LAND LEASE FOR FOREIGNERS AND WHAT YOU SHOULD BE CAREFUL OF
Land lease for foreigners is one of the preferred routes to go to protect one’s investment. As we are barred by law from ownership of land in all circumstances except hereditary succession, a land lease is a viable option in a lot of cases, but sadly, some foreigners do not educate themselves on leases to the same extent as if they were purchasing.
A Land Lease for Foreigners Which Went Bad and could have been Avoided
I was unfortunately reminded of this last week and want to relate to you the story of something that has happened to a fireigner here in Dumaguete.
A Filipina came into our office and offered a really nice beach property to my wife at a price which started all the alarm bells ringing. There was about 1700 square meters of land with a small house which was livable but needed work. The price tag offered was 1,500,000 php, with only half down and the other half on installments!!!! Great deal eh? And one we like most people would be extremely tempted on. However , we have been around the block a few times and have learned to be really cautious. time for some EXTREME due diligence. First off was to thoroughly question the seller’s rep to see how honest she would be with us. The story came out was that the the girl selling is the ex girlfriend of an American. He of course paid for the property, had a lease drawn up between herself and him. Not long after, there was a break up, and a new girl in his life and living in the house with him. The Filipina on title needed money and figured selling this property out from under her ex boyfriend was the quickest and easiest way to get it, because she believed that there were grounds to have the lease nullified.
To be honest, personally I wanted no part of this whole thing. Whether or not this foreigner had made some naive and foolish mistakes, my moral compass would have been severly taxed trying to justify basically steally a guys land he worked hard to buy. I did however want to foloow this through in the hopes that we could add to our base of knowledge in the real estate industry.
We requested a meeting between the seller’s rep, their Attorney and our Attorney just to see what would come out of it. The next big red flag was that their Attorney refused to meet with our Attorney present, but we agreed anyway. During that meeting, this attorney explained that the initial lease was for 99 years, which is illegal and would be cause to have the lease nullified outright. We nodded and said ok, but after the meeting took all the documents to our own Attorney for his thoughts. Turns out that though a 99 year lease is illegal, in all likelihood, the lease would NOT be nullified, but rather be amended to reflect the 25 year legal term allowable. Having done our initial due diligence simply out of curiosity, I learned something new.
Where does this leave the foreigner with the land lease? Well he is not out of the woods. Beyond naively agreeing to the 99 year lease term which could cause him a court battle, he also did not have the land lease annotated on the property title. That will be impossible to do because the Registry of Deeds will not annotate an invalid lease on the title. He would need to have the lease revised to the 25 year term, and that just ain’t going to happen with the deterioration of the realtionship with his wife. To add to his problems, it appears that his Ex, her Attorney and her rep, are planning to instigate assault charges against the foreigner with the hope that they can get him thrown in jail and deported, so that he will never even be able to defend against the looming lease battle.
All in all, the foreigner is not in a good position and it is something that he could have avoided. First off, he should have got independent legal advive, rather than depending on his girlfriend’s Attorney to protect his interests. An independent Attorney would have ensured that the lease was done properly and within the confines of Filipino law so that there would be no grounds for dispute, and he would have had the lease properly annotated on the title so that any person who attempted to buy the property from his Ex , would have had to have the annotation resolved. I suspect that these people will now shop around for a foreign buyer more naive than ourselves, have their Attorney do the same song and dance that he will get the lease nullified, file charges against the first foreigner so that he will not be around to fight the sale, and then all hell will break loose. An ugly situation for everyone involved except the seller, who will take the money and run.
So to recap some important lessons about land lease for foreigners, learned from this situation:
- make sure the terms of the lease are legal
- make sure the lease is annotated on the title
In general, there are a few other things to remember in terms of land lease for foreigners:
- Do not treat a lease situation any less serious than purchase. Always do your full due diligence to know your rights and make sure your position legally valid and of course that all property titles and documents are in order.
- Always seek your own independent legal counsel and do not rely on any other party’s Attorney. They are not paid to protect you
- Be very careful of who you choose as your Filipino “partner”. No matter how much you are protected legally, if they want to cause you trouble and aggravation , they can. Also remeber that you CANNOT enter a lease agreement with a spouse. That document will not be worth the paper it is written on.
Jay, Lee
on said
nowadays, some of Korean constructed condo. in Clark freeport Zone and i have curious what happens to the owner of condo units wherein Clark freeport zone?
even its only 50 years for lease contract and extension 25years more available.
I hear that unit onwer can not get back to the right of ownership in Clark freeport zone. because the already finished the lease contract. is it right?
gord
on said
That is the million dollar question, and not one I have been able to get a definitive answer on from anybody. When it comes to condos, my understanding is that the land that the condo sits on is quite often only leased, and not sure what will happen when that lease expires in 50 years. Do the condo owners have to pay again as a group to get a new lease? Not sure if this is a question that should only be asked in Subic
Toby Jones
on said
I have purchased property in the Philippines in my fiancées name. She agrees with me that for me to be protected if God forbid she dies, I need to enter into a 25 year lease with her. Can you recommend an attorney in Bacolod that can write the lease for us? Thank you
Jean Junio
on said
A former Filipino citizen inherited land from his parents thru intestate succession. He is now a US citizen and intending to construct a building in said piece of land and have it rented for commercial use. Is this allowed under Philippine laws? Thank you for the response.
david a shimmons
on said
I was under the impression it is illegal to lease from a spouse in the Philippines. Not sure about a girlfriend though as there are certain rights unmarried couples have.
gord
on said
yes, spouses cannot enter into a lease or loan agreement
'Roy
on said
If I enter a lease agreement with my girlfriend on some ground, and the purchase and lease is annotatted on the title, and later marry the girl, does that nulify the effect of the lease? Could she then divorce me and boot me to the curb?
gord
on said
No, as long as the lease was entered into prior to the marriage. Best to consult an Attorney though who would be able to give you full legal advice surrounding your specific situation
WILLIAM SHACKELFORD
on said
I am confused. ;-) I find online that in the Philippines you can enter a 50 YEAR LEASE, with renewals for up to 25 years, whereas you are stating that an initial lease can be for only 25 years, then renewals of 25 years. Which is it? Are you sure? I am an American and have had a relationship with a much younger Filipina for the last 4 years. I have been to the Philippines twice – once to meet another previous gf in 2016 and once to meet my current gf in 2019. I think that over the years I have read a lot about the legalities of many things in the Phil and of course will get an attorney over there before doing anything. I understand that the simplest thing to do is to buy a condo. You can own a condo either in your own name or a corporation. It gets tricky when you think of land and a house for you and your girlfriend or fiance’ or wife. Strange, the concept of leasing from your girlfriend, but not from your wife – so buy the land and get the lease before you marry her, etc., if I am understanding what was written, including the comments above. Seems to me the smarter thing to do, whether you have a gf, fiance’ or wife is to lease land in the name of a corporation that I control, with no ownership in the corporation by your beloved. Further, seems like just a plain BAD IDEA to lease from your girlfriend – so, better to just lease from somebody – anybody but your girlfriend / fiance’ / wife – and not from her family or friends either. lol – I mean, seems that it would be better to lease a property from ANYBODY that has no connection whatsoever to your beloved. Your Filipina may not LIKE that idea, but it is the better idea. As a consolation, perhaps you could buy her a small lot somewhere in her home area. Just figure that is hers – her land – her little house if you build on it, etc. If things were to ever go bad, you have YOUR LEASED LAND and the house you built on it, leased to my corporation – or you have a condo that is in the name of the corporation. I tend to think in terms of worst case scenario since I went through a horrible divorce in 2002 – and, my first Filipina that I visited in 2016 didn’t wind up being what or who I thought she was – that is, not quite the honest woman that I first thought. My current Filipina has seemed always to be exactly what she presented herself as and I have met her family, her friends, and relatives in several cities other than where she actually lives. Everything is consistent. I am NOT a wealthy KANO to care for the entire village – hahahah – I am a man of modest means, but what little I do have has to be protected.
gord
on said
Hi William. I am not an Attorney , and yes you should definitely get one before making any final decisions. I think you can lease for 50 years term, though only if you are enrolled in the foreigner investment programs through the Bureau of Investments. Otherwise it is my understanding that the maximum lease term to be 25 years renewable for 25.
Honestly, I see no problem from leasing from a girlfriend as long as you make sure the documents are all done properly. If you go the corporation route, there are still some things you have to watch. To discuss this further, I would prefer to do it through email if you don’t mind
Roy Derksen
on said
Hello, are you familiar with land owned by “declaration” rather than title? I am considering purchasing some land in my GF name in Camotes, which is owned by declaration. The paperwork seems to be in order and the record is good. Can I annotate a lease contract to the declaration when it is filed?
gord
on said
Yes Roy, we are . I will send you a private email on this.