Mother Title, Extrajudicial Settlements and Settlement of Estate
An Important Lesson To Learn.
Recently we were preparing to build a new home for a client when some one started putting “no trespassing signs” up on the lot. As you can well imagine this scenario is potentially one of the worst nightmares for any person who has bought and paid for a property in the Philippines. Once the dust settled, we found out the true story and sadly it does not paint a pretty picture.
Our clients were sold a portion of a mother title lot by one heir who claimed he had the rights to sell a certain percentage of the land he had inherited from a deceased relative. When the clients relatives started clearing the land in preparation for the home construction, apparently numerous other heirs came out of the woodwork claiming that the heir who sold them their small lot form the mother title, did not have the right to do so. These other heirs then offered to sell the remaining portion of the lot at a greatly inflated price tag, 5 times what the clients had paid per square meter initially , and the heir that sold is no where to be found. What a mess!!
So what went wrong? Actually it is quite simple and something everyone should be aware of when buying property in Dumaguete and surrounding Negros Oriental, or ANYWHERE in the Philippines.
I should start by briefly and simply explain what is meant by a “mother titles”. In legal terms it is the original title that has been issued on the property, and acknowledges the very first owner of the title land. In practical terms, what a potential buyer should know is that in all likelihood, that “original” owner is long deceased and the ownership of that property sits with all the descendants and heirs of that “original” owner. If you are seeing a mother title now, it usually means that the heirs never followed through on legally dividing the property into their inherited sub lots. Also, more often than not, there have been several generations of heirs that also never legally registered and titled their sub-properties. Putting aside the whole other issue of estate taxes (which I will deal with in another article) the problem is that if you buy a sub portion of a titled lot, you have to get every single heir and sub heir from the original owner on down that has an interest in the property, to sign off on the Deed of Absolute Sale of the portion of the property you are purchasing. The only , and by far the simplest way around this is if there is a settlement of estate of the original owner(s) with an extra-judicial settlement document and assignment of which portion of the property, which heir owns. This documentation MUST include a sketch plan and technical description of the portion each heir is inheriting.
To make a long story short, if you intend to buy a piece of property, and the person selling it to you is NOT the owner named on the title, you better do a whole lot of very in depth due diligence. If it turns out the the person listed on the title is deceased, the first thing you need to do is research the family tree to find out every single last one of the heirs, and what their interest may be in the property being offered to you. Once you know that, if there is an extrajudicial settlement of estate, you can compare the signatories on that to the list of heirs you have found through your research. If that all matches, then and only then should your proceed with your next crucial stages of due diligence, one of which is ensuring all the estate taxes have been paid.
As a conclusion to the story of our client, the one saving factor is that the person who sold them the sub-portion of the mother titled lot, also signed off all rights to them in terms of his portion of the property. They can file an adverse claim on the property and have that annotated on the title so that before the property or any portion of it is sold, they have to sign off, and receive that heirs percentage of the proceeds. In the end, considering that they purchased at about 25% of the true value of the property, when the lot is sold they might even make a nice tidy profit. The only question is when that will happen.