ll) "Synthetic Investment Products" are derivatives and other securities created
regulations promulgated by the Commission principally for the purpose of exclusively out of one or more financial instruments to simulate the returns of the
owning income - generating real estate assets. For purposes of clarity, a REIT, underlying financial instruments, such as credit - linked notes, collateralized debt
although designated as a "trust", does not have the same technical meaning as obligations. total return swaps, credit spread options, credit default options, and
"trust" under existing laws and regulations but is used herein for the sole similar products determined by the Commission.
purpose of adopting the internationally accepted description of the company in (mm) "Taxable Net Income" means the pertinent items of gross income specified
accordance with global best practices. in Section 32 of the National Internal Revenue Code of 1997, as amended, less
(dd) "Real Property" shall have the same definition as "Immovable Property" all allowable deductions enumerated in Section 34 of the National Internal
under Article 415 of the Civil Code of the Philippines. Real estate, when used in Revenue Code of 1997, as amended, less the dividends distributed by a REIT
this Act, shall have the same meaning as real property. out of its distributable income as of the end of the taxable year as: (a) dividends
(ee) "REIT Plan" refers to the plan, including its amendments, of the REIT to owners of the common shares; and (b) dividends to owners of the preferred
registered with the Commission. shares pursuant to their rights and limitations specified in the articles of
(ff) "Real Estate - Related Assets" mean:8 i. Debt securities and listed shares incorporation of the REIT.
issued by listed property companies; or Ii. Other funds and assets, including
personal property, incidental to the ownership of real estate. ARTICLE II
(gg) "Related Corporation" means the parent, subsidiary or affiliate of the REIT. REAL ESTATE INVESTMENT TRUST
(hh) "Related Party" includes:
Section 4. Investment in the REIT. - Investment in the REIT shall be by way of The Commission shall prescribe a recording and monitoring system that will
subscription to or purchase of shares of stock of the REIT. No shares of stock of effectively ensure that the shares of the public shareholders are traceable to
the REIT shall be offered for subscription or sale except in accordance with a their names and for their own benefit and not for the benefit of any of the non -
REIT plan and other requirements and restrictions as may be prescribed by the public shareholders mentioned above.
Commission. Compliance With the minimum public ownership requirement under this section
Section 5. Registration and Listing. - The shares of stock of the REIT must be must be duly certified by a responsible person designated by the Commission
registered with the Commission and listed in accordance with the rules of the upon listing, as of record date for any dividend declaration or any qorporate
Exchange. action requiring shareholder approval and other relevant times as may be
Section 6. Nationality Requirement. - A REIT that owns land located in the required by the IRR of this Act.
Philippines must comply with foreign ownership limitations imposed under 8.2 Capitalization - A REIT must have a minimum paid - up capital of Three
Philippine law. hundred million pesos (Php300, 000.000.00).
Section 7. Dividend Distribution. - A REIT must distribute annually at' least i. Real estate, whether freehold or leasehold, located In the Philippines. A REIT
ninety percent (90%) of its distributable income as dividends to its shareholders may invest in income - generating real estate located outside of the
not later than the last day of the fifth (5") month following the close of the fiscal Philippines: Provided, That such investment does not exceed forty percent (40%)
10 year of the REIT. Subject to the provisions of this Act, the dividends shall be of its deposited property and only upon special authority from the Commission.
payable only from out of the unrestricted retained earnings of the REIT as The Commission in issuing such authority shall consider, among others,
provided for under Section 43 of the Corporation Code of the Philippines. The satisfactory proof that the valuation of assets is fair and reasonable. An
percentage of dividends received by the public shareholders to the total investment in real estate may be by way of direct ownership or a shareholding in
dividends distributed by the REIT from out of its distributable income must not an unlisted special purpose vehicle constituted to hold/own real estate;
be less than such percentage of their aggregate ownership of the total ii. Real estate - related assets, wherever the issuers, assets, or securities are
outstanding shares of the REIT. Any structure, arrangement or provision which incorporated, located, issued, or traded;
would have the effect of diminishing or circumventing in any form this iii. Managed funds, debt securities and listed shares issued by local or foreign
entitlement to dividends shall be void and of no force and effect. non - property corporations;
Distributable income excludes proceeds from the sale of the REIT's assets that iv. Government securities issued on behalf of the Philippine government or
are re - invested by the REIT within one (1) year from the date of the sale. governments of other countries and securities issued by multilateral agencies;
Section 8. Requirements. - Unless the Commission provides otherwise and v. Cash and cash equivalent items; and
after public hearing, taking into account public interest, the need to protect vi. Such other similar investment outlets as the Commission may allow.
investors and develop the country's real estate investment industry to make it 8.4 Investment in Synthetic Investment Products - A REIT may invest not more
globally competitive, the following requirements shall apply: than five percent (5%) of its investible funds in synthetic investment products
8.1 Minimum Public Ownership - A REIT must be a public company and to be such as, but not limited to, credit default swaps, credit - linked notes,
considered as such, 'a REIT, must: (a) maintain its status as a listed company; collateralized debt obligations, total return swaps, credit spread options, and
and (b) upon and after listing, have at least one thousand (1,000) public credit default options, and only upon special authority from the appropriate
shareholders each owning at least fifty (50) shares of any class of shares who in regulatory authority.
the aggregate own at least one - third (1/3) of the outstanding capital stock of 8.5 Income - generating Real Estate - At least seventy - five percent (75%) of
the REIT. the deposited property of the REIT must be invested in, or consist of, income -
generating real estate.
8.6 Property Development - A REIT must not undertake property development i. Full, fair, timely and accurate disclosures on the identity of the parties their
activities whether on its own, in a joint venture with others, or by investing in relationship
unlisted property development companies, unless it intends to hold the with the REIT, and other important details of the transaction have been made to
developed property upon completion. The total contract value of property the Exchange and the Commission;
development activities undertaken and investments in uncompleted property ii. Be on fair and reasonable terms, including the contract price;
developments should not exceed ten percent (10%) of the deposited property of iii. Approved by at least a majority of the entire membership of the board of
the REIT. directors, including the unanimous vote of all independent directors of the REIT;
8.7 Single Entity Limit - Not more than fifteen percent (15%) of investible funds iv. Accompanied by a fairness opinion by an independent appraiser done in
of the REIT may be invested in any one issuer's securities or anyone managed accordance with the valuation methodology prescribed by the Commission, in
fund, except with respect to government securities where the limit is twenty - five the case of an acquisition or disposition of real estate assets and property or
percent (25%). share swaps or similar transactions; and
8.8 Foreign Assets - A REIT may invest in local or foreign, assets, subject to the v. Any other matter that may be materially relevant to a prospective investor in
terms of its articles of incorporation. Where an investment in a foreign real deciding whether or not to invest in the REIT.
estate asset is made, the REIT should ensure that the investment complies with 8.12 Valuation - A full valuation of a REIT's assets must be conducted by an
all the applicable laws and requirements in that foreign country such as, but not independent appraisal company, duly accredited by the Commission, at least
limited to, foreign ownership restrictions, if any, and requisites of having good once a year In accordance with the applicable rules of asset valuation and
and valid title to that real estate. valuation methodology' as prescribed by the Commission.
8.9 Joint Venture - When investing in real estate as a joint owner, the REIT 8.13 Fund Manager - A REIT must appoint a fund manager that is independent
should make such investment by acquiring shares or interests in an unlisted from the REIT and its sponsor(s)/ promoter(s) and shall be subject to the
special purpose vehicle constituted to hold/own the real estate and the REIT following minimum requirements:
should have freedom to dispose of such investment. The joint venture i. It must be a corporation duly organize under the laws of the Republic of the
agreement, memorandum and articles of association or other constitutive Philippines or a foreign corporation engaged in the business' of fund
documents of the special purpose vehicle should provide for a minimum management with proven track record and duly licensed to do business in the
percentage of distributable profits of the special purpose vehicle that will be Philippines by the appropriate regulatory agency;
distributed and grant the REIT veto rights over key operational issues of the ii. It must have a minimum paid - up capital" stock or assigned capital of Ten
special purpose vehicle. . million pesos (Php10, 000.000.00), unless the Commission provides otherwise;
8.10 Aggregate Leverage Limit - The total borrowings and deferred payments of iii. Its office in the Philippines must have a meaningful role in its business
a REIT should not exceed, 'thirty - five percent (35%) of its deposited activities and must perform accounting, compliance and investor relations,
property: Provided, however, That the total borrowings and deferred payments services in the Philippines;
of a REIT that has a publicly disclosed investment grade credit rating by a duly iv. It must comply with the requirements of the relevant law or appropriate
accredited or internationally recognized rating agency may exceed thirty - five regulatory authority on the number of independent directors;
percent (35%) but not more than seventy percent (70%) of its deposited property. v. It must comply with the corporate, governance requirements, including the fit
8.11 Related Party Transactions - Any contract or amendment thereto, between and proper rule, prescribed by this Act and its IRR;
the REIT and related parties, including contracts involving the acquisition or vi. It must adopt measures as may be prescribed by the IRR of this Act to avoid
lease of assets and contracts for services, must comply with the following conflicts of interest in the discharge of its duties as fund manager for the REIT;
minimum requirements: and
vii. It must employ a resident chief executive officer and at least two (2) full - allowed to serve or act in the capacity of officer, director or consultant of any
time professional employees who have a track record' and experience in REIT, REIT fund manager, or REIT property manager:
financial management as well as experience in the real estate industry. i. Any person convicted of any crime involving any security or financial product;
8.14 REIT Property Manager - The. RElT must appoint a REIT property ii. Any person convicted of an offense involving fraud or embezzlement, theft,
manager who shall be responsible for managing the real estate assets such as estafa or other fraudulent acts or transactions;
apartment buildings, office buildings, warehouses, hospital buildings" medical iii. Any person who, by reason of any misconduct, is enjoined by order, judgment,
facilities, hotel buildings, resort facilities, manufacturing plants and other or decree by any court, quasi - judicial body or administrative agency of
physical assets of the REIT. The contract between the REIT and the property competent jurisdiction from acting as a director, officer; employee, consultant, or
manager must comply with the disclosure and other requirements prescribed for agent occupying any fiduciary position;
related party transactions. iv. Any person found by the appropriate regulatory agency to have violated, or
The REIT property manager shall be independent from the REIT and its aided, abetted, counseled commanded, induced, or procured the violation of this
sponsor/promoter and possess the qualifications and be subject to such Act, the Corporation Code, the General Banking Law, the Insurance Code, the
functions and responsibilities, restrictions and other requirements prescribed by SRC, or' any related laws and any rules, regulations or orders thereunder; ,
the Commission. v. Any person judicially declared to be' insolvent, or incapacitated to contract;
The property manager must comply with the following minimum qualifications: and
i. It must comply with the requirement of the SRC or the Commission on the vi. Any person found guilty by a foreign court, regulatory authority or government
number of independent directors; agency of the, acts or violations similar to any of the acts' or misconduct
ii. It must comply with the corporate governance requirements, including the fit enumerated in the foregoing paragraphs.
and proper rule, prescribed by this Act and its IRR; and A conviction in the first instance shall be considered sufficient ground for
iii. It must adopt measures as may be prescribed by the IRR of this Act to avoid disqualification.:
conflicts of interest in the discharge of its duties as property manager for the 8.17 Executive Compensation - The total annual compensation of all executive
REIT. officers of the REIT shall not exceed such percentage of the net income before
8.15 Independent Directors - At least one - third (113) of the board of directors of regular corporate income tax of the REIT during the immediately preceding
a REIT must be independent directors. taxable year, as may be provided in the IRR of this Act and shall be governed by
8.16 Fit and Proper Rule - To maintain the quality of management of the REIT the provisions on related party transactions.
and afford better protection to REIT investors, the Commission, or the 8.18 Fund Manager and Property Manager Fees - Fees received by the REIT
concerned regulatory agency, shall prescribe or pass upon and review the fund manager and the RET property manager from the REIT shall not exceed
qualifications and disqualifications of individuals elected or appointed as one percent (1%) of the net asset value of the assets under management.
directors or officers of the REIT, REIT fund managers, REIT property managers, Section 9. Reportorial and Disclosure Requirements. –
distributors and other REIT participants and disqualify those found unfit. The 9.1 Requirements - The REIT shall comply with the reportorial and disclosure
appropriate regulatory agency may disqualify, suspend or remove any director requirements prescribed by the Corporation Code, the SRC and the Exchange.
or officer who commits or omits an act which renders him unfit for the position. At the minimum, the REIT shall disclose the following information:
In determining whether an individual is fit and proper to hold the position, regard i. Material contracts as defined under Section 3 of this Act;
shall be given to his integrity, experience, education, training, and ii. Allowable investments of the REIT under Section 8.3 hereof;
competence: Provided, however, That the following persons shall in no case be iii. Related party transactions under Section 8.11 hereof;
iv. Contracts between the REIT and fund manager or the property manager, ii. Summary of all the REIT's real estate assets, including the location of such
including the identity of the parties, contract price, fees and the other basic assets, their purchase' prices and the latest valuations, rentals received and
terms of the contract; occupancy rates, and/or the remaining terms of the REIT's leasehold properties;
v. Valuation of the real estate properties of the REIT, including the valuation iii. Comparative summary of the financial performance of the REIT covering
methodology used therefore; various time periods (e.g. quarterly, one (1) - year, three (3) - year, five (5) - year
vi. Material changes in the income stream of the REIT; or (l0) - year).
vii. Any fee received by any party relating to the acquisition or disposition of the 9.3 REIT Plan - The REIT plan or prospectus shall comply with the requirements
real estate of the REIT; of the SRC and disclose the risks specific to investing in REITs.
viii. Merger, consolidation, joint venture, takeover or spin - off involving the REIT; 9.4 Failure of Compliance - Failure to comply with reportorial and disclosure
ix. Any modification of the rights of the holders of any class of securities issued requirements shall subject the REIT to the applicable penalties under the SRC
by the REIT and the corresponding effect of such modification upon the rights of and the rules of the Exchange, without prejudice to the filing of the appropriate
the holders; administrative, civil or criminal action under this Act or existing laws.
x. Any declaration of cash dividend, stock dividend, property dividend and pre -
emptive rights by the REIT; ARTICLE III
xi. Appointment of a receiver or liquidator for the REIT; TAXES AND OTHER RELATED ISSUES
xii. Change in control of the REIT; Section 10. Income Taxation of REITs. - A REIT shall be subject to income tax
xiii. Losses, or potential losses which amount to at least five percent (5%) of the under Chapter IV, Title II of the National Internal Revenue Code of 1997, as
deposited property of the REIT; amended, on its taxable net income as defined in this Act: Provided, That in no
xiv. Occurrence of any event of dissolution with details in respect thereto; case shall a REIT be subject to the minimum corporate income tax, as provided
xv. Acts or facts that might seriously impair the business activities of the REIT; under Section 27(E) and Section 28(A)(2) of the same Code: Provided,
xvi. Creation of mortgages, pledges or liens on the properties of the REIT; further, That for purposes of computing the taxable net income of a REIT,
xvii. Any development activity undertaken by the REIT, including the essential dividends distributed by a REIT from its distributable income after the close of a
details thereof; taxable year and on or before the last day of the fifth (5") month following the
xviii. Direct and indirect ownership of directors and principal officers in the close of the taxable year shall be considered as paid on the last day of such
securities of the REIT; taxable year.
xix. Any amendment to the articles of incorporation and bylaws of the REIT; and A REIT shall be subject to the income tax on its taxable net income as defined in
xx. Any planned acquisition of outstanding shares or disposition of treasury Chapter V, Title II of the National Internal Revenue Code of 1997, as amended,
shares of the REIT. instead of its taxable net income as defined in this Act, upon the occurrence of
9.2 Special Quarterly and Annual Reports - In addition to the quarterly and any of the following events subject to such curing period as may be prescribed
annual reportorial and disclosure requirements prescribed for public and listed in the IRR of this Act:
companies, the REIT shall make a report on and disclose the following to the i. Failure to maintain its status as a public company as defined in Section 8.1 of
Commission and the Exchange: this Act;
i. Summary of all real estate transactions entered into during the period, ii. Failure to maintain the listed status of the investor securities on the Exchange
including the identity of the parties, the contract price, and their valuations:' and the registration of the investor securities by the Commission; and/or
including the methods' used to value the assets; iii. Failure to distribute at least ninety percent (90%) of its distributable income
required under Section 7 of this Act.
Section 11. Creditable Withholding Tax. - Income payments to a REIT shall be from the Exchange, shall be exempt from the DST prescribed under Title VII of
subject to a lower creditable withholding tax of one percent (1%). the National Internal Revenue Code of 1997, as amended; and
Section 12. Transfer of Real Property. - Any existing, law to the contrary iv. Any initial public offering and secondary offering of investor securities shall be
notwithstanding, the sale or transfer of real property to REITs, which includes exempt from the tax imposed under Section 127(b) of the National Internal
the sale or transfer of any and all security interest thereto, shall be subject to fifty Revenue Code of 1997, as amended.
percent (50%) of the applicable Documentary Stamp Tax (DST) imposed under Section 14. Dividends Paid by REITs. - Cash or property dividends paid by a
Title VII of the National Internal Revenue Code of 1997, as amended. REIT shall be subject to a final tax of ten percent (10%), unless: (a) the
All applicable registration and annotation fees to be paid, related or incidental to dividends are received by a nonresident alien individual or a nonresident foreign
the transfer of assets or the security interest thereto, shall be fifty percent (50%) corporation entitled to claim a preferential withholding tax rate of less than ten
'of the' applicable registration and annotation fees. percent (10%) pursuant to an applicable tax treaty; or (b) the dividends are
The incentives granted under this section can be availed of by an unlisted REIT, received by a domestic corporation or resident foreign corporation, or an
provided it is listed with an Exchange not later than two (2) years from the date overseas Filipino investor in which case, they are exempt from income tax or
of the initial availment of the incentives. any withholding tax: Provided, That in the case of overseas Filipino investors,
The fifty percent (50%) of the applicable DST shall nevertheless be due and they are exempt from the dividends tax for seven (7) years from the effectivity of
demandable together with the applicable surcharge, penalties, and interest the tax regulations implementing this Act.
thereon reckoned from the date such taxes should have been paid upon the Section 15. VAT on Gross Sales or Gross Receipts of RElTs. - A REIT shall be
occurrence of any of the following events subject to such curing period as may subject to value - added tax (VAT) imposed under Title IV of the National
be prescribed in the IRR of this Act: Internal Revenue Code of 1997, as amended, on its gross sales from any
i. Failure to list with an Exchange within the period prescribed in this section; disposal of real property, and on its gross receipts from the rental of such real
ii. Failure to maintain its status as a public company as defined in Section 8.1 of property. A REIT shall not be considered as a dealer in securities and shall not
this Act; be subject to VAT on its sale, exchange or transfer of securities forming' part of
iii. Failure to maintain the listed status of the investor securities on the Exchange its real estate - related assets.
and the registration of the investor securities by the Commission; and/or Section 16. General Application of the National Internal Revenue Code of 1997,
iv. Failure to distribute at least ninety percent (90%) of its distributable income as amended. - Unless otherwise provided under this Act, the internal revenue
required under Section 7 of this Act. taxes under" the National Internal Revenue Code of 1997, as amended, shall
Section 13. Issuance and Transfer of Investor Securities. - The following rules apply.
shall apply: Section 17. Delisting of REITs. - In the event the REIT is delisted from the
i. The original Issuance of investor securities shall be subject to DST under Title Exchange, whether voluntarily or involuntarily, for failure to comply with the
VII of the National Internal Revenue Code of 1997, as amended; provisions of this Act or rules of the Exchange, the tax incentives granted under
ii. Any sale, barter, exchange or other disposition of listed investor securities this Act shall be ipso facto revoked and withdrawn as of the date the delisting
through the Exchange, including block sales or cross sales with prior approval becomes final and executory and any tax incentives that may have been availed
from the Exchange, shall be subject to the stock transaction tax imposed under 'of by the REIT thereafter shall immediately be refunded to the Government and
Section 127(a) of the National Internal Revenue Code of 1997, as amended; the surcharge and penalty prescribed by Section 19 hereof shall apply. If the
iii. Any sale, barter or exchange or other disposition of listed investor securities delisting is for causes highly prejudicial to the' interest of the investing public
through the Exchange, including block sales or cross sales with prior approval such as violation of the disclosure and related party provisions of this Act or
insolvency of the REIT due to mismanagement or misappropriation, conversion,
wastage or dissipation of its corporate assets, the responsible persons shall The prosecution and conviction of the offender under this Act and the imposition
refund to its investors at the time of final delisting the value of their shares. of the above penalties shall be without prejudice to the administrative, civil and
criminal liabilities of the offender under the SRC.
ARTICLE IV
PENAL PROVISIONS ARTICLE V
Section 18. Revocation of Registration. - If the Commission finds out that the MISCELLANEOUS PROVISIONS
REIT was established so as to seek the benefits of this Act without a true, Section 20. Corporate Governance. - The REIT property manager and the REIT
intention to carry out its provisions and/or the IRR, the Commission shall revoke fund manager shall be subject to the principles of corporate governance adopted
or cancel the registration of the securities of the REIT. The REIT shal1 pay the by the proper regulatory body.
applicable taxes plus interests and23 surcharges under the National Internal Section 21. Use of Registration Fees. - To carry out the purposes of this Act,
Revenue Code of 1997, as amended. the. Commission shall retain and use fifty percent (50%) of all fees paid to it
Section 19. Penalties. - A fine of not less than Two hundred thousand pesos relative to the establishment of REITs and the registration of their securities in
(Php200,000.00) nor more than Five million pesos (Php5, 000.000.00) or addition to its annual budget.
imprisonment of not less than six (6) years and one (1) day nor more than Section 22. Implementing Rules and Regulations. - Within ninety (90) days from
twenty - one (21) years, or both at the discretion of the court, shall be imposed the effectivity of this Act; the Commission, in coordination with the Bangko
upon any person, association, partnership or corporation, its officer, employee or Sentral ng Pilipinas (BSP) and the Department of Finance (DOF) and in
agent, who, acting alone or in connivance with others, shall: consultation with other stakeholders such as the Philippine Stock Exchange and
i. Understate or overstate the financial statements of the RElT; the real estate industry, shall promulgate the implementing rules and regulations
ii. Cause any loss, conversion, misappropriation of the assets, securities or of the provisions of this Act: Provided, That the Commission, the BSP and the
income of the REIT; DOF may continue to issue separate regulations that will apply exclusively to the
iii. Use another person to hold the legal title of the shares of the REIT for his institutions under their, respective jurisdiction, consistent with the implementing
benefit for the purpose of circumventing the minimum public ownership rules and regulations: Provided, further, That the Commissioner of the Bureau of
prescribed in Section 8.1 of this Act; Internal Revenue shall issue the lRR regarding all tax provisions of this Act (Tax
iv. Allow himself to be used by another person to hold legal title to the shares' of Regulations), subject to the review of the Secretary of Finance, in accordance
the REIT for the purpose of circumventing the minimum public ownership with Section 4 of the National Internal Revenue Code, as amended, after full and
prescribed m Section 8.1 of this Act; complete consultation with all concerned. 1avvp hi1

v. Submit false or misleading certification on the minimum public ownership Section 23. Separability Clause. - If, for any reason, any article or provision of
required by this Act; or this Act or any portion therefore or application of such article, provision or
vi. Violate any of the provisions of this Act, or the rules and regulations portion thereof to any person, group or circumstance is declared invalid or
promulgated under authority hereof. unconstitutional, the remainder of this Act shall not be affected by such decision.
If the offender is a corporation, partnership or association or other juridical entity, Section 24. Repealing Clause. - All laws, executive orders, rules and
the penalty may, at the discretion of the court, be imposed upon such juridical regulations and parts thereof which are inconsistent With this Act are hereby
entity and/or upon the officer or officers of the corporation, partnership, repealed or amended accordingly.
association or entity responsible for the violation, and if such officer is an alien, Section 25. Effectivity Clause. - This Act shall take effect fifteen (15) days after
he shall in addition to the penalties prescribed, be deported without further its complete publication in the Official Gazette or in at least two (2) newspapers
proceedings after service of sentence. of general circulation in the Philippines.
BATAS PAMBANSA BLG. 185 – AN ACT TO to determine how to proceed. A major restriction in the law is However, there are a very few single-detached homes or For Business/Commercial Use (RA 8179 – amended the
IMPLEMENT SECTION FIFTEEN OF ARTICLE XIV the restriction on the number of foreign members on the Board townhouses in the Philippines with condominium titles. Most Foreign Investment Act of 1991):
OF THE CONSTITUTION AND FOR OTHER of Directors of a landholding company (which is limited to condominiums are high-rise buildings.
PURPOSES 40% foreign participation). Another concern is the possible Up to 5,000 square meters of urban land
forfeiture of the property if the provisions of the law is Being Married to a Filipino Citizen Up to three (3) hectares of rural land
Section 1. In implementation of Section fifteen of Article XIV breached. If holding a title as an individual, a typical situation would be Real Estate Transaction Costs in the Philippines
of the Constitution, a natural-born citizen of the Philippines that a foreigner married to a Filipino citizen would hold title in
who has lost his Philippine citizenship may be a transferee of Exceptions to the restriction on foreign acquisition of land in the Filipino spouse’s name. The foreign spouse’s name cannot Purchases from Individuals
private land, for use by him as his residence, subject to the the Philippines are the following: be on the Title but can be on the contract to buy the property.
provisions of this Act. In the event of the death of the Filipino spouse, the foreign Capital Gains Tax – 6% of actual sale price. This is paid by
1. Acquisition before the 1935 Constitution spouse is allowed a reasonable amount of time to dispose of the seller but in some cases, the buyer might be expected to be
Sec. 2. Any natural-born citizen of the Philippines who has 2. Acquisition through hereditary succession if the foreigner is the property and collect the proceeds or the property will pass the one to pay. This percentage could differ if the property
lost his Philippine citizenship and who has the legal capacity a legal or natural heir to any Filipino heirs and/or relatives. assessed is being used by a business or is a title owned by a
to enter into a contract under Philippine laws may be a 3. Purchase of not more than 40% interest in a condominium corporation, in this case, the percentage is 7.5%.
transferee of a private land up to a maximum area of one project For Former Natural-Born Filipino Citizens
thousand square meters, in the case of urban land, or one 4 Purchase by a former natural-born Filipino citizen subject to Any natural-born Philippine citizen who has lost their Document Stamp Tax – 1.5% of the actual sale price. This is
hectare in the case of rural land, to be used by him as his the limitations prescribed by law (natural-born Filipinos who Philippine citizenship may still own private land in the paid by either the buyer or the seller upon agreement.
residence. In the case of married couples, one of them may acquired foreign citizenship is entitled to own up to 5,000 Philippines (up to a maximum area of 5,000 square meters in Normally, however, it is the buyer who shoulders the cost.
avail of the privilege herein granted; Provided, That if both sq.m. of residential land, and 1 hectare of agricultural or farm the case of rural land). In the case of married couples, the total
shall avail of the same, the total area acquired shall not exceed land). area that both couples are allowed to purchase should not Transfer Tax – 0.5% of the actual sale price
the maximum herein fixed. 5. Filipinos who are married to aliens and able to retain their exceed the maximum area mentioned above. Registration Fee – 0.25% of the actual sale price
Filipino citizenship (unless by their act or omission they have
In case the transferee already owns urban or rural lands for renounced their Filipino citizenship) Former Filipino Citizens, Balikbayans, and OFWs SEC. 10. Other Rights of Natural Born Citizen Pursuant to the
residential purposes, he shall still be entitled to be a transferee Former natural-born Filipinos who are now naturalized Provisions of Article XII, Section 8 of the Constitution. - Any
of additional urban or rural lands for residential purposes Land Ownership as a Corporation citizens of another country can buy and register, under their natural born citizen who has lost his Philippine citizenship and
which, when added to those already owned by him, shall not Foreign nationals, expats or corporations may completely own own name, land in the Philippines (but with limitations in land who has the legal capacity to enter into a contract under
exceed the maximum areas herein authorized. a condominium or townhouse in the Philippines. To take area). However, those who avail of the Dual Citizenship Law Philippine laws may be a transferee of a private land up to a
ownership of a private land, residential house and lot, and in the Philippines can buy as much as any other Filipino maximum area of five thousand (5,000) square meters in the
Sec. 3. A transferee under this Act may acquire not more than commercial building and lot, they may set up a domestic citizen. case of urban land or three (3) hectares in the case of rural
two lots which should be situated in different municipalities or corporation in the Philippines. This means that the corporation land to be used by him for business or other purposes. In the
cities anywhere in the Philippines; Provided, That the total owning the land has less than or up to 40% foreign equity and Under the Dual Citizenship Law of 2003 (RA 9225), former case of married couples, one of them may avail of the
area thereof shall not exceed one thousand square meters in is formed by 5-15 natural persons of legal age as Filipinos who became naturalized citizens of foreign countries privilege herein granted: Provided, that if both shall avail of
the case of urban lands or one hectare in the case of rural lands incorporators, the majority of which must be Philippine are deemed not to have lost their Philippine citizenship, thus the same, the total area acquired shall not exceed the
for use by him as urban land shall be disqualified from residents. enabling them to enjoy all the rights and privileges of a maximum herein fixed.
acquiring acquiring rural land, and vice versa. Filipino citizen regarding land ownership in the Philippines.
Leasing of Real Estate Property In the case the transferee already owns urban or rural land for
Land Ownership and Property Acquisition in the Leasing land in the Philippines on a long-term basis is an How to Gain Dual Citizenship business or other purposes, he shall still be entitled to be a
Philippines for Foreigners and Former Filipino Citizens option for foreigners, expats or foreign corporations with more If you are in the Philippines, file a Petition for Dual transferee of additional urban or rural land for business or
than 40% foreign equity. Under the Investor’s Lease Act of Citizenship and Issuance of Identification Certificate (pursuant other purposes which when added to those already owned by
In general, only Filipino citizens and corporations or the Philippines, they may enter into a lease agreement with to RA 9225) at the Bureau of Immigration (BI) and for the him shall not exceed the maximum areas herein authorized.
partnerships with least 60% of the shares are owned by Filipino landowners for an initial period of up to 50 years cancellation of your alien certificate of registration.
Filipinos are entitled to own or acquire land in the Philippines. renewable once for an additional 25 years. A transferee under this Act may acquire not more than two (2)
Foreigners or non-Philippine nationals may, however, Those who are not BI-registered and overseas should file the lots which should be situated in different municipalities or
purchase condominiums, buildings, and enter into a long-term Owning Houses or Buildings petition at the nearest embassy or consulate. cities anywhere in the Philippines: Provided, That the total
land lease. Foreign ownership of a house or building in the Philippines is land area thereof shall not exceed five thousand (5,000) square
legal as long as the foreigner or expat does not own the land If a former Filipino who is now a naturalized citizen of a meters in the case of urban land or three (3) hectares in the
For Foreigners on which the house was built. foreign country does not want to avail of the Dual Citizen Law case of rural land for use by him for business or other
in the Philippines, he or she can still acquire land based on purposes. A transferee who has already acquired urban land
Ownership of land in the Philippines is highly-regulated and Owning Condominiums or Townhouses Batas Pambansa (BP) 185 and RA 8179, but limited to the shall be disqualified from acquiring rural land and vice versa”.
reserved for persons or entities legally defined as Philippine The Condominium Act of the Philippines (R.A. 4726) following: (As amended by R.A. 8179)
nationals or Filipino citizens. For this purpose, a corporation expressly allows foreigners to acquire condominium units and
with 60% Filipino ownership is treated as a Philippine shares in condominium corporations up to 40% of the total and For Residential Use (BP 185 – enacted in March 1982):
national. outstanding capital stock of a Filipino-owned or controlled
condominium corporation. Up to 1,000 square meters of residential land
Foreigners or expats interested in acquiring land or real Up to one (1) hectare of agricultural of farmland
property through aggressive ownership structures must
consider the provisions of the Philippines’ Anti-Dummy Law
 BATAS PAMBANSA Blg. 185 Section 4. As used in this Act

An Act to Implement Section Fifteen of Article Xiv of the

(a) A natural-born citizen is one who is a citizen of the Philippines from birth
Constitution and for Other Purposes without having to perform any act to acquire or perfect his Philippine citizenship.

Section 1. In implementation of Section fifteen of Article XIV of the Constitution, (b) Urban areas shall include:
a natural-born citizen of the Philippines who has lost his Philippine citizenship
may be a transferee of private land, for use by him as his residence, subject to (1) In their entirety, all municipal jurisdictions which, whether designated as
the provisions of this Act. chartered cities, provincial capitals or not, have a population density of at least
1,000 persons per square kilometer;
Section 2. Any natural-born citizen of the Philippines who has lost his Philippine
citizenship and who has the legal capacity to enter into a contract under (2) Poblaciones or central districts of municipalities and cities which have a
Philippine laws may be a transferee of a private land up to a maximum area of population density of at least 500 persons per square kilometer;
one thousand square meters, in the case of urban land, or one hectare in the
case of rural land, to be used by him as his residence. In the case of married (3) Poblaciones or central districts (not included in 1 and 2) regardless of

couples, one of them may avail of the privilege herein granted; Provided, That if population size which have the following:

both shall avail of the same, the total area acquired shall not exceed the
(a) Street pattern, i.e, network of streets in either at parallel or right angle
maximum herein fixed.
orientation;

In case the transferee already owns urban or rural lands for residential purposes,
(b) At least six establishments (commercial, manufacturing, recreational and/or
he shall still be entitled to be a transferee of additional urban or rural lands for
personal services); and
residential purposes which, when added to those already owned by him, shall
not exceed the maximum areas herein authorized.
(c) At least three of the following:

Section 3. A transferee under this Act may acquire not more than two lots which
1. A town hall, church or chapel with religious services at least once a month;
should be situated in different municipalities or cities anywhere in the
Philippines; Provided, That the total area thereof shall not exceed one thousand 2. A public plaza, park or cemetery;
square meters in the case of urban lands or one hectare in the case of rural
lands for use by him as urban land shall be disqualified from acquiring acquiring 3. A market place or building where trading activities are carried on at least once
rural land, and vice versa. a week; and
4. A public building like a school, hospital, puericulture and health center or Penal Code and deportation in appropriate cases, be penalized by forfeiture of
library. such lands and their improvements to the National Government. For this
purpose the Solicitor General or his representative shall institute escheat
(4) Barangays having at least 1,000 inhabitants which meet the conditions set proceedings.
forth in sub-paragraph (3) of paragraph (b) above, and in which the occupation
of the inhabitants is predominantly other than farming or fishing. Any transferee liable under this Section shall moreover be forever barred from
further availing of the privilege granted under this Act.
(c) All other areas of the Philippines which do not meet the conditions in the
preceding definition of urban areas shall be considered as rural areas. Section 8. The Minister of Justice shall issue such rules and regulations as may
be necessary to carry out the provisions of this Act. Such rules and regulations
1âwphi1

Section 5. Transfer as a mode of acquisition of private land under this Act refers shall take effect fifteen days following its publication in a newspaper of general
to either voluntary or involuntary sale, devise or donation. Involuntary sales
£á⩊ phi£

circulation in the Philippines.

shall include sales on tax delinquency, foreclosures and executions of judgment.
Section 9. If any part of this Act shall be declared unconstitutional, the
Section 6. In addition to the requirements provided for in other laws for the remaining provisions not thereby affected shall remain in full force and effect.
registration of titles to lands, no private land shall be transferred under this Act,
unless the transferee shall submit to the register of deeds of the province or city Section 10. This Act shall take effect upon its approval.
where the property is located a sworn statement showing the date and place of
his birth; the names and addresses of his parents, of his spouse and children, if
any; the area, the location and the mode of acquisition of his land-holdings in the
Philippines, if any; his intention to reside permanently in the Philippines; the date
he lost his Philippine citizenship and the country of which he is presently a
citizen; and such other information as may be required Section 8 of this Act.

Section 7. The transferee shall not use the lands acquired under this Act for any
purpose other than for his residence. Violations of this Section, any
misrepresentation in the sworn statement required under Section 6 hereof, any
acquisition through fraudulent means or failure to reside permanently in the land
acquired within two years from the acquisition thereof, except when such failure
is caused by force majeure, shall, in addition to any liability under the Revised
 [ REPUBLIC ACT NO. 8179, March 28, 1996 ] SEC. 2. Sec. 7 of Republic Act No. 7042 is hereby amended to read as follows:
AN ACT TO FURTHER LIBERALIZE FOREIGN INVESTMENTS, "SEC. 7. Foreign Investments in Domestic Market Enterprises. – Non-Philippine
AMENDING FOR THE PURPOSE REPUBLIC ACT NO. 7042, nationals may own up to one hundred percent (100%) of domestic market
AND FOR OTHER PURPOSES enterprises unless foreign ownership therein is prohibited or limited by the
Constitution and existing law or the Foreign Investment Negative List under Section
Be it enacted by the Senate and House of Representatives of the Philippines in 8 hereof."
Congress assembled:
SEC. 3. Section 8 of the Foreign Investments Act of 1991 is hereby amended to read
SEC 1. Section 3, paragraph (a), of Republic Act No. 7042, otherwise known as the as follows:
"Foreign Investments Act of 1991," is hereby amended to read as follows: "SEC. 8. List of Investment Areas Reserved to Philippine Nationals (Foreign
"SEC. 3. Definitions. – as used in this Act: the term Philippine national shall mean a Investment Negative List). – The Foreign Investment Negative List shall have two
citizen of the Philippines; or a domestic partnership or association wholly owned by (2) component lists: A and B:
citizens of the Philippines; or a corporation organized under the laws of the
Philippines of which at least sixty percent (60%) of the capital stock outstanding and "a) List A shall enumerate the areas of activities reserved to Philippine nationals by
entitled to vote is owned and held by citizens of the Philippines; or a corporation mandate of the Constitution and specific laws.
organized abroad and registered as doing business in the Philippines under the
Corporation Code of which one hundred percent (100%) of the capital stock "b) List B shall contain the areas of activities and enterprises regulated pursuant to
outstanding and entitled to vote is wholly owned by Filipinos or a trustee of funds law:
for pension or other employee retirement or separation benefits, where the trustee is "1) which are defense-related activities, requiring prior clearance and authorization
a Philippine national and at least sixty percent (60%) of the fund will accrue to the from Department of National Defense (DND) to engage in such activity, such as the
benefit of Philippine nationals: Provided, That where a corporation and its non- manufacture, repair, storage and/or distribution of firearms, ammunition, lethal
Filipino stockholders own stocks in a Securities and Exchange Commission (SEC) weapons, military ordnance, explosives, pyrotechnics and similar materials; unless
registered enterprise, at least sixty percent (60%) of the capital stock outstanding and such manufacturing or repair activity is specifically authorized, with a substantial
entitled to vote of each of both corporations must be owned and held by citizens of export component, to a non-Philippine national by the Secretary of National Defense;
the Philippines and at least sixty percent (60%) of the members of the Board of or
Directors of each of both corporations must be citizens of the Philippines, in order
that the corporation shall be considered a Philippine national." "2) which have implications on public health and morals, such as the manufacture
and distribution of dangerous drugs; all forms of gambling; nightclubs, bars, beer "Amendments to List B after promulgation and publication of the first Regular
houses, dance halls, sauna and steam bathhouses and massage clinics. Foreign Investment Negative List at the end of the transitory period shall not be
"Small and medium-sized domestic market enterprises with paid-in equity capital made more often than once every two (2) years."
less than the equivalent of Two hundred thousand US dollars (US$200,000), are
reserved to Philippine nationals: Provided, That if: (1) they involve advanced SEC. 4. The Foreign Investments Act is further amended by inserting a new section
technology as determined by the Department of Science and Technology, or designated as Section 9 to read as follows:
"SEC. 9. Investment Rights of Former Natural-born Filipinos. – For purposes of this
(2) they employ at least fifty (50) direct employees, then a minimum paid-in capital Act, former natural born citizens of the Philippines shall have the same investment
of One hundred thousand US dollars (US$100,000) shall be allowed to non- rights of a Philippine citizen in Cooperatives under Republic Act No. 6938, Rural
Philippine nationals. Banks under Republic Act No. 7353, Thrift Banks and Private Development Banks
under Republic Act No. 7906, and Financing Companies under Republic Act No.
"Amendments to List B may be made upon recommendation of the Secretary of 5980. These rights shall not extend to activities reserved by the Constitution,
National Defense, or the Secretary of Health, or the Secretary of Education, Culture including (1) the exercise of profession; (2) in defense related activities under
and Sports, indorsed by the NEDA, or upon recommendation motu proprio, of Section 8 (b) hereof, unless specifically authorized by the Secretary of National
NEDA, approved by the President, and promulgated by a Presidential Proclamation. Defense; and (3) activities covered by Republic Act No. 1180 (Retail Trade Act),
Republic Act No. 5487 (Security Agency Act), Republic Act No. 7076 (Small Scale
"The Transitory Foreign Investment Negative List established in Section 15 hereof Mining Act), Republic Act No. 3018, as amended (Rice and Corn Industry Act), and
shall be replaced at the end of the transitory period by the first Regular Negative List P.D. 449 (Cockpits Operation and Management)."
to be formulated and recommended by NEDA, following the process and criteria,
provided in Sections 8 and 9 of this Act. The first Regular Negative Lists shall be SEC. 5. The Foreign Investments Act is further amended by inserting a new section
published not later than sixty (60) days before the end of the transitory period designated as Section 10 to read as follows:
provided in said section, and shall become immediately effective at the end of the "SEC. 10. Other Rights of Natural Born Citizen Pursuant to the Provisions of Article
transitory period. Subsequent Foreign Investment Negative Lists shall become XII, Section 8 of the Constitution. – Any natural born citizen who has lost his
effective fifteen (15) days after publication in a newspaper of general circulation in Philippine citizenship and who has the legal capacity to enter into a contract under
the Philippines: Provided, however, That each Foreign Investment Negative List Philippine laws may be a transferee of a private land up to a maximum area of five
shall be prospective in operation and shall in no way affect foreign investment thousand (5,000) square meters in the case of urban land or three (3) hectares in the
existing on the date of its publication. case of rural land to be used by him for business or other purposes. In the case of
married couples, one of them may avail of the privilege herein changes embodied in this Act.
granted: Provided, That if both shall avail of the same, the total area acquired shall
not exceed the maximum herein fixed. SEC. 8. Sections 9 and 10 of Republic Act No. 7042 and all references thereto in
said law are hereby repealed or modified accordingly. All other laws, rules and
"In case the transferee already owns urban or rural land for business or other regulations and/or parts thereof inconsistent with the provisions of this Act are
purposes, he shall still be entitled to be a transferee of additional urban or rural land hereby repealed or modified accordingly.
for business or other purposes which when added to those already owned by him
shall not exceed the maximum areas herein authorized. SEC. 9. If any part or section of this Act is declared unconstitutional for any reason
whatsoever, such declaration shall not in any way affect the other parts or sections of
"A transferee under this Act may acquire not more than two (2) lots which should be this Act.
situated in different municipalities or cities anywhere in the Philippines: Provided,
That the total land area thereof shall not exceed five thousand (5,000) square meters SEC. 10. This Act shall take effect fifteen (15) days after publication in two (2)
in the case of urban land or three (3) hectares in the case of rural land for use by him newspapers of general circulation in the Philippines.
for business or other purposes. A transferee who has already acquired urban land
shall be disqualified from acquiring rural land and vice versa."

SEC. 6. The National Economic and Development Authority, in consultation with

the Board of Investments, the Department of Trade and Industry and Securities and
Exchange Commission, shall prepare and issue the necessary primer and other
information campaign materials regarding the Foreign Investments Act and the
amendments introduced thereto, with copies of said materials furnished all the
Philippine embassies, consulates and other diplomatic offices abroad and
disseminated to Filipino nationals, former natural-born Filipino citizens, and foreign
investors, within sixty (60) days after the effectivity hereof.

SEC. 7. The NEDA is hereby directed to make the necessary amendments to the
implementing rules and regulations of Republic Act No. 7042 in order to reflect the
 Republic Act No. 9225 Natural born citizens of the Philippines who, after the effectivity of this Act,
become citizens of a foreign country shall retain their Philippine citizenship upon
AN ACT MAKING THE CITIZENSHIP OF PHILIPPINE CITIZENS WHO taking the aforesaid oath.
ACQUIRE FOREIGN CITIZENSHIP PERMANENT.
AMENDING FOR THE PURPOSE COMMONWEALTH ACT. NO. 63, AS Section 4. Derivative Citizenship - The unmarried child, whether legitimate,
AMENDED AND FOR OTHER PURPOSES illegitimate or adopted, below eighteen (18) years of age, of those who re-
acquire Philippine citizenship upon effectivity of this Act shall be deemed
Be it enacted by the Senate and House of Representatives of the Philippine citizenship of the Philippines.
Congress Assembled:
Section 5. Civil and Political Rights and Liabilities - Those who retain or re-
Section 1. Short Title – this act shall be known as the "Citizenship Retention acquire Philippine citizenship under this Act shall enjoy full civil and political
and Re-acquisition Act of 2003." rights and be subject to all attendant liabilities and responsibilities under existing
laws of the Philippines and the following conditions:
Section 2. Declaration of Policy - It is hereby declared the policy of the State
that all Philippine citizens of another country shall be deemed not to have lost (1) Those intending to exercise their right of surffrage must Meet the
their Philippine citizenship under the conditions of this Act. requirements under Section 1, Article V of the Constitution, Republic Act No.
9189, otherwise known as "The Overseas Absentee Voting Act of 2003" and
Section 3. Retention of Philippine Citizenship - Any provision of law to the
other existing laws;
contrary notwithstanding, natural-born citizenship by reason of their
naturalization as citizens of a foreign country are hereby deemed to have re- (2) Those seeking elective public in the Philippines shall meet the qualification
acquired Philippine citizenship upon taking the following oath of allegiance to the for holding such public office as required by the Constitution and existing laws
Republic: and, at the time of the filing of the certificate of candidacy, make a personal and
sworn renunciation of any and all foreign citizenship before any public officer
"I _____________________, solemny swear (or affrim) that I will support and
authorized to administer an oath;
defend the Constitution of the Republic of the Philippines and obey the laws and
legal orders promulgated by the duly constituted authorities of the Philippines; (3) Those appointed to any public office shall subscribe and swear to an oath of
and I hereby declare that I recognize and accept the supreme authority of the allegiance to the Republic of the Philippines and its duly constituted authorities
Philippines and will maintain true faith and allegiance thereto; and that I imposed prior to their assumption of office: Provided, That they renounce their oath of
this obligation upon myself voluntarily without mental reservation or purpose of allegiance to the country where they took that oath;
evasion."
(4) Those intending to practice their profession in the Philippines shall apply with
the proper authority for a license or permit to engage in such practice; and

(5) That right to vote or be elected or appointed to any public office in the
Philippines cannot be exercised by, or extended to, those who:

(a) are candidates for or are occupying any public office in the country of which
they are naturalized citizens; and/or

(b) are in active service as commissioned or non-commissioned officers in the

armed forces of the country which they are naturalized citizens.

Section 6. Separability Clause - If any section or provision of this Act is held

unconstitutional or invalid, any other section or provision not affected thereby
shall remain valid and effective.

Section 7. Repealing Clause - All laws, decrees, orders, rules and regulations
inconsistent with the provisions of this Act are hereby repealed or modified
accordingly.

Section 8. Effectivity Clause – This Act shall take effect after fifteen (15) days
following its publication in the Official Gazette or two (2) newspaper of general
circulation.
 NOTES ON DUAL CITIZENSHIP (RA 9225)
Additional requirements:
Retain/Re-acquire Philippine Citizenship Under R.A. 9225 (Dual citizenship  Original and four (4) copies of DFA-apostilled marriage certificate or
under The Citizenship Retention and Re-acquisition Act of 2003 or R.A. 9225 Report of marriage, for married applicants
and its Implementing Rules and Regulations.  Most recent Philippine passport issued to applicant plus four (4) copies of
the data page
Republic Act 9225 otherwise known as the Citizenship Retention and  Foreign passport and identification card plus four (4) copies
Reacquisition Act of 2003 (more popularly known as the Dual Citizenship Law)  Recent passport-size colored photo – four (4) pieces
enables former natural-born Filipinos who have become naturalized citizens of  For minor children born after the applicant received foreign citizenship,
another country to retain/reacquire their Philippine citizenship by taking an oath original birth certificate with verified English translation (Report of Birth
of allegiance to the Republic of the Philippines before a Philippine Consular must be submitted)
Officer. Upon retaining or reacquiring their Philippine citizenship, they shall  Fees: PLN 250 for principal applicant, PLN 125 for every minor child
enjoy full civil, economic and political rights as Filipinos. included in the petition

The Philippine Embassy in Warsaw, Poland shall evaluate and approve any Note: The consular officer may require additional documents if there is a
petition to retain/re-acquire Philippine citizenship under R.A. 9225. This is discrepancy between the applicant’s name in his/her birth certificate and in
applicable to natural-born Filipino nationals who have acquired Polish, Estonian, his/her naturalization certificate/foreign passport.
Latvian, or Lithuanian citizenship.
After Issuance of Dual Citizenship Papers
How to Apply:
1. Appointment is required for this service. As a dual citizen, you may wish to apply for a Philippine passport.
2. Proceed to the Embassy on the appointed date and time.
3. Bring all the requirements and supporting documents. If you prefer not to apply, you may use your existing alien passport when
4. Fees only in cash. travelling to the Philippines. You simply must present your dual documents to
the Philippine Immigration Officer as proof of Philippine citizenship, per the
Requirements and Fees: Bureau of Immigration’s Operation Order No. SBM-2014-045 dated 30
 Proof of natural-born Philippine citizenship – Original plus four (4) copies September 2014 which is in force and still in effect. Incoming Filipinos may
of PSA birth certificate apostilled by the DFA present a valid PHL passport, Identification Certificate or a Certificate of Re-
 Proof of acquisition of foreign citizenship – Original plus four (4) copies of acquisition / Retention of PHL Citizenship to be admitted as Filipino citizens.
naturalization certificate with English translation verified by the Foreign
Ministry Individuals who have just retained/reacquired their Philippine citizenship and
 Two (2) copies of accomplished Petition Form for re-acquisition of PH who wish to apply for a Philippine passport will need to make a separate
citizenship application and submit the requirements as specified.
Family Code of the Philippines Summary and Salient Points

- The Family Code of the Philippines (Executive Order no. 209) was signed into law by then President
Corazon Aquino on July 6, 1987.
- The basic law covering persons and family relations governs marriages, legal separations, property
relations between spouses, and parental authority, among others.

Summary/ Salient Points

TITLE I. MARRIAGE
Chapter 1. Requisite of - The two essential requisites for a valid marriage are: (1) contracting parties must be
Marriage (Article 1- male and female and have the legal capacity to enter into marriage, and (2) consent of
Article 26) the contracting parties must be freely given before a solemnizing officer.
Chapter 2. Marriage - If the residence of either party is so located that there is no means of transportation to
Exempt from Licence enable such party to appear personally before the local civil registrar, the marriage may
Requirements be solemnized without necessity of a marriage license (Article 28, Family Code). This
(Article 27- Article 34) fact shall be stated in an affidavit executed by the solemnizing officer.
Chapter 3. Void and -A void marriage is one that is considered inexistent from the start, as if no marriage
Voidable Marriages transpired between the couple. A voidable marriage is one that is valid until it is declared
(Article 35- Article 54) annulled by the courts.
- As to the susceptibility of being ratified. A void marriage cannot be ratified since
there is no marriage to speak of. A voidable marriage is susceptible of convalidation or
ratification either by the free cohabitation of the parties or by prescription.
- As to effect on property. There is no community property but only a co-ownership in
a void marriage. On the other hand, an absolute community exists in a voidable
marriage, unless there was a marriage settlement or prenuptial agreement defining the
system that will govern property relations during the marriage.
TITLE II. LEGAL - Legal separation is merely the separation of spouses from bed and board. (Article 63 of
SEPARATION the Family Code) While it permits the partial suspension of marital relations, the
marriage bond still exists as the marital bonds are not severed as in the case of
(Article 55- Article 67) annulment or petition for nullity.
TITLE III. RIGHT & - In this jurisdiction the husband and wife are obliged to lived together observe love,
OBLIGATION mutual respect and fidelity and render mutual help and support.
BETWEEN HUSBAND
& WIFE
- Procreation- essential in marital obligation, that procreation of children through sexual
(Article 68- Article 67) cooperation is the basic end of marriage.

- No compulsion – a court cannot validly issue a decision compelling the spouses to live
together….Except for support

- Damages for failure to comply with obligations.There can be no action for

damages because of a breach of marital obligation.Hence, if a spouse in bad faith
refuses to comply with his/her obligations, he or she may be held liable under Article 19,
20 and 21.

TITLE IV. PROPERTY

RELATION
BETWEEN HUSBAND
AND WIFE.

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 Chapter 1. General - The property relations between husband and wife shall be governed in the following
Provision (Article 74- order (Article 74 of Family Code) :
Article 81)
1) By Marriage settlement executed before the marriage;

2) By the provisions of this Code

3) By the Local Customs

- The future spouses may, in the marriage settlements, agree upon the regime
of absolute community, conjugal partnership of gains, complete separation of property,
or any other regime. In the absence of a marriage settlement, or when the regime agreed
upon is void, the system of absolute community of property as established in this code
shall govern. (Article 75 of Family Code)

Chapter 2. Donation by - In order that Donations By Reason Of Marriage may be valid, the following requisites
Reasons of Marriage must be present:
(Article 82- Article 87)
a. They must be made before the celebration of the marriage;
b. They must be made in consideration of the marriage;
c. They must be made in favor of one or both of the future spouses.
It must be noted that a donation is an act of liberality by which a person disposes
gratuitously of a thing or right in favor of another, who accepts it.

- The spouses cannot donate or grant gratuitous advantage, direct or indirect, during the
existence of the marriage, except moderate gifts which the spouses may give during
family celebrations or rejoicings. (Article 87 of the Family Code)

- If the spouses are governed by the absolute community regime, there is no limit as to
the extent of the donation the future spouses may give to one another before or in
consideration of the marriage. The reason for the rule is, if the future spouses are
governed by the absolute community property, the same is a virtual donation of
properties to one another before the marriage. Their properties are put into a common
fund to form parts of their absolute community properties.

- However, if they are governed by the conjugal partnership or complete separation of

properties or dowry system, the limit of the donations to one another before and in
consideration of the marriage is only one-fifth (1/5) of their present property.Any excess
shall be considered void.
Chapter 3. System of - Absolute community of property means that you and your future spouse will be
Absolute Community co-owners of all the properties that each of you will bring into your marriage as well as
of all those that you will acquire during your marriage
(Article 88- Article 104) .
- e.g. Even if you owned a sports car that you bought during your debonair days, your
future spouse will be a co-owner of that sports car as soon as you get married.

- Excluded from the system of absolute community of property are: 1) properties

acquired by you or your future spouse during your marriage through gratuitous title
including the fruits from and income thereof; 2) properties for each of your personal and
exclusive use, and 3) properties acquired by either of you before your marriage where

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 either of you have legitimate descendants under a former marriage, including the fruits
from and income thereof.

Chapter 4. Conjugal - In a Conjugal Partnership of Gains, the spouses place in a common fund place the fruits
Partnership of Gains of their separate property, and the income from their work or industry and the same is to
be divided between them equally, generally, upon the dissolution of the marriage or the
partnership. The spouses however retain ownership and administration of their separate
(Article 105- Article 133)
properties. They also retain possession and enjoyment of the same. But either of them
may transfer the administration to each other by means of a public instrument which
must be recorded in the registry of property of the place where the property is located.

- While the law guarantees that the net gains or benefits of the conjugal partnership shall
be divided between the spouses at the liquidation of the conjugal partnership, such
guarantee, however, does not mean that they would always get their shares. Such right
over the net gains is merely inchoate because it may be found out after the liquidation
that there is no conjugal partnership of gains to be divided.

- The Conjugal Partnership covers the following properties:

A. The proceeds, products, fruits and income from the separate properties of
the spouses.

B. Those acquired by either or both of the spouses:

1. by their efforts, or
2. by chance.

- Spouses are liable pro-rata in the satisfaction of the partnership’s indebtedness.

Nonetheless, if the conjugal partnership is insufficient to cover the liabilities, the spouses
shall be solidarity liable for the unpaid balance with their separate properties.

- The conjugal partnership of gains is supposed to last until:

1. the dissolution of the marriage, like death or annulment.

2. the dissolution of the partnership, like legal separation or judicial
separation of property.
Chapter 5. Separation of - Under Article 134 of the Family Code: “in the absence of the express declaration in the
Property of the Spouses marriage settlements, the separation of the property between the spouses during the
and Administration of marriage shall not take place save in virtue of a judicial order.” Hence, the separation of
Common Property of One property is not effected by mere execution of a contract or agreement of the parties but
Spouse During the by the decree by the court approving the same.
Marriage

(Article 134- Article 142)

Chapter 6. Regime of - Under the system of complete separation of properties between the husband and wife,
Separation of Property each spouse shall own, dispose of, possess, administer and enjoy his or her own separate
estate, without need of the consent of the other. To each spouse shall belong all earnings

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(Article 143- Article 146) from his or her profession, business or industry and all fruits, natural, industrial or civil,
due or received during the marriage from his or her separate property. And both spouses
shall bear the family expenses in proportion to their income, or, in case of insufficiency
or default thereof, to the current market value of their separate properties. The liability of
the spouses to creditors for family expenses shall, however, be solidary.

- The separation of property may refer to present or future property or both. Further, it
may be total or partial separation of property. In a partial separation of property, the
assets not agreed upon as separate shall pertain to the absolute community.

- If in the marriage settlement the future spouses agreed on the system of complete
separation of property, this cannot later on be converted during the marriage into the
conjugal partnership of gains. The conjugal partnership and absolute community of
property can, however, be converted into the separation of property regime during the
marriage, provided there is judicial approval. Such judicial separation of property may
either be voluntary or for sufficient cause.

- The spouse may jointly file a verified petition with the court for the voluntary
dissolution of the absolute community or the conjugal partnership of gains, and for the
separation of their common properties. All creditors of the absolute community or of the
conjugal partnership of gains, as well as the personal creditors of the spouse, shall be
listed in the petition and notified of the filing thereof. The court shall take measures to
protect the creditors and other persons with pecuniary interest.

- Once the separation of property has been decreed, the absolute community or the
conjugal partnership of gains shall be liquidated in conformity with the Family Code.
During the pendency of the proceedings for separation of property, the absolute
community or the conjugal partnership shall pay for the support of the spouses and their
children.

- After dissolution of the absolute community or of the conjugal partnership, the

complete separation of property shall apply. The petition for separation of property and
the final judgment granting the same shall be recorded in the proper local civil registries
and registries of property.
Chapter 7. Property - Under Article 147 of the Family Code, there are two instances when the governing
Regime of Union system is that of co-ownership, namely:
without Marriage
1. when a man and a woman live together as husband and wife, but they are not
(Article 147- Article 148) married (hence, a common-law union or a “live-in’’ relationship); and
2. when there is no benefit of marriage although the man and the woman are
capacitated to marry each other and the marriage is void (void ab initio).

- Under the rules of co-ownership, the share of the co-owners, in the benefits as well as
in the charges, shall be proportional to their respective interests. And the properties of
common-law partners falling under Article 147 of the Family Code, which is under
co-ownership are as follows:

1. the property acquired by either or both of them thru their work or industry; and
2. their wages and salaries.

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 -Henceforth, donated, or inherited properties are not considered co-owned. But in the
case of purchased properties, they are considered co-owned if it was obtained through
their wages and salaries or it was bought in exchange or substitution of the property
acquired by either or both of the couple thru their work or industry. Thus, a house and lot
purchased with salaries of the couple should be regarded as co-owned, but a house and
lot bought with inherited cash of any of the parties are not considered co-owned. The
house and lot belong exclusively to the person who had inherited the money.

- As for the fruits from the work or industry of either or both of the parties, these will be
considered owned in common by them. For example, interest on bank deposits
exclusively owned by either couple should likewise be regarded as exclusive or separate
property, not co-owned. However, interest on joint bank deposits of the couple is
considered as property owned in common.
TITLE V. THE
FAMILY

Chapter 1. The Family as - The family is generally regarded as a primary social institution. The institution of
an Institution family is a basic unit in the society, and the multifaceted functions performed by it
makes it a much-needed institution in a society. It is one of the oldest social institution
(Article 149- Article 151) on the earth. Although families differ widely around the world, they also share certain
common concerns in their everyday lives.

- Under Article 149 of Family Code. The family, being the foundation of the nation, is a
basic social institution which public policy cherishes and protects. Consequently, family
relations are governed by law and no custom, practice or agreement destructive of the
family shall be recognized or given effect. (216a, 218a)

Chapter 2. The Family - The actual value of the family home shall not exceed, at the time of its constitution, the
Home amount of the three hundred thousand pesos in urban areas, and two hundred thousand
pesos in rural areas, or such amounts as may hereafter be fixed by law. (Article 157 of
Family Code )
(Article 152- Article 162

- For purposes of this Article, urban areas are deemed to include chartered cities and
municipalities whose annual income at least equals that legally required for chartered
cities. All others are deemed to be rural areas. (231a)

TITLE VI.
PATERNITY &
FILIATION

Chapter 1. Legitimate - Children born after one hundred and eighty days following the celebration of the
Children marriage, and before three hundred days following its dissolution or the separation of the
spouses shall be presumed to be legitimate. (Art. 225, Civil of the Philippines).
(Article 163- Article 171)
- Children conceived or born during the marriage of the parents are legitimate.

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 - Children conceived as a result of artificial insemination of the wife with the sperm of
the husband or that of a donor are likewise legitimate children of the husband and his
wife, provided that both of them authorized or ratified such insemination in a written
instrument executed and signed by them before the birth of the child. The instrument
shall be recorded in the civil registry together with the birth certificate of the child. (Art.
164, Family Code of the Philippines).
Chapter 2. Proof of - The filiation of legitimate or illegitimate children is established by any of the
Filiation following: (1) the record of birth appearing in the civil register or a final judgment; or (2)
an admission of legitimate filiation by the parent concerned in a signed public document
(Article 172- Article 174) or a private handwritten instrument. In the absence of the said documents, filiation shall
be proved by: (1) the open and continuous possession of the status of a legitimate or
illegitimate child; or (2) any other means allowed by the Rules of Court and special laws
(Article 172 in relation to Article 175, Family Code).
- The law itself establishes the status of a child from the moment of his birth. Proof of
filiation is necessary only when the legitimacy of the child is being questioned. This rule
also applies to illegitimate children.
Chapter 3. Illegitimate - Under Article 176 of Family Code. Illegitimate children shall use the surname and shall
Children be under the parental authority of their mother, and shall be entitled to support in
conformity with this Code. However, illegitimate children may use the surname of their
(Article 175- Article father if their filiation has been expressly recognized by the father through the record of
birth appearing in the civil register, or when an admission in a public document or
176)
private handwritten instrument is made by the father. Provided, the father has the right to
institute an action before the regular courts to prove non-filiation during his lifetime. The
legitime of each illegitimate child shall consist of one-half of the legitime of a legitimate
child.

Chapter 4. Legitimated Legitimation is a remedy by means of which those who in fact were not born in wedlock
Children and should, therefore, be considered legitimate, it being supposed that they were born
when their parents were already married.
(Article 177- Article 182)
- Legitimation takes place by the subsequent valid marriage of the parents of the child.
Legitimated children are originally illegitimate but later considered legitimate by legal
fiction because of the subsequent marriage of the parents who, at the time of the child’s
conception, had no legal impediment to marry each other. Legitimated children enjoy the
rights of legitimate children, as to the use of surname of both parents, support and
legitime which I have mentioned earlier. A married couple who would want to file for
legitimation has to execute a joint affidavit of legitimation. Attached to it are the
couple’s marriage certificate and birth certificate of the child, who is to be legitimated.
The affidavit together with the attached documents shall be submitted to the local civil
registry where the birth of the child is registered. The upper right corner of the certificate
of live birth is reserved for remarks/annotation. The local civil registrar shall place there
legitimated, the new status of the child. The documents pertaining to the legitimated
child shall then be submitted to the National Statistics Office (NSO). The effects of
legitimation shall retroact to the time of the child’s birth.

- Legitimation may be impugned by “those who are prejudiced in their rights, which
means those who would suffer economic or material injury by the legitimation like
testamentary or intestate heirs. Creditors are excluded, because they step into the picture
only when there is repudiation of inheritance by the heirs.

1. Legitimation is a remedy by means of which those who in fact were not born in
wedlock and should, therefore, be considered illegitimate, are, by fiction,

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 considered legitimate, it being supposed that they were born when their parents
were already validly married.
2. Only children conceived and born outside of wedlock of parents who at the time
of the conception of the former, were not disqualified by any impediments to
marry each other, may be legitimated. (Art. 177, Family Code)
3. Legitimation of children by subsequent marriage of parents shall be recorded in
the civil registry office of the place where the birth was recorded.
4. For a child to be considered legitimated by subsequent marriage, it is necessary
that:

 the parents could have legally contracted marriage at the time the child was
conceived ;
 that the child has been acknowledged by the parents before or after the
celebration of their marriage ; and
 the acknowledgement has been made with the consent of the child, if age or
with the approval of the court, if a minor, unless it has been made in the
certificate before a court of record, or in any authentic writing.

TITLE VII. - A person of age and in possession of full civil capacity and legal rights may adopt,
ADOPTION provided he is in a position to support and care for his children, legitimate or
illegitimate, in keeping with the means of the family. (Article 183 of Family Code)
(Article 183- Article 193)
- Only minors may be adopted, except in the cases when the adoption of a person of
majority age is allowed in this Title.
TITLE VIII. SUPPORT - Article 194 of the Family Code defines support as everything indispensable for the
sustenance, dwelling, clothing, medical attendance, education and transportation, in
(Article 194- Article 208) keeping with the financial capacity of the family. Since children are under the parental
authority of their parents while they are minors, parents are obliged to provide support to
their children who are below eighteen (18) years of age. However, even if the child is
over eighteen (18) years of age, the parents are still required to provide support insofar
as education of the child is concerned.

- It bears stressing that support of the child is a joint obligation of the father and mother.
Thus, if both parents are gainfully employed, then the obligation cannot be shifted to one
parent alone.

- Support includes whatever is necessary to keep a person alive.

A. Natural Support-the basic necessities

B. Civil Support-anything beyond the basic necessities

TITLE IX. PARENTAL

AUTHORITY

Chapter 1. General - The father and the mother shall jointly exercise parental authority over the persons of
Provision their common children. In case of disagreement, the father’s decision shall prevail,
unless there is a judicial order to the contrary.
(Article 209- Article 215)
- The parents are equally bound to ensure the wholesome upbringing of the children.
This precept is in accordance with the natural order of life . A father and a mother are

5 0
 not expected to have a compartmentalized concern over their children or in their parental
love be split up to serve different purposes.
Chapter 2. Substitute & - Article 218 of the Family Code says: “The school, its administrators and teachers, or
Special Parental the individual entity or institution engaged in child care shall have special parental
Authority authority and responsibility over the minor child while under their custody instruction or
custody.”
(Article 216- Article 219)
- Under this supervision instruction or custody for the special parental authority to apply
and responsibility too. Moreover, remember that authority and responsibility shall apply
to all activities with authorization. Whether outside or inside the premises of the school
entity or institution. One good example would be field trips or conferences for
journalism students or journalism activities, national or regional press conference.
During these extracurricular activities, the students are still under the authority and
responsibility of the teacher and the school.
Chapter 3.Effect of - Parental authority refers to parents’ rights and responsibilities toward their children
Parental Authority Upon from the minute they are born until they turn 18. Under their parental authority, parents
the Persons of the make decisions that affect their children’s well-being.
Children

(Article 220- Article 224)

Chapter 4.Effect of - The child himself owns the property acquired by him or her through his or her work or
Parental Authority Upon industry and shall be primarily used for his own welfare, support and education.
the Property of the However, being a part of a family which the state seeks to strengthen, if the child’s
Children property is more than sufficient to maintain the said child, the said properties may be
used to defray the collective daily needs of the family.
(Article 225- Article 227)
- It must likewise be emphasized that a child is obliged to support his or her parents in
accordance with Article 195 of the Family Code and from his or her separate property
can be taken the support to be given to the parents if the same needs it and if the child
can afford it.
Chapter 5. Suspension - Parental authority is automatically suspended upon conviction of the parent or the
and Termination of person exercising the same of a crime which carries with it the penalty of civil
Parental Authority interdiction. The authority is automatically reinstated upon service of the penalty or upon
pardon or amnesty of the offender.
(Article 228- Article 233)
- On the other hand, parental authority may be suspended by the court, in an appropriate
case where the parent or person who has parental authority:

1. Treats the child with excessive harshness or cruelty.

2. Gives the child corrupting orders, counsel or example.

3. Compels the child to beg.

4. Subjects the child or allows him to be subjected to acts of lasciviousness.

- These grounds are deemed to include cases which have resulted from culpable
negligence of the parent or the person exercising parental authority.

- The suspension or deprivation may be revoked and the parental authority revived in a
case filed for the purpose or in the same proceeding if the court finds that the cause

5 0
 therefor has ceased and will not be repeated.

- Parental authority of either or both parents may be terminated or suspended by order of

the court. The grounds for permanently terminating parental authority are:

1. Death of the parents.

2. Death of the child.

3. Emancipation of the child.

4. When a person exercising parental authority has subjected the child or allowed
him/her to be subjected to sexual abuse, such person shall be permanently deprived
by the court of such authority.

- Custody and parental authority may also be terminated, subject to revival by the court
in a proper case, in any of the following instances:

1. Upon adoption of the child.

2. Upon appointment of a general guardian.

3. Upon judicial declaration of abandonment of the child in a case filed for the
purpose.

4. Upon final judgment of a competent court divesting the party concerned of

parental authority.

5. Upon judicial declaration of absence or incapacity of the person exercising

parental authority.

TITLE X. - The emancipation of a minor refers to a court process through which a minor becomes
EMANCIPATION AND self-supporting, assumes adult responsibility for their welfare, and is no longer under the
AGE OF MAJORITY care of their parents. Upon achieving emancipation, the minor assumes the rights,
privileges, and duties of adulthood before actually reaching the "age of majority"
(Article 234- Article 237) (adulthood). At that point, the minor's parents are no longer responsible for the child, and
also have no claim to the minor's earnings. During the court proceedings and before
granting emancipation, the court primarily considers the best interests and level of
maturity of the minors, and considers whether minors can support themselves
financially.

TITLE XI. SUMMARY

JUDICIAL
PROCEEDINGS IN
THE FAMILY LAW
Chapter 1. Scope of - Until modified by the Supreme Court, the procedural rules provided for in this Title
Application shall apply as regards separation in fact between husband and wife, abandonment by one
of the other, and incidents involving parental authority. (Article 238 of Family Code)
(Article 238)

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Chapter 2. Separation in - The spouses are co-owners or partners of the community property or partnership
Fact Between Husband & property. In case they are separated in fact or one spouse abandons the other, this will
Wife not affect the absolute community of property or conjugal partnership of gains.

(Article 239- Article 248) - If any spouse desires to enter into any transaction, he or she can go to court for
approval of the sale if he or she cannot obtain the consent of the other spouse

- The petition should be under oath.

Chapter 3. Incidents - Article 249

Involving Parental Petitions filed under Articles 223, 225 and 235 of this Code involving parental
Authority authority shall be verified.

(Article 249- Article 252) - Article 250

Such petitions shall be verified and filed in the proper court of the place where the
child resides.

- Article 251
Upon the filing of the petition, the court shall notify the parents or, in their absence or
incapacity, the individuals, entities or institutions exercising parental authority over
the child.

- Article 252
The rules in Chapter 2 hereof shall also govern summary proceedings under this
Chapter insofar as they are applicable.

Chapter 4. Other - Article. 253. The foregoing rules in Chapters 2 and 3 hereof shall likewise govern
Matters Subject to summary proceedings filed under Articles 41, 51, 69, 73, 96, 124 and 127, insofar as
Summary Proceedings they are applicable.

(Article 253)

TITLE XII. FINAL - Article. Titles III, IV, V, VI, VIII, IX, XI, and XV of Book 1 of Republic Act No. 386,
PROVISION otherwise known as the Civil Code of the Philippines, as amended, and Articles 17, 18,
19, 27, 28, 29, 30, 31, 39, 40, 41, and 42 of Presidential Decree No. 603, otherwise
(Article 253- Article known as the Child and Youth Welfare Code, as amended, and all laws, decrees,
257) executive orders, proclamations, rules and regulations, or parts thereof, inconsistent
herewith are hereby repealed.

- Article . If any provision of this Code is held invalid, all the other provisions not
affected thereby shall remain valid.

- Article 256. This Code shall have retroactive effect insofar as it does not prejudice or
impair vested or acquired rights in accordance with the Civil Code or other laws.

- Article 257. This Code shall take effect one year after the completion of its publication
in a newspaper of general circulation, as certified by the Executive Secretary, Office of
the President.

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 RA 7160 REVIEWER Aims of the LGC of 1991
The Code is meant to transform LGU's into self-reliant communities and active
partners in nation-building by giving them more powers, authority, responsibilities
I. GENERAL PRINCIPLES and resources.
Corporation is an artificial being created by operation of law, having the right of
succession and the powers, attributes and properties expressly authorized by law or Rules of Interpretation
incident to its existence. 1.) provision on power: liberally interpreted in favor of LGU; in case of doubt,
Public Corporation is one formed and organized for the government of a portion of resolved in favor of devolution of powers;
the State. 2.) ordinance or revenue measure: construed strictly against LGU enacting it and
liberally in favor of taxpayer;
Classes of Corporations: 3.) tax exemptions, incentive or relief granted by LGU: construed against person
1. Public or municipal— a body politic and corporate constituted by claiming;
incorporation of inhabitants of city or town for purposes of local government 4.) general welfare provisions: liberally interpreted to give more powers to LGU's in
thereof or as agency of State to assists in civil government of the country; one accelerating economic development and upgrading quality of life for people in
formed and organized for the government of a portion of the State. community;
2. Priνate — one formed for some private purpose, benefit, aim or end. 5.) rights and obligations existing on date of effectivity of LGC of 1991 and arising
3. Quasi-public — a private corporation that renders public service or supplies out of contract or any other source of prestation involving LGU, shall be governed by
public wants. the original terms and conditions of said contract or law in force at time such rights
4. Quasi-corporation — public corporations created as agencies of State for were vested; and
narrow and limited purpose. 6.) resolution of controversies arising under the LGC of 1991 where no legal
provision or jurisprudence applies, resort may be had to customs and traditions in
Elements of Public Corporation place where controversies take place.
1. legal creation or incorporation;
2. corporate name; THE LOCAL GOVERNMENT CODE OF l99l: SALIENT FEATURES
3. inhabitants; and Declaration of State Policy over LGU’s
4. territory  Guarantee genuine and meaningful local autonomy to local government units
or political and territorial subdivisions;
Under the Local Government Code of 1991, inhabitants and territory, as elements of
public corporation, are referred to as population and land area, respectively. Local Autonomy — is “self governing.” It is the granting of more powers, authority,
responsibilities and resources to the lower or local levels of a government system.
Dual Nature of Municipal Corporation The principle of local autonomy under the 1987 Constitution simply means
 Public or goνernmental — it acts as an agent of the State for the government decentralization. It does not make the local government sovereign within the state
of the territory and the inhabitants within the municipal limits; it exercises by or an “imperium in imperio.”
delegation a part of the sovereignty of the State.
 Priνate or proprietary — it acts in a similar category as a business corporation, Under the Philippine concept of local autonomy, the national government
performing functions not strictly governmental or political; it stands for the has not completely relinquished all its powers over local governments, including
community in the administration of local affairs. It acts as a separate entity for autonomous regions. Only administrative powers over local officers are delegated to
its own purposes and not as a subdivision of the state. political subdivisions. The purpose of delegation is to make governance more
directly responsive and effective at the local levels. Policy-setting for the entire
The operation of a public market is not a governmental function but merely an country still lies in the President and Congress. Municipal governments are still
activity undertaken by the city in its private proprietary capacity. agents of the national government. (Pimentel νs. Aguirre, 336 SCRA 20l)

Criterion to determine whether corporation is public: The relationship of the The Supreme Court, in Leynes νs. COA, 4l8 SCRA l80, upheld the power of
corporation to the State, i.e., if created by the State as its own agency to help the the local government units to grant allowances to judges and leaving to their
State in carrying out its governmental functions, then it is public; otherwise, it is discretion the amount of allowances they may want to grant, depending on the
private. availability of local funds if only to ensure the genuine and meaningful local
De Facto Municipal Corporation is a corporation that may exist in fact although not autonomy of the local government units.
in point of law because of certain defects in some essential features of its
organization. Section 3, paragraph (e) of the Local Budget Circular, by outrightly
prohibiting LGU's from granting allowances to judges whenever such allowances are
Elements/Requisites of a De Facto Municipal Corporation (1) also granted by the national government or (2) similar to the allowances granted
1. a valid law authorizing incorporation; by the national government, violates Section 447 (a) (1) (xi) of the Local Government
2. an attempt in good faith to organize under it; Code of 1991. Likewise, it is elementary in statutory construction that an
3. a colorable compliance with the law; and administrative circular cannot supersede, abrogate, modify or nullify a statute. (Ibid.)
4. an assumption of corporate powers.
The State is mandated to ensure local autonomy of local governments, and local
Four Major Parts of the Local Government Code of 1991 governments are empowered to levy taxes, fees and charges that accrue
Book I — General Provisions exclusively to them, subject to congressional guidelines and limitations.
Book II - Local Taxation and Fiscal Matters
Book III - Local Government Units  Ensure accountability of LGU's through institution of effective mechanisms of
Book IV - Miscellaneous and Final Provisions recall, initiative and referendum; and
Effectivity: January 1, 1992  Require all national agencies and offices to conduct periodic consultation with
appropriate LGU's, NGO's and People's Organizations and other concerned
Scope of Application of Local Government Code sectors of community before any project or program is implemented in their
Applicable to: respective jurisdiction.
 all provinces
 cities Application of the Policy. Under the Local Government Code, two requisites must be
 municipalities met before a national project that affects the environmental and ecological balance
 barangays of local communities can be implemented: (1) prior consultation with the affected
 and other political subdivisions as may be created by law, and local communities and prior approval of the project by the appropriate sanggunian.
 to the extent provided in the Local Government Code (i.e, devolution of Absent either of these mandatory requirements, the project implementation is
powers): illegal.
a) officials
b) offices, or The prior approval of local government units affected by the proposed conversion
c) agencies of the National Government of a Timber License Agreement (TLA) into an Integrated Forest Management
Agreement (IFMA) is necessary before any project or program can be implemented
by government authorities that may cause depletion of no-renewable resources, 2. Provide funding support;
loss of crop land, rangeland or forest cover, and extinction of animal or plant series. 3. Augment basic services assigned to LGUs;
4. Provide technical and other forms of assistance and coordinate on the
When the Policy Does Not Apply. The requirement of prior consultation applies only discharge of NGA functions;
to national projects and/or programs which are to be implemented in a particular 5. Ensure the participation of LGUs in planning and implementing national
local community. Although sanctioned by the national government, the operation of projects, and
lotto is neither a program nor project of the national government but of charitable 6. Conduct mandatory consultations with LGUs.
institution, the Philippine Charity Sweepstakes Office. The projects and programs
mentioned in Section 27 should be interpreted to mean projects and programs Extent of the LCE’s Authority over NGA’s and their Functionaries
whose environmental and ecological effects are among those mentioned in Sections  The LCE can call upon any employee stationed or assigned in his locality to
26 and 27 of the LGC. advise him on matters affecting the LGU as well as coordinate with said
officials, plans, programs and projects.
Power of Control and Power of General Supervision  The LCE can enlist the attendance of the national official stationed in the LGU
Over LGU’s Distinguished on a meeting of elective and appointed officials of the LGU treating matters in
the promotion of the general welfare of the residents.
 The LCE can also initiate proper administrative or judicial action against
national government official or employee who may have committed an
offense while stationed or assigned in the LGU.

Inter-Local Government Relations

 The province, through the governor, shall ensure that every component city
and municipality acts within its powers. (Sec. 29, LGC)
 The city or municipality, through the mayor, shall ensure that barangays act
within the scope of their powers. (Sec. 32, LGC)
 The governor shall review all executive orders promulgated by the mayor. The
mayor shall review all executive orders promulgated by the punong barangay.
(Sec. 30, LGC)
 As part of its delegated power of general supervision, the Sangguniang
Panlalawigan of a province exercises the quasi-judicial function (administrative
disciplinary authority) of hearing and deciding administrative cases involving
elective municipal and component city officials under their jurisdiction.

In turn, the Sangguniang Panlungsod and Sangguniang Bayan exercise

disciplinary authority over elective barangay officials within their jurisdiction. The
Governor, upon the recommendation of the Sangguniang Panlalawigan, and the
City/Municipal Mayor, upon the recommendation of the Sangguniang
Panlungsod/Bayan, may impose preventive suspension upon local elective officials
falling under their delegated administrative jurisdiction.

 Review of component city and municipal ordinances by the Sangguniang

Panlalawigan (Sec. 56, LGC)
 Review of barangay ordinances by the Sangguniang Panlungsod or
Sangguniang Bayan. ((Sec.57, LGC)
Other distinctions:
The distinction between the two powers was enunciated in Drilon νs. Lim: Under RA 6734, executive power in the ARMM is vested in the Regional Governor,
 An officer in control lays down the rules in the doing of an act. If they are not who has control of all the regional executive commissions, board, bureaus and
followed, he may, in his discretion, order the act undone or re-done by his offices, and exercises general supervision over the local government units within
subordinates or he may even decide to do it himself. Supervision does not cover the Autonomous Region.
such authority. The supervisor or superintendent merely sees to it that the rules
are followed, but he himself does not lay down such rules, nor does he have Relations with PO’s and NGO’s
discretion to modify or replace them. If the rules are not observed, he may  Section 23, Article II provides that it is the policy of the State to encourage
order the work done or re-done but only to conform to the prescribed rules. He non-governmental, community-based, or sectoral organizations that promote
may not prescribe his own manner for doing the act. He has no judgment on the welfare of the nation.
this matter except to see to it that the rules are followed. 
 By constitutional fiat, the heads of political subdivisions are subject to the  Debureaucratization: Private Sector Participation In Local Governance
President's supervision only, not control, so long as their acts are exercised Purpose: to ensure the viability of local autonomy as an alternative strategy for
within the sphere of their legitimate powers, and by the same token, the sustainable development. LGUs shall encourage private- sector participation in the
President may not withhold or alter any authority or power given them by the delivery of basic services.
Constitution and the law. Also, the DBM, by issuing Local Budget Circular 55
which dictated a uniform amount that an LGU can disburse as additional Role of PO's, NGO's in the LGU's:
allowance to judges stationed therein, overstepped its power of supervision  LGUs shall promote the establishment and operation of people's and non-
over LGU's by imposing a prohibition that did not correspond with law it sought governmental organizations as active partners.
to implement.  LGUs may enter into joint venture and cooperative undertakings with people's
and non-governmental organizations particularly in the following:
Power of Superνision Oνer Liga. The President's power of general supervision, as 1. delivery of certain basic services;
exercised by the DILG Secretary as his alter ego, also extends to the Liga ng mga 2. capability building and livelihood projects, and
Barangay. It is not subject to control by the Chief Executive or his alter ego. Hence, 3. developing local enterprises designed to improve productivity and income,
when respondent judge appointed the DILG as interim caretaker to manage and diversifies agriculture, spur rural industrialization; and enhance the economic
administer the affairs of the Liga, she effectively removed the management from and social well- being of the people.
the National Liga Board and vested control of the Liga on the DILG. The acts of the Special Local Bodies where the Private Sector may
DILG went beyond the sphere of general supervision and constituted a direct Participate in Local Governance
interference with the political affairs not only of the Liga, but more importantly of
the barangay as an institution. What the DILG wielded was the power of control 1.) Local Development Council
which even the President does not have. — a duly constituted body which shall assist the corresponding Sanggunian in
General Responsibilities of the National Government towards LGU’s setting the direction of economic and social development, and coordinating
1. Formulate policies and set standard and guidelines; development efforts in its territorial jurisdiction.
Relationship of the LDC with the Sanggunian and RDC: Creation of Provinces
- All programs and policies proposed by the Local Development Council shall be Role of Proνinces
submitted to its Sanggunian for appropriate action. A province, composed of cluster of municipalities, or municipalities and component
- The local development plans approved by the Sanggunian may be integrated with cities, and as a political and corporate unit of government, serves as a dynamic
those of the next higher level of the Local Development Council. mechanism for developmental processes and effective governance of local
- All approved local development plans shall be submitted to the Regional government units within its territorial jurisdiction. (Sec. 459, LGC)
Development Council which shall be integrated into the regional development plan
to be submitted to the National Economic Development Authority. Who Creates Proνinces
- The Department of Budget and Management shall provide the Local Development A province may be created, divided, merged or abolished, or its boundary
Councils the information on applicable financial resources and budget allocations to substantially altered, only by an act of Congress, subject to the satisfaction of the
guide their planning. criteria set forth by the LGC. Thus, in Sema νs. COMELEC, GR No. l77597, July l6,
2008, under RA 9054, the power of the Regional Legislative Assembly of the
2.) Prequalifications, Bids and Awards Committee (PBAC) Autonomous Region of Muslim Mindanao to create provinces within its territorial
- Primarily responsible for the conduct of prequalification of contractors, bidding, jurisdiction has also been declared unconstitutional by the Supreme Court.
evaluation of bids, and the recommendation of awards concerning local
infrastructure projects. Substantive Requirements
(1) Average annual income of at least twenty million pesos; and
3.) Local Peace and Order Council, pursuant to EO No. 309, as amended, Series of (2) contiguous territory of at least two thousand square kilometers, or
1988. (3) a population of not less than two hundred fifty inhabitants. The creation of the
new province shall not however reduce the land area, population and income of the
4.) Local School Board original unit or units at the time of the said creation to less than the minimum
Functions: requirements prescribed by the LGC. (Sec. 46l, LGC) BP 885, which created the
 determine the annual supplementary budget needs for operating and Province of Negros del Norte was declared unconstitutional because it did not
maintaining public schools; comply with the land area criterion prescribed under the LGC. The use of the word
 serve as advisory committee on educational matters to the Sanggunian; “territory” in Section 17 of the Local Government Code refers only to the physical
 recommend changes in the names of public schools within the territorial mass of land area, not to the waters comprising a political entity. It excludes the
jurisdiction of the LGU for enactment of the Sanggunian concerned and waters over which the political unit exercises control.
 authorize local treasurers to distribute funds pursuant to the budget prepared
in accordance with existing rules and regulations. Status of Sub-provinces
 Existing sub-provinces are converted into regular provinces upon the approval
The DECS shall consult the Board on the appointment of division superintendents, by a majority votes cast in a plebiscite to be held in the said sub-province and
district supervisors, school principals, and other school officials. However, the the original province directly affected. (Sec. 462, LGC)
requirement in Section 99 of the LGC of prior consultation with the local school
board does not apply to a mere designation of a schools division superintendent Division and Merger of LGU’s
which partakes the nature of reassignment. It only refers to appointments made The division and merger of local government units shall comply with the same
by the DECS. (Osea νs. Malaya, 375 SCRA 285) requirements for their creation. The income, population or land area shall not be
reduced to less than the minimum requirements. Likewise, the income classification
The following shall be given priority in the annual school board budget: of the original local government unit or units shall not fall below its current income
1. construction, repair and maintenance of school buildings and other facilities of classification prior to such division. (Sec. 8, LGC)
public elementary and secondary schools;
2. establishment and maintenance of extension classes where necessary; and Summary of Substantive Requirements in the Creation of LGU’s
3. sports activities at the division, district, municipal and barangay levels.

The Special Education Fund may be expended only for salaries and personnel
related benefits of teachers appointed by the local school board in connection with
the establishment and maintenance of extension class. Extension classes are
referred to mean additional classes needed to accommodate all children of school
age deserving to enter in public schools to acquire basic education.

Likewise, the local Government Code reveals that expenses for college scholarship
grants are not among the projects for which the proceeds of the SEF may be
appropriated. While Secs. 100 c and 272 of the LGC reproduced Sec. 1 of RA No.
5447, the granting of scholarship to poor but deserving students was omitted in
Secs. 100 c and 272 of the LGC.

5.) Local Health Board

Functions:
 propose to the Sanggunian the annual budgetary allocation for health services
according to the DOH criteria;
Autonomous Regions
 serve as advisory committee on the health to the Sanggunian; and
The Philippine Constitution mandates the creation of autonomous regions in
 create its own advisory committees to advise local health agencies on
Muslim Mindanao and in the Cordilleras consisting of provinces, cities,
personnel selection and discipline, budget review, operations review, bids and
municipalities, and geographical areas sharing common and distinctive historical
awards, grievances and complaints and similar functions according to technical
and cultural heritage, and economic and social structures. (Sec. l5, Art. X, PC)
and administrative standards of the DOH.

Special Metropolitan Political Subdivisions
6.) People’s Law Enforcement Board (PLEB)
The Congress may, by law, create special metropolitan political subdivisions, but the
— a disciplinary body for erring police officers. (RA 6975)
component cities and municipalities shall retain their basic autonomy and shall be
entitled to their own local executives and legislative assemblies. The jurisdiction of
CREATION, CONVERSION, DIVISION, MERGER, CONSOLIDATION
the metropolitan authority that will be thereby created shall be limited to basic
AND ABOLITION OF LGU's
services requiring coordination. (Sec. ll, Art. X, PC)
Beginning of Corporate Existence
Substantiνe Requisites:
When a new local government unit is created, its corporate existence shall
(1) A minimum population of two hundred thousand inhabitants and;
commence upon the election and qualification of its chief executive and a majority
(2) the latest annual income must be at least fifty million pesos.
of the members of the sanggunian, unless some other date is fixed therefor by law
or ordinance creating it. (Sec. l4, LGC)
Abolition of LGUs use is not such. These things must be determined and resolved in the ordinary
A local government unit may be abolished when its income, population or land area courts of law. If a thing be in fact a nuisance due to the manner of its operation,
has been irreversibly reduced to less than the minimum standards prescribed for its that question cannot be determined by a mere resolution of a Sanggunian.
creation under the Local Government Code, as certified by the national agencies to
Congress or to the Sanggunian concerned. Likewise, the law or, ordinance Power to Generate and Apply Resources - Eec. 18, LGC (Power of Taxation)
abolishing a local government unit shall specify the province, city, municipality, or All LGU's are empowered to create their own sources of revenues and to levy taxes,
barangay with which the local government unit sought to be abolished will be fees and charges subject to the provisions on local taxation consistent with the
incorporated or merged. (Sec. 9, LGC) basic policy of local autonomy. The power to tax is no longer vested exclusively on
Congress. Local legislative bodies are now given direct authority to levy taxes, fees
General Effects of Annexation/Consolidation of LGUs and other charges, pursuant to Section 5, Article X of the Philippine Constitution
On the legal existence of the territory annexed. — Unless otherwise provided for The Sanggunian concerned through an ordinance has the power to impose a tax,
by law, the annexation of one municipal corporation to another will dissolve the fee or charge. The procedural requirements of public hearing and publication must
annexed territory. It shall become part of the annexing corporation and will fall be observed for purposes of compliance with the requirements of due process.
under the jurisdiction of the latter.
On the laws and ordinances of the annexed corporation.— In the absence of any Only guidelines and limitations that may be established by Congress can define and
provision of law to the contrary, when a territory is annexed to a municipal limit such power of local governments. (Philippine Petroleum Corp. νs. Municipality
corporation, it shall become subject to all the laws and ordinances by which the oƒ Pililia, Rizal, l98 SCRA 82) See Section 133 of the LGC for common limitations. The
annexing corporation is governed. Constitutional mandate that every local government units shall enjoy local
On the right of officers or employees of the annexed or consolidated territory to autonomy, does not mean that the exercise of power by local government units is
continue to hold their offices. — Subject to what the legislature may provide upon beyond regulation of Congress. Thus, while each local government unit is granted
annexation, the officers and employees of the annexed or consolidated territory the power to create its own sources of revenue, Congress, in the light of its broad
shall terminate their official relation with their offices. power to tax, has the discretion to determine the extent of the taxing powers of
On the title to the property of the annexed territory. — When a municipal local government units consistent with the policy of autonomy.
corporation is annexed to another, the annexing territory shall acquire title to the
property of the annexed territory at the time of annexation without compensation Under existing law, local government units, in addition to having administrative
unless the annexing statute provides otherwise. Where the annexed territory, autonomy in the exercise of their functions, enjoy fiscal autonomy as well. Fiscal
however, forms part of a municipality from which it is taken, the legislature may autonomy means that local governments have the power to create their own
provide for the payment of compensation for the indebtedness. sources of revenue in addition to their equitable share in the national taxes
released by the national government, as well as the power to allocate their
Burial Lots resources in accordance with their own priorities. (Pimentel νs. Aguirre, 336 SCRA
In City Goνernment of Quezon City, νs. Ericta, l22 SCRA 759, the Quezon City 20l)
ordinance which required commercial cemetery owners to reserve 6% of burial lots
for paupers in the City was held to be an invalid exercise of police power, but was Under Section 133(o) of the LGC, local governments have no power to impose tax,
instead an exercise of the power of eminent domain which would make the City fees or charges on the National Government, its agencies and instrumentalities, and
liable to pay the owners just compensation Municipal corporations cannot adopt local government units. However, indicative of legislative intent to carry out the
ordinances which infringe the spirit of a state law or repugnant to the general policy constitutional mandate of vesting broad powers to local government units, the
of the State. It must be consistent with the general law. (Batangas CATV νs.CA, 439 Local Government Code effectively withdrawn tax exemption or incentives
SCRA 326) therefore enjoyed by certain entities.

Cockfighting License The limited and restrictive nature of the tax exemption privileges under the LGC is
It is the Sangguniang Bayan concerned alone which has the power to authorize and consistent with the State policy to ensure autonomy of local government units.
license the establishment, operation and maintenance of cockpits, and regulate Hence, Cebu City has the power to collect taxes from the MCIAA.
cockfighting and commercial breeding of gamecocks within its territorial jurisdiction.
But its discretion is limited by PD 449, the Cockfighting Law of 1974, in that it However, LGU’s shall receive 1% of the gross sale or receipts of the preceding
cannot authorize more than one cockpit per city or municipality, unless such cities calendar year and 40% of taxes, fees or charges that GOCCs would have paid if not
or municipalities have population of over 100,000, in which case two cockpits may tax exempt, whichever is higher.
be established. Cockfighting is a valid matter of police regulation, as it is a form of
gambling essentially antagonistic to the aims of enhancing national productivity and How National Wealth is Distributed?
self-reliance — limitation on the number of cockpits in a given municipality is a  If the national wealth is located in one province, the province shall receive 20%,
reasonably necessary means for the accomplishment of the purpose of controlling the component city/municipality shall receive 45% and the barangays 35%.
cockfighting, for clearly more cockpits equals more cockfight. A municipal ordinance  If the national wealth is located in two or more LGU’s, distribution shall be
must not contravene the Constitution and any statute. Ordinance No. 7 contravenes based on the following: Population — 70% and Land Area —30%.
the Cockfighting Law in allowing three cockpits in a city.  If the national wealth is located in Highly Urbanized City or Independent
Component City, the HUC or ICC shall receive 65% and the barangays shall
Lease of Stall in Public Market receive 35%.
It was within the ambit of the Sanggunian's authority in the exercise of police power
to regulate the enjoyment of the privilege to lease the market stalls. The enactment Fundamental Principles of Local Fiscal Administration
of the ordinance was a valid exercise of such governmental authority to regulate Among the fundamental principles governing the financial affairs, transactions and
the possession and use of the public market and its facilities. The lease and operations of the LGU’s are:
occupation of a stall in a public market is not a right but a purely statutory privilege 1. No money shall be paid out of the local treasury except in pursuance of an
governed by laws and ordinances. The operation of a market stall by virtues of a appropriation ordinance or law;
license is always subject to the police power of the city government. This power 2. Local government funds and monies shall be spent solely for public purposes;
could be exercised anytime to change the provisions of the contracts or even
abrogate them entirely, for the protection of general welfare. Such an act did not Section 335 of RA 7160 is clear and specific that no public money shall be
violate the non-impairment clause which is anyway subject to and limited by the appropriated or applied for private purposes. This is in consonance with the
paramount police power. fundamental principle in local fiscal administration that local government funds and
monies shall be spent solely for public purposes. The use of LGU funds for the
POWERS OF LOCAL GOVERNMENT UNIT widening and improvement of privately-owned sidewalks is unlawful and it directly
contravenes Section 335 of RA 7160. Only the construction, improvement, repair and
Abatement of Nuisance maintenance of infrastructure facilities owned by the LGU may be bankrolled with
While a Sanggunian is empowered under the Local Government Code to enact local government funds.
ordinances declaring, preventing or abating noise and other forms of nuisances, it
cannot declare a particular thing as a nuisance per se and order its condemnation. It 3. Local revenue is generated only from the sources expressly authorized by law
does not have the power to find as a fact, that a particular thing is a nuisance with or ordinance, and collection thereof shall at all times be acknowledged
such thing is not a nuisance per se; nor it can authorize the extrajudicial properly;
condemnation and destruction of that as a nuisance which in its nature, situation or
4. All monies officially received by a local government officer in any capacity or the purpose thereof is clearly not public. Where property is expropriated for the
on any occasion shall be accounted for as local funds, unless otherwise purpose of constructing a road, the expropriator is not mandated to comply with
provided by law; the essential requisites for an easement of right of way made under the New Civil
5. Trust funds in the local treasury shall not be paid out except in fulfillment of Code — case law has it that in the absence of legislative restriction, the grantee of
the purpose for which the trust was created or the funds received. the power of eminent domain may determine the location and route of the land to
be taken unless such determination is capricious and wantonly injurious.
NOTE: Pursuant to Section 16 and in the proper exercise of the corporate powers
of local government units as provided for under Section 22, the Sangguniang The testimony that although there were other ways through which can enter the
Panlalawigan/Panlungsod/Bayan shall approve ordinances and pass resolutions vicinity, no vehicle, however, especially fire trucks, could enter the area except
for an efficient and effective local government, in this connection shall adopt through the property sought to be expropriated is more than sufficient to establish
measures to protect the inhabitants of the province/city/municipality from that there is genuine necessity for the construction of a road in the area — absolute
harmful effects of man - made or natural disasters and calamities, and to provide necessity is not required, only reasonable and practical necessity will suffice. (Ibid.)
relief services and assistance for victims during and in the aftermath of said
disasters and calamities and their return to productive livelihood following said Public use, purpose, welfare; not for priνate use. In this jurisdiction, “public use” is
events. (Sections 648,458 and 447 (a)(1)(iv), LGC) defined as “whatever is beneficially employed for the community.” Expropriation is
justified so long as it is for the public good and there is genuine necessity of public
Eminent Domain (Eec. 19, LGC) character. That only a few could actually benefit from the expropriation of the
property does not diminish its public use character. It is simply not possible to
Nature. The right of eminent domain is usually understood to be an ultimate right provide all at once land and shelter for all who need them.
of the sovereign power to appropriate any private property within its territorial
sovereignty for a public purpose upon payment of just compensation. It is the The expropriation of property intended for the establishment of a pilot
Government's right to expropriate, in the nature of compulsory sale to the State, development center and housing project of the Province of Camarines Sur was held
private property for public use. Eminent domain is a fundamental State power that valid in consonance with the public purpose requirement of the Constitution.
is inseparable from sovereignty. Likewise, local government units can expropriate agricultural lands without prior
authority from the Department of Agrarian Reform as the determination of the
The power of eminent domain is inherently possessed by the State. It is lodged in public use of the property subject for expropriation is considered an expression of
the legislative branch of the government which has the authority to delegate the legislative policy.
exercise thereof. By delegation, the power may also be possessed by the President,
administrative bodies, local government units, and even to private enterprises Conversely, expropriation can not be exercised for private use or purpose. Where
performing public services, subject only to Constitutional limitations. Indeed, local the property sought to be expropriated was allegedly intended to benefit the
government units themselves have no inherent power of eminent domain and can residents of Sitio or Purok Paraiso but it would actually benefit the owners of a
exercise it only when expressly authorized by the legislature. subdivision and incidental benefit to homeowners within the sitio, the same
involves expropriation of private property for the benefit of private individual which
Section 19 of the LGC prescribes the delegation by Congress of the power of is clearly proscribed by the constitution. In this case, the owners of the subdivision
eminent domain and lays down the parameters for its exercise. Thus, strictly will be able to circumvent the commitment to provide road access to the
speaking, the power of eminent domain delegated to an LGU is in reality not subdivision and relieved from spending their funds for a right of way. Public funds
eminent but “inferior” since it must conform to the limits imposed by the can be used only for a public purpose. This proposed condemnation,
delegation and thus partakes only of a share in eminent domain. The national government funds would be employed for the benefit of a private individual
legislature is still the principal of the LGUs and the latter cannot go against the without any legal mooring.
principal's will or modify the same.
Just Compensation. The government must pay the owner thereof just
An expropriation suit does not involve the recovery of sum of money. It deals with compensation as consideration therefore. Just compensation means the fair market
the exercise by the government of its authority and right to take property for public value of the property or the equivalent for the value of the property at the time of
use. its taking. Anything beyond, that is more anything short of that is less, than just
compensation.
Purposes and Limitations. The taking of private property by local government units
shall be for public use, or purpose, or welfare, for the benefit of the poor and the When eminent domain is exercised by a local government unit, the amount to be
landless. The exercise by LGU's of the power of eminent domain is not absolute and paid for the expropriated property shall be determined by the proper court, based
is subject to the usual constitutional limitations such as necessity, private property, on the fair market value of the property at the time of actual taking. While Section 4
taking, public use, just compensation and due process of law and equal protection of Rule 67 of the Rules of Court provides that just compensation shall be
of the law. determined at the time of filing of the complaint for expropriation, such law cannot
prevail over Section 19 of RA 7160 which is a substantive law. It was also held that
Taking. The taking of private property is not absolute. Government may not the value of the property shall be ascertained as of the date it was actually taken,
capriciously or arbitrarily choose which private property should be expropriated. because it is as of that time that the real measure of the owner's loss may be fairly
adjudged. Once the value of the property is fixed by the court, the amount shall
Coνerage. Only private property can be the subject of expropriation. Private earn interest at the legal rate until full payment is effected.
property already devoted to public use can still be a subject of expropriation by
Congress but not by LGUs. Coro lary to the expanded notion of public use, An expropriation suit falls within the jurisdiction of the RTC since it is incapable of
expropriation is not anymore confined to vast tracts of land and landed estates. It is pecuniary estimation.
therefore of no moment that the land sought to be expropriated in this case is less
than half a hectare only. A property that is intended for the construction of a place The additional limitations on the exercise of the power of eminent domain by
of religious worship and a school for its members may still be expropriated. local government units are, as follows:
1. Exercised only by the local chief executive, acting pursuant to a valid ordinance;
Genuine Necessity. The right to take private property for public purposes  Expropriation is the procedure or action for carrying out that right of
necessarily originates from “necessity” and the taking must be limited to such eminent domain. The right extends to property partly or entirely personal
necessity. The foundation of the right to exercise eminent domain is genuine and the procedure is substantially the same.
necessity and that necessity must be of public character and must also be shown to An LGU shall file a complaint for expropriation on the strength of
exist. The ascertainment of the necessity must precede or accompany and not an ordinance and not a mere resolution passed by the Sanggunian. The
follow, the taking of the land. As a rule, the determination of whether there is legislative acts of the Sangguniang Panlungsod in the exercise of its law-
genuine necessity for the exercise of the power of eminent domain is a justiciable making authority are denominated ordinances.
question, including the exercise by LGUs. However, when the power is exercised by
the legislature, the question of necessity is essentially a political question. The promulgation of the ordinance authorizing the local chief
executive to exercise the power must be promulgated prior to the filing of
There is a failure to establish that there is genuine necessity when the basis for the complaint for eminent domain with the proper court, and not after the
passing the ordinance authorizing the expropriation indicates that the intended court shall have determined the amount of just compensation to which the
beneficiary is a private non-profit organization, and not residents of the locality — defendant is entitled.
 Sec. 9 of RA 7279, otherwise known as the Urban Development There is no provision in the Constitution or in the Local Government Code granting
and Housing Act of 1992, provides for priorities in the acquisition of land for local legislative bodies the power to subpoena a witness and the power to cite
socialized housing. Private lands rank last in the order of priority for them for contempt, either pursuant to its legislative power or quasi-judicial power.
purposes of socialized housing. Expropriation proceedings are to be
resorted to only when the other modes of acquisition have been exhausted. Products of Legislative Action
Compliance with these conditions must be deemed mandatory because  Ordinance — the legislative acts of the sanggunian in the exercise of its
these are the only safeguards in securing the right of owners of private law-making authority are denominated ordinances. They prescribe a
property to due process when their property is expropriated for public use. permanent rule of conduct; with force and effect of laws and requires
approval by the local chief executive.
Expropriation as a mode of acquiring lands for socialized housing under RA 7279 is  Resolution — an expression of sentiments of the members of the
subject to two conditions: sanggunian; they are of temporary character and does not have the force
 it shall be resorted to only when the other modes of acquisition have been and effect of a law.
exhausted; and
 parcels of land owned by small property owners are exempt from such Presiding Officer
acquisition.  The vice-governor, the vice-mayor, and the punong barangay shall be the
presiding officer of the sanggunian but shall vote only in case of tie. In
RA 7279 expressly exempted “small property owners” from expropriation of their case of inability of the presiding officer, the members shall elect a
lands for urban land reform. The two elements defining “small property owners” temporary presiding officer from among themselves.
are:
 those owners of real property whose property consists of residential lands  Being the acting governor, the Vice-governor cannot simultaneously
with an area of not more than 300 square meters in highly urbanized cities and exercise the duties of the latter, since the nature of the duties of the
800 square meters in other urban areas, and Provincial Governor calls for a full-time occupant to discharge them. The
 they do not own real property other than the same. creation of a temporary vacancy in the office of the Governor creates a
corresponding vacancy in the office of the Vice - governor whenever the
2. For public use or purpose or welfare, for the benefit of the poor and the landless; latter acts as Governor by virtue of such temporary vacancy. This event
The power of eminent domain must not be exercised arbitrarily even if purposed constitutes an “inability” on the part of the regular presiding officer
for resolving a critical problem such as squatting. (Vice-governor) to preside over the SP sessions, which thus calls for the
operation of the remedy set in Sec. 49(b) of the Local Government Code
3. Only after a valid and definite offer had been made to, and not accepted by, the — the election of a temporary presiding officer from among themselves.
owner.
 The continuity of the Acting Governor's (Vice-governor) powers as
The purpose of the requirement of a valid and definite offer to be presiding officer of the SP is suspended so long as he is in such capacity. A
first made to the owner is to encourage settlements and voluntary temporary presiding officer who merely steps into the shoes of the
acquisition of property needed for public purposes in order to avoid the presiding officer could not have greater power than that possessed by
expense and delay of a court action. It permits the land owner to receive the latter who can vote only in case of tie. Thus, while acting as presiding
full compensation, and the entity acquiring the property, immediate use officer, a Board Member may not, at the same time be allowed to
and enjoyment of the property. A single bona fide offer that is rejected by exercise the rights of a regular board member, including that of voting
the owner will suffice. even when there is no tie to break.
Sessions
A letter offered to prove that municipality's desire or intent to  The minimum number of sessions shall be once a week for the
acquire a property for a right of way does not prove that the LGU made sangguniang panlalawigan, sangguniang panlungsod and sangguniang
definite and valid offer to acquire the property for public use as an access bayan, and twice a month for the sangguniang barangay. On the first day
road before filing the complaint for expropriation. In the absence of of session immediately following the election of its members, the
competent evidence that indeed, the municipality made a definite and valid sanggunian shall by resolution, fix the day, time and place of its regular
offer to all co-owners of the property, the declaration in an ordinance that sessions.
the property owners were notified of the intent to purchase the same for  A special session may be called by the local chief executive or a majority
public use as a municipal road is not in compliance with Section 19 of the of the sanggunian members. Unless concurred in by two-thirds vote of
LGC. (Ibid.) the members present, no matter may be reconsidered at the special
session except those stated in the notice. A majority of all the members
There are two phases of an expropriation proceedings: of the sanggunian shall constitute a quorom.
 the determination of the authority of the plaintiff local government unit to
exercise the power of eminent domain and the propriety of its exercise, which Quorom
ends either by an order of dismissal or condemnation; and  A majority of all members of the Sanggunian who have been elected and
 the determination by the court of just compensation for the property sought to qualified shall constitute a quorum to transact official business. (Section
be taken. 53, LGC)
 “Quorom” is defined as that number of members of a body which, when
LOCAL LEGISLATIVE POWER legally assembled in their proper places, will enable the body to transact
its proper business or that number which makes a lawful body and gives
Local legislative power shall be exercised by: it power to pass upon a law or ordinance or do any valid act. “Majority”
 Sangguniang Panlalawigan for the province when required to constitute a quorum, means the number greater than
 Sangguniang Panlungsod for the city half or more than half of any total.
 Sangguniang Bayan for the municipality, and  The entire membership, including the presiding officer and ex-official
members, must be taken into account in computing the quorum of the
 Sangguniang Barangay for the barangay
sangguniang panlalawigan, for while the Constitution merely states that
Two categories of power conferred to the Sanggunian by the Local Government “majority of each House shall constitute a quorum” Section 53 of the
Code: local Government Code is more exacting as it requires that the “majority
of all members of the Sanggunian who have been elected and qualified”
1.) Legislative Power — the power to propose, enact, amend and repeal shall constitute a quorum.
ordinances
2.) Quasi-judicial Power — except sangguniang barangay, the power to: Making and approval of ordinances
 to settle boundary disputes, and  On the first regular session following the election of its members and
 the power to investigate and impose disciplinary actions to the elective within 90 days thereafter, the sanggunian concerned shall adopt or
officials upon the next lower level of local government units. update its existing rules of procedure which shall provide for the
following:
a) organization of the sanggunian, election of its officers and creation of standing
committees;
b) the order and calendar of business for each session; Resignation
c) the legislative process;  Acceptance by Proper Authority. Resignation of elective local officials shall be
d) the parliamentary procedures; deemed effective only upon acceptance by the following authorities:
e) discipline of members, and other rules as the sanggunian may adopt. a) The President, in case of governors, vice-governors, and mayors and vice-
mayors of highly urbanized cities and independent component cities.
The Local Government Code requires is the “on its first regular session xxx the b) The governor, in case of municipal mayors and vice-mayors, city mayors and
Sanggunian concerned shall adopt or update its existing rules or procedures.” vice-mayors of component cities.
(Section 50, LGC) and by resolution, fix the day, time and place of its regular sessions c) Sanggunian concerned, in case of sanggunian members
(Section 52, LGC). The law does not require the completion of the updating or d) The city or municipal mayor, in case of barangay officials.
adoption of the internal rules of procedure before the sanggunian could act on any
other matter like the enactment of ordinance. It simply requires that the matter of  Effectiνity. Resignation takes effect upon acceptance. It is deemed accepted if
adopting or updating the internal rules of procedure be taken up during the first day not acted upon within 15 working days. Irrevocable resignation by sanggunian
of session. There is nothing in the language thereof that restricts the matters to be members takes effect upon presentation before an open session. (Sec. 82)
taken up during the first regular session merely to the adoption of updating of the
house rules. If it were the intent of Congress to limit the business of the local council Practice of Profession
to such matters, then it would have done so in clear and unequivocal terms. But as it a) Governors or mayors are prohibited from practicing their profession or
is, there is no such intent. An ordinance may be enacted in one session day because engaging in any occupation.
the Local Government Code does not prohibit the same, unlike in Congress where a
bill must undergo three readings on separate days. (Ibid.) b) Sanggunian members may practice their profession, engage in any occupation,
or teach except during session hours.
An ordinance shall be approved by the local chief executive by affixing his
signature in each and every page thereof. The governor or mayor may veto any EXAMPLE: VGR, a lawyer and a Punong Barangay and Chairman of the
item in the following cases: Lupong Tagapamayapa, presided over the conciliation proceedings in an
 Appropriations ordinance ejectment case. The parties to the case were not able to amicably settle
 Ordinance adopting a local development plan and public investment program their dispute. Then one of the parties sought his legal assistance and
 Ordinance directing the payment of money or creating liability handled her case. In the course thereof, he prepared and signed pleadings
including the answer with counter claim, pre-trial brief, position paper and
The grounds for veto are: notice of appeal. He is sued for violation of Rule 6.03 of the Code of
1) the ordinance is ultra νires, or Professional Responsibility. The Court held that the Rule applies only to a
2) that it is prejudicial to public welfare. lawyer who has left the government service in connection “with any matter
in which he intervened while in said service.” Accordingly, as Punong
The compensation of local officials and personnel shall be determined by the Barangay, he was not forbidden to practice his profession. However, he
Sanggunian concerned and may be based upon the pertinent provisions of RA 6758. should have procured prior permission or authorization from the head of
Increase in compensation of elective local officials shall take effect after expiration his Department (DILG Secretary), as required by civil service rules and
of the term of those approving the increase. Elective officials shall be entitled to the regulations, particularly Section 12, Rule XVIII of the Revised Civil Service
same leave privileges as those enjoyed by appointive local officials, including the Rules. In acting as a counsel for a party without first securing the required
cumulation and commutation thereof. (Sec. 81) written permission, he not only engaged in the unauthorized practice of
law but also violated civil service rules which is a breach of rule 1.01 of the
Recall Code of professional Responsibility.
 Initiation. RA 9244 effectively amended Section 70 of the LGC and thus,
eliminated the preparatory recall assembly as one of the modes of initiating c) Sanggunian members who are lawyers shall not:
recall and provided a new procedure in the conduct of recall initiated through I. Appear as counsel in any civil case where the local government is the
the written petition of registered voters according to the following schedule: adverse party.
II. Appear as counsel in a criminal case where the accused is an officer of
- 25% where the voting population of LGU does not exceed 20,000; the national or local government accused of an offense committed in
relation to his office.
- at least 20% but not less than 5,000 for LGU's with at least 20,000 but
III. Collect a fee for appearance in administrative proceedings involving the
not more than 75,000 voting population; local government unit of which he is an official.
- at least 15% but not less than 15,000 for LGU's with at least 75,00 but
d) Physicians may practice their profession even during office hours only on
not more than 300,000 voting population; AND emergencies and without monetary compensation. (Sec. 90)
- at least 10% but not less than 45,000 for LGU's with over 300,000 voting
Disclosure of Business and Financial Interests
population.  Every sanggunian member, upon assumption of office shall make a full
disclosure of his business and financial interests. He shall also disclose any
In Angobung νs. Paras, 269 SCRA 245, it was held that only a petition signed and
business, financial or professional relationship or any relationship within the
filed by at least 25% of the total number of registered voter, and not only by the
fourth degree which he may have with anyone affected by any ordinance or
respondent, may validly initiate recall proceedings.
resolution of the sanggunian which involves a conflict of interests.
 Recall Election. The official sought to be recalled is automatically a candidate.
Such relationship includes:
(Sec. 71)
a) Investment in the entity to which the ordinance may apply
 Effectiνity of Recall. Recall shall be effective upon the election and
b) Contracts with any person to which the ordinance may apply.
proclamation of successor receiving the highest number of votes. (Sec. 72)
c) Use any public property of the local government unit for private
 Prohibition against resignation. The official sought to be recalled cannot resign
purpose. (Sec. 89)
while the recall process is in progress. (Sec. 73)
 Limitations. An official may be subject of recall only once during his term. No
 It is unlawful for any public official and his relatives within the fourth civil
recall shall take place within one year from assumption of office or one year
degree of consaguinity or affinity to enter into any contract for the
before the regular local election. (Sec. 74) The phrase “regular election” should
construction, acquisition, operation or maintenance of any project or
be construed as referring to an election where the office held by the local
procurement of materials or equipment with the local government. (Sec. 520)
elective official sought to be recalled will be contested.

Another limitation is the prohibition to conduct recall election within one year from
the date of assumption of office of the official concerned. The purpose of this
limitation is to provide a reasonable basis for judging the performance of an elective
local official. As long as the election is held outside the one year period from
assumption from office of the local official sought to be recalled, the preliminary
proceedings to initiate recall can be held even before the end of the first year in
office of said local official.
 LOCAL INITIATIVE AND REFERENDUM
I. Initiative
A. Procedure
 Number of signatures of voters
- At least 1,000 in provinces and cities
- At least 100 I municipalities
- At least 50 in barangays
 Period to collect signatures
- 90 days in provinces
- 60 days in municipalities
- 30 days in baranggays

B. Limitations on Initiatives
 The power of initiative shall not be exercised more than once a year
 It shall extend only to matters within the power of the sanggunian
to enact
In delineating the scope of an initiative or referendum, Section 32,
Article VI of the Constitution includes any act of a local legislative
body. The Constitution includes not only ordinances but
resolutions as appropriate subjects of a local initiative. Section 3(6)
of RA 6735 expressly includes resolutions as subjects of initiative
on local legislations. Section 124 of the Local Government Code
includes all matters within the legal powers of the Sanggunian to
enact in the scope of initiative, which includes resolutions.
 If the sanggunian adopts the proposition, the initiative shall be
cancelled. (Sec. 124)

C. Limitations on Sanggunian
 Any proposition or ordinance approved through initiative or
referendum shall not be repealed or amended by the sanggunian
within 3 years by three-fourths vote of all member
 Chapter XI Local Taxes

Provinces - Not exceeding 1% of the

assessed value of the real
property; and
Chapter XI Cities or Municipalities - Not exceeding 2% of the
within the MMA assessed value of the real
property

LOCAL TAXES371
The RPT is based on the assessed value which is a certain
percentage of the market value of the real property. The assessed
value is arrived at upon application of the assessment levels to the
market value of the property. The assessment levels are fixed by
Local government units (LGUs) derive their revenues from local ordinance of the local Sanggunian depending on the actual use of
the property, at rates not exceeding the following:373
and external sources. Local sources include tax revenues from the real
property tax and the business tax, and non-tax revenues from fees and
charges, receipts from government business operations and proceeds from (1) Lands
sale of assets. External sources, on the other hand, include the Internal
Revenue Allotment (IRA) and other shares from special laws, grants and Class Assessment Levels
aids and borrowings.
 Residential 20%
 Agricultural 40%
I. TAXING POWERS OF LOCAL GOVERNMENTS  Commercial, Industrial and Mineral 50%
A. Taxes on Real Property  Timberland 20%

a. Basic Real Property Tax

(2) Buildings and Other Structures
The real property tax (RPT) is an ad valorem tax on
real properties such as lands, buildings, and other improvements, The rate progresses directly with the fair market value
and machineries imposed by provinces, cities and municipalities (FMV) as follows:
within the Metropolitan Manila Area (MMA), at the following
rates:372  Residential – 0% for those with FMV of
PhP175,000.00 or less to 60% for those with FMV of
more than PhP10 million.
371
Book II, Title One of RA 7160, otherwise known as the “Local Government
Code of 1991”.
373
Section 218, supra.
372
Section 233, supra.

Guide to Philippine Taxes 221

220 Guide to Philippine Taxes
Chapter XI Local Taxes Chapter XI Local Taxes

 Agricultural – 25% for those with FMV of  Exemptions: The following are exempted from payment of
PhP300,000.00 or less to 50% for those with FMV of the RPT: 374
more than PhP2 million.
 Real property owned by the Republic of the Philippines or
 Commercial/Industrial – 30% for those with FMV of any of its political subdivisions, except when the beneficial
PhP300,000.00 or less to 80% for those with FMV of use thereof has been granted, for consideration or otherwise,
more than PhP10 million. to a taxable person;

 Timberland – 45% for those with FMV of

 Charitable institutions, churches, parsonages, or convents
PhP300,000.00 or less to 70% for those with FMV of
appurtenant thereto, mosques, non-profit or religious
more than PhP2 million.
cemeteries, and all lands, buildings, and improvements
actually, directly, and exclusively used for religious, charitable
or educational purposes;
(3) Machineries

Class Assessment Levels  All machineries and equipment that are actually, directly and
exclusively used by local water districts and government-
 Agricultural 40% owned or–controlled corporations (GOCCs) engaged in the
supply and distribution of water and/or generation and
 Residential 50%
transmission of electric power;
 Commercial and Industrial 80%
 All real property owned by duly registered cooperatives as
provided for under RA 6938; and
(4) Special Classes. The assessment levels for all lands, buildings,
machineries, and other improvements are as follows:
 Machinery and equipment used for pollution control and
environment protection.
Actual Use Assessment Levels

 Cultural 15%
Except as provided in the LGC, any exemption from the payment
 Scientific 15% of RPT previously granted to or presently enjoyed by, all persons, whether
 Hospital 15% natural or juridical, including all GOCCs were withdrawn upon the
 Local Water Districts 10% effectivity of the LGC.
 Government-owned or controlled 10%
corporations engaged in the supply
and distribution of water and/or
generation and transmission of
electric power 374
Section 234, supra.

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Chapter XI Local Taxes Chapter XI Local Taxes

b. Special Levies on Real Property meters in area, one-half of which remain unutilized or
unimproved.
(1) Special Education Fund Tax375
Regardless of land area, the tax shall likewise apply
In addition to the basic RPT, a province or city, or a to residential lots in subdivisions duly approved by proper
municipality within the MMA may levy and collect an annual authorities, the ownership of which has been transferred
tax of 1% on the assessed value of real property which shall to individual owners, who shall be liable for the additional
be in addition to the basic RPT. The proceeds thereof shall tax.
exclusively accrue to the Special Education Fund (SEF) to
 Exemption378
support public education.
The LGU may exempt idle lands from the additional
levy by reason of force majeure, civil disturbance, natural
(2) Idle Lands Tax376
calamity or any cause or circumstance which physically or
A province or city, or a municipality within the MMA legally prevents the owner of the property or person having
may levy an annual tax on idle lands at a rate not exceeding legal interest therein from improving, utilizing or cultivating
5% of the assessed value of the property which shall be in the same.
addition to the basic RPT.

 Coverage377 (3) Special Levy379

(a) Agricultural lands, more than one (1) hectare in area, A province, city or municipality may impose a special
suitable for cultivation, dairying, inland fishery, and levy on the lands within its territorial jurisdiction specially
other agricultural uses, one-half (1/2) of which remain benefitted by public works projects or improvements funded
uncultivated or unimproved. Not considered as idle by the LGU concerned. The special levy shall not exceed
lands are (i) agricultural lands planted to permanent or 60% of the actual cost of such projects and improvements,
perennial crops with at least fifty (50) trees to a hectare, including the costs of acquiring land and such other real
and (ii) lands actually used for grazing purposes. property in connection therewith.

(b) Lands, other than agricultural, located in a city or The special levy shall not apply to lands exempt from
municipality more than one thousand (1,000) square basic RPT and the remainder of the land portions of which
have been donated to the LGU concerned for the construction
of such projects or improvements.
375
Section 235, supra.

376 378
Section 236, supra. Section 238, supra.

377 379
Section 237, supra. Section 240, supra.

224 Guide to Philippine Taxes Guide to Philippine Taxes 225

Chapter XI Local Taxes Chapter XI Local Taxes

(4) Other Impositions on Real Property may be paid without interest in four (4) equal installments; the
first installment to be due and payable on or before March 31;
a. Socialized Housing Tax380 the second installment, on or before June 30; the third
installment, on or before September 30; and the last installment
In addition to the RPT and SEF tax, a socialized on or before December 31.
housing tax may also be imposed by a province, city or
municipality within the MMA. The tax is 1/2 of 1% of the The special levy shall accrue on the first day of the
assessed value of all lands in urban areas in excess of quarter next following the effectivity of the ordinance imposing
PhP50,000.00. such levy. Its payments shall be governed by the ordinance of
the Sanggunian concerned.
b. Tax on Transfer of Real Property Ownership381
The tax on transfer of real property ownership shall
A province, city or municipality within the MMA be paid within sixty (60) days from the date of the execution of
may impose a tax on the sale, donation, barter, or any the deed or from the date of the decedent’s death.
other mode of transferring ownership or title of real property
at the rate of not more than 50% of 1% in the case of a The date for the payment of any other tax on real
province and 75% of 1% in the case of a city or a property shall be prescribed by the Sanggunian concerned.
municipality in MMA of the total consideration involved in
the acquisition of the property or of the FMV in case the
monetary consideration involved in the transfer is not B. Other Local Taxes
substantial, whichever is higher.
Local government units are empowered to impose the following
The sale, transfer or other disposition of real taxes:
property pursuant to RA 6657 (Comprehensive Agrarian
Reform Law of 1988) shall be exempt from the tax. 1. Provincial Taxes383

a. Tax on business of printing and publication at a rate not exceeding

(5) Collection of Real Property Tax 382 50% of 1% of the gross annual receipts for the preceding
calendar year. In case of newly started business, the tax shall
The real property tax for any year shall accrue on the not exceed 1/20 of 1% of the capital investment.384
first day of January. The basic RPT and the additional SEF tax
b. Tax on a business enjoying franchise at a rate not exceeding
50% of 1% of the gross annual receipts for the preceding
380
Section 43, RA 7279, otherwise known as the “Urban Development and
Housing Act of 1992”, as implemented by Local Circular No. 1-97, dated April 16, 1997.

381 383
Section 135, LGC. Section 134, supra.

382 384
Sections 135, 245, 246 and 250, supra. Section 136, supra.

226 Guide to Philippine Taxes Guide to Philippine Taxes 227

Chapter XI Local Taxes Chapter XI Local Taxes
390
calendar year. In case of a newly started business, the tax 2. Municipal Taxes
shall not exceed 1/20 of 1% of the capital investment.385
a. Business Taxes
c. Tax on sand, gravel and other quarry resources at a rate
not exceeding 10% of the fair market value in the locality There are three (3) kinds of business taxes imposed
per cubic meter of ordinary stones, sand, gravel, earth, and by municipalities: (a) a combination of a graduated-fixed and
other quarry resources, as defined under the National percentage business taxes; (b) percentage tax; and (c) annual
Internal Revenue Code (NIRC), as amended, extracted tax.
from public lands or from the beds of seas, lakes, rivers,
streams, creeks, and other public waters within its territorial The following are subject to a combination of a
jurisdiction.386 graduated-fixed and percentage business taxes:

d. Professional tax on each person engaged in the exercise or (1) Manufacturers, assemblers, repackers, processors,
practice of his/her profession requiring government brewers, distillers, rectifiers, and compounders of liquors,
examination at a rate not exceeding PhP300.00.387 distilled spirits, and wines or manufacturers of any article
of commerce of whatever kind or nature at rates ranging
e. Amusement tax payable by proprietors, lessees, or from PhP165.00 for gross receipts of less than
operators of theaters, cinemas, concert halls, circuses, PhP10,000.00 to PhP24,375.00 for gross receipts of
boxing stadia, and other places of amusement at a rate of PhP5 million to PhP6,499,999.00. Those with gross
not more than 10% of the gross receipts from admission receipts of PhP6,500,000.00 or more are taxed at a
fees.388 rate of not exceeding 37 1/2% of 1% of the gross
receipts.391
f. Annual fixed tax not exceeding PhP500.00 for every
delivery truck or van used by manufacturers, producers, (2) Wholesalers, distributors, or dealers in any article of
wholesalers, dealers or retailers in the delivery or distribution commerce of whatever kind or nature at rates ranging
of distilled spirits, fermented liquors, soft drinks, cigars and from PhP18.00 for gross receipts of less than
cigarettes, to sales outlets, or consumers, whether directly PhP1,000.00 to PhP10,000.00 for gross receipts of
or indirectly, within the province.389 PhP1 million to PhP1,999,999.00. Those with gross
receipts of PhP2 million or more are taxed at a rate of
not exceeding 50% of 1% of the gross receipts.392
385
Section 137, supra.

386
Section 138, supra.

387 390
Section 139, supra. Section 142, supra.

388 391
Section 140, amended by RA 9640, approved on May 21, 2009. Section 143 (a), supra.

389 392
Section 141, supra. Section 143 (b), supra.

228 Guide to Philippine Taxes Guide to Philippine Taxes 229

Chapter XI Local Taxes Chapter XI Local Taxes

(3) Exporters, and manufacturers, millers, producers, Sanggunian. If the business is subject to the excise,
wholesalers, distributors, dealers or retailers of essential VAT or percentage tax under the NIRC, the rate shall
commodities are subject to not more than one-half not exceed 2% of the gross sales or receipts of the
(1/2) of the rates prescribed for manufacturers preceding calendar year.397
wholesalers and retailers of other products.393
Annual tax on peddlers engaged in the sale of any
(4) Contractors and other independent contractors at rates merchandise or article of commerce, at a rate not exceeding
ranging from PhP27.50 for gross receipts of less than PhP50.00 per peddler.398
PhP5,000.00 to PhP11,500.00 for gross receipts of
PhP1 million to PhP1,999,999.00. Those with gross
receipts of PhP2 million or more are taxed at a rate of 3. City Taxes399
not exceeding 50% of 1% of the gross receipts.394
The city government may impose and collect any of the
Percentage taxes are imposed on the following: taxes, fees and charges imposed by the province or municipality.
The rates of taxes may exceed the maximum rates allowed for
(1) Retailers, at rates of 2% for gross receipts of the province or municipality by not more than 50% except the
PhP400,000.00 or less and 1% for gross receipts over rates of professional and amusement taxes which are already
PhP400,000.00.395 fixed.

(2) Banks and other financial institutions at a rate not

exceeding 50% of 1% of the gross receipts of the 4. Barangay Taxes400
preceding calendar year derived from interest,
commissions and discounts from lending activities, income The barangay may impose a tax on stores or retailers
from financial leasing, dividends, rentals, on property and with fixed business establishments with annual gross sales or
profit from exchange or sale of property, insurance receipts of PhP50,000.00 or less in the case of cities; and
premium.396 PhP30,000.00 or less, in the case of municipalities, at a rate
not exceeding 1% of gross sales or receipts.
(3) Any business, not otherwise specified in the preceding
paragraph at a rate to be determined by the local

393
Section 143 (c), supra.

394 397
Section 143 (e), supra. Section 143 (h), supra.

395 398
Section 143 (d), supra. Barangays have exclusive power to levy taxes on Section 143 (g), supra.
gross sales or receipts of P50,000 or less in the case of cities, and P30,000 or less, in the
399
case of municipalities. Section 151, supra.

396 400
Section 143 (f), supra. Section 152, supra.

230 Guide to Philippine Taxes Guide to Philippine Taxes 231

Chapter XI Local Taxes Chapter XI Local Taxes
401 402
5. Community Tax  Exemptions

City and municipal government may impose a community The following are exempt from the community tax:
tax at the following rates:
 Diplomatic and consular representatives; and
a. Individuals
 Transient visitors when their stay in the Philippines does not
Basic community tax ………………………....... PhP5.00 exceed three (3) months.

Additional tax –
For every PhP1,000.00 of income .…............ PhP1.00 C. Other Revenue-Raising Powers of Local Governments

The tax, however, shall in no case exceed 1. Common403

PhP5,000.00.
a. Service Fees and Charges

b. Corporations LGUs may impose and collect such reasonable fees

and charges.
Basic community tax………………………... PhP500.00
b. Public Utility Charges
Additional tax –
LGUs may fix the rates for the operation of public
 For every PhP5,000.00 worth of utilities owned, operated and maintained by them within their
real property …......................................... PhP2.00 jurisdiction.

 For every PhP5,000.00 worth of gross receipts/ c. Toll Fees and Charges
earnings derived from business…………... PhP2.00
LGUs may prescribe the terms and conditions and
The tax, however, shall in no case exceed fix the rates for the imposition of toll fees or charges for the
PhP10,000.00. use of any public road, pier or wharf, waterway, bridge, ferry
or telecommunication system funded and constructed by the
LGU concerned.

402
Section 159, supra.

401 403
Section 156, supra. Sections 153, 154, and 155, supra.

232 Guide to Philippine Taxes Guide to Philippine Taxes 233

Chapter XI Local Taxes Chapter XI Local Taxes

2. Municipalities (b) For the issuance of a barangay clearance for any business or
activity located or conducted within the territorial jurisdiction
a. Fees and charges on business and occupation and, except as of the barangay before the city or municipality may issue a
reserved to the province in Section 139 of the LGC, on the license or permit to said business or activity.
practice of any profession or calling, commensurate with the
cost of regulation, inspection and licensing at rates to be (c) On commercial breeding of fighting cocks, cockfights and
prescribed by the Sangguniang Bayan.404 cockpits.

b. Fees for the sealing and licensing of weights and measures at (d) On places of recreation which charge admission fees.
rates to be prescribed by the Sangguniang Bayan.405
(e) On billboards, signboards, neon signs, and outdoor
c. Rentals, fees or charges on the use of municipal waters at advertisement.
rates prescribed by the Sangguniang Bayan.406

D. Collection of Taxes, Fees and Charges 409

3. Cities407
All local taxes, fees and charges shall accrue on the first day of
Fees and charges imposed by the province or municipality. January of each year. However, new taxes, fees or charges, or changes
in the rates thereof, shall accrue on the first (1st) day of the quarter next
following the effectivity of the ordinance imposing such new levies or
4. Barangays408 rates.

Fees and charges: All local taxes, fees and charges shall be paid within the first
twenty (20) days of January or of each subsequent quarter, as the case
(a) For services rendered in connection with the regulation or the may be. The payments may be made in quarterly installments.
use of barangay-owned properties or service facilities.

404
Section 147, supra.

405
Section 148, supra.

406
Section 149, supra.

407
Section 151, supra.

408 409
Section 152 (b), (c) and (d), supra. Sections 165, 166 and 167, supra.

234 Guide to Philippine Taxes Guide to Philippine Taxes 235

 DEFINITIONS OF TERMS
• Assessment - is the act or process of determining the
value of a property, or proportion thereof subject to
tax, including the discovery, listing, classification, and
appraisal of properties.
• Fair Market Value – is the price at which a property
SOME NOTES ON may be sold by a seller who is not compelled to sell
REAL PROPERTY TAX and bought by a buyer who is compelled to buy.

• Assessed Value – is the Fair Market Value of the real DEFINITIONS OF TERMS
property multiplied by the assessment level.
Synonymous to tax base
• Assessment Level – is the percentage applied to the
The Assessed Value of a real property is determined Fair Market Value to determine the taxation value
by the formula: (better known as Assessed Value) of the property.
AV = MV x AL • Actual Use - refers to the purpose for which the
where: property is principally or predominantly utilized by the
AV = ASSESSED VALUE person in possession thereof.
MV = MARKET VALUE
AL = ASSESSMENT LEVEL
 ASSESSMENT LEVEL BASIC TAX AND ITS RATE
The assessment level to be applied to the Fair Market
Value of real property to determine its assessed value Tax rates are to be set forth by a local ordinance
shall be fixed by ordinances of the Sangguniang with maximum rates as follows:
Panlalawigan , Sangguniang Panglungsod or
Sangguniang Pambayan of a municipality within the FOR PROVINCES – not exceeding one (1%)
Metropolitan Manila Area, at the rates not exceeding: percent of the assessed value of the property
A. ON LAND:
FOR CITIES AND MUNICIPALITIES WITHIN
CLASS ASSESSMENT LEVEL
METRO MANILA – not exceeding two (2%)
Residential 20 %
percent of the assessed value of the property.
Agricultural 40 %
Commercial 50 %
Industrial 50 %
Mineral 50 %
Timberland 20 %

SPECIAL EDUCATION FUND (SEF) ADDITIONAL AD VALOREM TAX ON IDLE LANDS

In addition to the basic real property tax, the LGUs In addition to the basic real property tax, LGUs may
may levy and collect an annual tax of one (1%) impose an annual tax on idle lands at the rate of not
percent which shall accrue exclusively to the Special exceeding five (5%) percent of the assessed value
Education Fund (SEF). of the property.
 For purpose of real property taxation, For purpose of real property taxation,
idle lands shall include the following: idle lands shall include the following:

Agricultural lands, more than one (1) hectare in area, Regardless of land area, residential lots in
suitable for cultivation, dairying, inland fishery and subdivisions.
other agricultural uses, 1/2 of which remain
uncultivated or unimproved. Exemption: lands planted Idle lands maybe exempt by reason of force majure, civil
to permanent or perennial crops with at least 50 trees disturbances, natural calamity or any cause or
to a hectare and lands used for grazing purposes. circumstances which physically or legally prevents the
Lands other than Agricultural located in a city or owner from improving, utilizing or cultivating the same.
Municipality more than 1,000 sq.m. In area, 1/2 of
which remain unutilized or unimproved.

TAX DISCOUNT
COLLECTION OF REAL PROPERTY TAX
FOR ADVANCE AND PROMPT PAYMENT

The real property tax for any year shall accrue on If the basic real property tax and the additional tax
the first day of January and from that date it shall accruing to special education fund are paid on time or
constitute a lien on the property which shall be in advance in accordance with the prescribed
superior to any other lien, mortgage, or encumbrance schedule of payment as provided in Article 341 of this
of any kind whatever, and shall be extinguished only Rule, the Sangguniang concerned may grant a
upon the payment of the delinquent tax. The tax may discount not exceeding twenty percent (20%) of the
be paid in four (4) quarterly installments which shall be annual tax due.
paid on or before the last day of the quarter. For the purpose of this Rule, prompt payments may be
given a discount of ten percent (10%), while advanced
payments may be entitled to the maximum discount of
twenty percent (20%).
 DECLARATION OF REAL PROPERTY BY THE DECLARATION OF REAL PROPERTY BY THE
OWNER OR ADMINISTRATION. OWNER OR ADMINISTRATION.

All persons, natural of juridical, or their duly authorized All property owners or administrators or their duly
representatives, owning or administering real property, authorized representatives shall file the sworn
including improvements thereon, within a city or a
municipality, shall prepare or cause to be prepared, declaration of real property values once every three
and file with the provincial, city, or municipal assessor, (3) years during the period from January 1 to June 30
a sworn statement declaring the true value of their of the year commencing with Calendar Year 1992.
property or properties, whether previously declared or (Thence 1995, 1998, 2001, and so forth)
undeclared, taxable or exempt, which shall be the
current and fair market value of the property as
determined by the declarant.
Such declaration shall contain a description of the
property sufficient in detail to enable the local
assessor or his deputy to identify the same for
assessment purposes.

DUTY OF PERSONS ACQUIRING

REAL PROPERTY OR
Thank you!
MAKING IMPROVEMENT THEREON.
All persons, natural or juridical, or their duly
authorized representatives, who acquire at any time a
parcel or parcels of land in any city or municipality,
shall file with the provincial, city or municipal assessor
of the locality where the property is located, a sworn
statement declaring the true value of subject property
within sixty (60) days after the acquisition of such
property as evidenced by a duly notarized or final
deed of conveyance executed between the contracting
parties bearing proof of registration from the registrar
of deed concerned. The sixty-day period shall
commence on the date of execution of the deed of
conveyance.