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RE: QUALIFICATIONS OF AN ALIEN TO ACQUIRE REAL PROPERTIES

DISCUSSION:
Section 7, Article XII of the 1987 Constitution states that:
Section 7. Save in cases of hereditary succession, no private lands shall be
transferred or conveyed except to individuals, corporations, or associations
qualified to acquire or hold lands of the public domain.

Aliens, whether individuals or corporations, have been disqualified from acquiring


lands of the public domain. Hence, by virtue of the aforecited constitutional
provision, they are also disqualified from acquiring private lands.
The right to acquire lands of the public domain is reserved only to Filipino citizens
or corporations at least sixty percent of the capital of which is owned by Filipinos.
The primary purpose of this constitutional provision is the conservation of the
national patrimony.

In the classic case of Krivenko v. Register of Deeds (G.R. No. L-630, November 15,
1947) which is cited in the case of Muller v. Muller (G.R. No. 149615, August 29,
2006), the Supreme Court held that:
Under Section 1 of Article XIII of the Constitution, natural resources, with the
exception of public agricultural land, shall not be alienated, and with respect to
public agricultural lands, their alienation is limited to Filipino citizens. But this
constitutional purpose conserving agricultural resources in the hands of Filipino
citizens may easily be defeated by the Filipino citizens themselves who may
alienate their agricultural lands in favor of aliens. It is partly to prevent this result
that Section 5 is included in Article XIII, and it reads as follows:
Section 5. Save in cases of hereditary succession, no private agricultural land
will be transferred or assigned except to individuals, corporations, or
associations qualified to acquire or hold lands of the public domain in
the Philippines.
This constitutional provision closes the only remaining avenue through which
agricultural resources may leak into aliens hands. It would certainly be futile to
prohibit the alienation of public agricultural lands to aliens if, after all, they may
be freely so alienated upon their becoming private agricultural lands in the hands
of Filipino citizens.
Xxxxxx
If the term private agricultural lands is to be construed as not including residential
lots or lands not strictly agricultural, the result would be that aliens may freely
acquire and possess not only residential lots and houses for themselves but
entire subdivisions, and whole towns and cities, and that they may validly buy
and hold in their names lands of any area for building homes, factories, industrial
plants, fisheries, hatcheries, schools, health and vacation resorts, markets, golf
courses, playgrounds, airfields, and a host of other uses and purposes that are

not, in appellants words, strictly agricultural. That this is obnoxious to the


conservative spirit of the Constitution is beyond question.

The rule is clear and inflexible: aliens are absolutely not allowed to acquire public
or private lands in the Philippines, save only in constitutionally recognized
EXCEPTIONS:
a) Acquisition through hereditary succession if the foreigner is a legal or natural heir
(Section 7, Article XII, Philippine Constitution).
It means that when the non-Filipino is married to a Filipino citizen and the
spouse dies, the non-Filipino as the natural heir will become the legal
owner of the property. The same is true for the children.
Filipinos who are naturalized as U.S. citizens lose their Filipino citizenship.
Despite the loss of citizenship, they remain eligible to acquire real property
in the Philippines by hereditary succession. Children born to them in the
U.S. are also eligible to inherit real property even if they are U.S. citizens.
b) A natural-born citizen of the Philippines who has lost his Philippine citizenship
may be a transferee of private lands, subject to limitations provided by law
(Section 8, Article XII, Philippine Constitution).
Republic Act No. 8179 now allows a former natural-born Filipino citizen
to acquire up to 5,000 square meters of urban land and 3 hectares or rural
land, and he may now use the land not only for residential purposes, but
even for business or other purposes.
c) Purchase of not more than 40% interest in a condominium project;
d) Acquisition before the 1935 Constitution.

Foreign Ownership as a Philippine Corporation (Condominium)

The Condominium Act of the Philippines, R.A. 4726, expressly allows foreigners
to acquire condominium units and shares in condominium corporations up to not
more than 40% of the total and outstanding capital stock of a Filipino owned or
controlled condominium corporation.
Foreign nationals or corporations may completely own a condominium or
townhouse. To take ownership of a private land, residential house and lot, and
commercial building and lot, foreign nationals or corporations should form a
Philippine corporation.
The corporation is to be 40% foreign-owned (maximum) and 60% Filipino-owned
(minimum), and with at least five [5] incorporators.
Upon incorporation, a main bank account should be tied to it.
A foreign national may be the sole person in the bank account, allowing him/her
total control over the funds derived from the corporation and the income or sale
of the asset or property.

o The land on which a condominium building stands is always owned by a


condominium corporation. When a person buys a condominium unit, he
automatically becomes a stock-holder in the corporation which owns the
land.
o Under Philippine law, foreigners are allowed to become stockholders of a
corporation which own land but only up to a maximum of forty percent
(40%) of the shares of the corporation. Foreigners, therefore, are allowed
to own condominium units provided the total floor area owned by all
foreigners in the condominium building does not exceed forty percent
(40%).

Foreign Leasing of Philippine Real Estate Property

Leasing land in the Philippines on a long term basis is an option for foreigners or
foreign corporations with more than 40% foreign equity.
A foreign national and/or corporation may enter into a lease agreement with
Filipino landowners for an initial period of up to 50 years, and renewable for
another 25 years.
Problem with a lease is that there is no benefit from future appreciation of the
property. If you own the property, you benefit from the future appreciation.
What you must do is to create a corporation. You need to meet the limitations of
non-citizen ownership of corporations in Philippines, such as the 40/60 equity
ownership rule, five Filipino directors, etc.

Foreigners owning Houses in the Philippines

Foreigners owning a house or building in the Philippines is legal as long as the


foreigner does not own the land on which the house is build.

Foreigners Married to a Filipino Citizen

If holding a title as an individual, a typical situation would be that a foreigner


married to a Filipino citizen would hold title in the Filipino spouses name.
A foreigner can legally own a house or building in the Philippines as long as he or
she does not own the land on which the structure is built.
The foreign spouses name cannot be on the Title but can be on the contract to
buy the property.
In the event of death of the Filipino spouse, the foreign spouse is allowed a
reasonable amount of time to dispose of the property and collect the proceeds or
the property will pass to any Filipino heirs and/or relatives.

Former Natural-born Philippine Citizen now Naturalized Citizen of another country


(Dual Citizenship)

Any natural-born Philippine citizen who has lost his Philippine citizenship may still
own private land in the Philippines up to a maximum area of 5,000 square meters
in the case of rural land.
In the case of married couples, the total area that both couples are allowed to
purchase should not exceed the maximum area mentioned above.
Dual citizenship is available for individuals having two citizenship and passports
from two different countries.
Under the Philippine real estate law, dual citizens are former Philippine citizens
born in the Philippines that have immigrated to another country, such as the U.S.,
and obtained citizenship of that country.
Having a dual citizenship allows the dual Philippine citizenship holder full rights of
possession of Philippine real estate property.

Filipinos & Former Filipino Citizens, Balikbayans & OFW

Former natural-born Filipinos who are now naturalized citizens of another country
can buy and register, under their own name, land in the Philippines but limited in
land area.
However, those who avail of the Dual Citizenship Law in the Philippines can buy
as much as any other Filipino citizen.
Under Republic Act 9225 (Philippines Dual Citizenship Law of 2003), former
Filipinos who became naturalized citizens of foreign countries are deemed not to
have lost their Philippine citizenship, thus enabling them to enjoy all the rights
and privileges of a Filipino regarding land ownership in the Philippines.