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.