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Tag: Philippine Valuation Standards

  • Secure Your Investment: The Benefits of Titled Land

    Real estate is a risk mitigation tool. It provides inflation protection… What is nice about it is it’s a way to compound wealth over time.

    – Chad Tredway, Head of Real Estate Americas, JP Morgan Asset Managment

    By Realttorney®

    Property ownership is a cornerstone of financial stability and wealth-building in the Philippines. However, the benefits of owning land can be maximized significantly when land titles are secured for these real properties.

    Land titles are more than just pieces of paper. They are the linchpins of security, value, and opportunity in real estate ownership. The Supreme Court said that a certificate of title is merely an evidence of ownership or title over the particular property described therein.

    This article delves into the reasons why landowners should prioritize obtaining land titles, highlighting the legal security, enhanced property value, and access to government programs and incentives that come with titled land instead of untitled ones.

    The Legal Landscape of Land Titles in the Philippines. Before we delve into the benefits, it is crucial to understand the legal framework governing land titles in the Philippines. The Torrens system, adopted from the Massachusetts Land Registration Act of 1898, is the backbone of the country’s land registration system.

    The Torrens system was adopted in this country because it was believed to be the most effective measure to guarantee the integrity of land titles and to protect their indefeasibility once the claim of ownership is established and recognized.

    If this is so, what are the benefits for landowners if they apply for land titles over their lands?

    Legal Security and Protection from Fraud. The Supreme Court said in Ebancuel vs. Ancierto, et al. (G.R. No. 214540, July 28, 2021) that “it is a fundamental principle in land registration that the certificate of title is evidence of an indefeasible and incontrovertible title over the property in favor of the person in whose name it is registered. The title serves as conclusive evidence of the ownership of the land described therein.”

    The Torrens system ensures that land titles are conclusive against all claims except those noted in the certificate of title. By registering property under the Torrens system, landowners gain legal protection and recognition of their ownership against everyone else.

    Hence, the person who has a Torrens title over the property is entitled to its possession. Likewise, the registered owner has the exclusive right to use, lease, or sell the land. Moreover, the landowner of a titled property has the right to the fruits of the land and to evict any illegal occupant on the said land.

    In addition, the certificate of title becomes the best proof of ownership of a parcel of land. Having a Torrens title provides a stout defense against any fraudulent claims of ownership and possession. And, in the Philippines, there is no shortage of fraud committed against landowners.

    Yet the Supreme Court has always ruled in favor of owners of registered lands with Torrens titles against usurpers and illegal occupants with unsubstantiated self-serving claims. However, at the same time, landowners must also know that the Torrens system CANNOT be used for the perpetration of fraud against the real owner of the parcel of land.

    It should be emphasized that the Torrens system merely confirms ownership but does not create it. What does this mean?

    In a 1915 case, the Supreme Court held that “the registration under the Torrens system and the issuance of a certificate of title do not give the owner any better title than he had. He does not obtain title by virtue of the certificate.”

    To be clear, the mere possession of a duly registered Torrens title does not automatically make the possessor a true owner of the parcel of land described therein. If a person acquires a certificate of title under the Torrens system which includes, by mistake or oversight, land that can no longer be registered under the system, he does not, by virtue of the certificate alone, become the owner of the land illegally included.

    Furthermore, in various cases, the Supreme Court has always held that the Torrens system CANNOT be used to protect a usurper from the true landowner, shield the commission of fraud, or enrich oneself at the expense of another.

    Enhanced Property Value and Marketability. According to the Philippine Valuation Standard (PVS), which incorporates the International Valuation Standards (IVS), titled real properties are generally valued higher than untitled properties due to the legal security and protection they generally offer.

    Why? Because potential buyers and investors have greater confidence in the legality and security of their investment in real properties with clear or “clean” certificates of title. Titled lands also provide clear ownership and protection against disputes and fraud.

    Moreover, the process of verifying ownership and ensuring that there are no encumbrances is straightforward when a property is titled. This simplicity and transparency make titled properties more attractive to buyers, leading to quicker and more profitable sales.

    The difference in value between titled and untitled parcels of land can vary significantly depending on location, market conditions, and other factors. However, according to experienced licensed real estate appraisers, it is common for titled properties to be valued 15-35% higher than untitled parcels of land.

    This premium reflects the added security, marketability, and potential for financing that comes with having a certificate of title that is “clean”.

    Access to Financing. Major financial institutions are more likely to approve loans or mortgages for titled land than untitled ones. Hence, securing a certificate of title opens up various opportunities for landowners to leverage their assets for financial gain and wealth-building.

    For instance, a titled property can be used as collateral for a business loan, enabling the owner to invest in new ventures or improve existing ones. Or a titled agricultural land can serve as collateral to develop and make more productive a farm for the benefit of both the owner and the broader community.

    Also, a titled residential land can be used to finance the building of a house or a renovation of an existing one. These cannot be done if the parcels of land are untitled. Hence, the benefits of having a titled parcel of land are irrefutable.

    In conclusion, securing a certificate of title is a vital step for landowners in the Philippines. The benefits of legal security and protection, enhanced property value and marketability, and access to finance far outweigh the costs and effort involved in obtaining a land title.

    As the Philippine real estate market continues to evolve, landowners who prioritize securing their Torrens certificates of titles will be in a better position to protect their investments, capitalize on market opportunities, and contribute to the nation’s development.

    As a final note, always remember that a land title is not just a document. it is a key to security, prosperity, and peace of mind. Please don’t wait for disputes or missed opportunities to prompt you into action. Secure your land title today and reap the rewards of a well-protected and valuable property.

    Transform your untitled land into an asset. Register now and equip yourself with the comprehensive knowledge to navigate the intricacies of land titling. Join us in this three-hour lecture that will walk you through the essentials of titling untitled lands in the Philippines.

    The lecture is entitled, “Best Practices Guide to Titling Untitled Properties,” brought to you by the Center for Global Best Practices. For more information call Glaisie Falculan at (+63 949) 870-1832 or (+632) 8842-7148 or 59. Or kindly send her an email via glaisie.cgbp@yahoo.com.

    Register now to begin 2025 with asset protection ideas.

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    Atty. Jojo is a real estate attorney, an estate planning attorney, a licensed real estate broker, and a PRC-accredited Lecturer/ Speaker for Training Programs in Real Estate. He is a Chartered Trust and Estate Planning (CTEPTM) professional committed to educating Filipinos about the value and importance of incorporating real estate in their estate plan.

  • 5 Critical Things to Know About the Real Property Valuation and Assessment Reform Act

    “Per World Bank estimates, the Philippines’ real property taxes account for only 0.37% of the Gross Domestic Product (GDP) with an overall collection efficiency of 71%.”

    – OIC-Director Brenda L. Miranda, BLGF Local Fiscal Policy Service

    House approves the Real Property Valuation and Assessment Reform Bill (https://blgf.gov.ph)

    By Realttorney®

    Sometime on April 2-4, 2013, ranking officials of our Department of Finance (DOF) presented “Property Tax Reforms in the Philippines” during the Fourth IMF-Japan High-Level Tax Conference at Hotel Nikko, Tokyo, Japan. During this event, the Philippines identified eight (8) Issues and Challenges regarding our property-related tax administration system.

    The eight are as follows: (1) lack of uniform property valuation systems and methodology; (2) outdated real property values; (3) political interference in property valuation; (4) limited use of information technologies in the appraisal process; (5) multiple taxes on property ownership and transfers; (6) relatively high transfer taxes, which discourage formal transactions; (7) weak enforcement of property-related taxes; and (8) no provision for formal education and training of assessors/appraisers

    The promulgation and adoption of DOF Department Order No. 37-09 [Philippine Valuation Standards, 1st Edition] on October 19, 2009, continues to address the first item above, while the passage of Rep. Act No. 9646 addressed the last item on the list.

    Meanwhile, the various Joint Memoranda of the DOF and the DILG enjoined all Local Government Units (LGUs) regarding the regular preparation of Schedule of Market Values (SMV) and the conduct of general revision of property assessment in their respective jurisdictions.

    Way back on May 12, 2012, the House of Representatives passed the Valuation Reform Bill [House Bill No. 6044] to address most of the 8 Issues and Challenges mentioned above. However, the Senate of the Philippines failed to pass the counterpart bill at that time until recently.

    In the 2022 State of the Nation Address (SONA), Pres. Marcos, Jr. identified the Real Property Valuation and Assessment Reform Act (RPVARA) as one of his Administration’s priority legislations, and a key tax reform under the Comprehensive Tax Reform Program under the Duterte Administration.

    On December 12, 2022, the House of Representatives passed on third and final reading, the Real Property Valuation and Assessment Reform bill [House Bill No. 6558]. Thankfully, this time, the Senate of the Philippines had counterpart bills on hand.

    In the Explanatory Note of Senate Bill No. 897, filed by Sen. Pia S. Cayetano on July 26, 2022, she stated that “there are various agencies conducting or requiring property valuation, with each agency using their own system and methodology of valuation” of the economy, including the real estate industry. Understanding these implications is crucial for real estate professionals, investors, and policymakers.

    Senate Bill No. 2386 was passed on the third and final reading on March 11, 2024, via a unanimous vote by all 23 Senators present. Both Houses of Congress ratified the final version of the bill on March 20, 2024. The President approved the bill as Republic Act No. 12001 on June 13, 2024.

    As a real estate service practitioner (RESP), what do you need to know about this crucial tax reform program that was signed into law in June 2024?

    1. Updated and Fairer Property Valuation: According to RPVARA, it is the policy of the State to promote the development of a just, equitable, and efficient real property valuation system. Thus, it aims to establish uniform appraisal standards and procedures. This should lead to more accurate and consistent valuations across the country, reducing unfair tax burdens on property owners.

    According to Ma. Pamela Quizon, Director of the Bureau of Local Government Finance (BLGF), this reform bill will address the current inefficiencies in the system such as overlapping valuation. She stressed that there are currently 23 national government agencies requiring valuations of 1,715 LGUs.

    However, each government agency uses its own systems and methodologies which is causing wide disparities between zonal values, market values, and private appraisers’ values. Thus, leading to varying and multiple values for the same parcel of land or real property.

    RPVARA strengthened and expanded the powers and functions of the BLGF as the primary or lead implementing agency of this reform bill. The BLGF shall be the agency responsible for ensuring that valuations or revaluations are completed per standards outlined in the RPVARA.

    Finally, under the RPVARA, an updated schedule of market values (SMV) will be used as the basis for local and national land and property-related taxes. There shall be only one valuation for a specific real property.

    The SMV refers to a table of base unit market values for all kinds of real property, except machinery within an LGU, prepared by assessors according to existing laws, rules and regulations. LGUs are mandated to update SMV and its revision once every 3 years under Section 219 of the Local Government Code of 1991, as amended.

    2. Transparency and Efficiency: RPVARA shall develop and maintain the Real Property Information System (RPIS). This is an up-to-date electronic database of the sale, exchange, lease, mortgage, donation, transfer, and all other real property transactions and declarations in the country and on the cost of construction or renovation of buildings and other structures, and on prices of plant, machinery, and equipment.

    For this purpose, the BLGF shall require the mandatory submission of necessary documents from the concerned officials or employees of government agencies and instrumentalities, and LGUs. Towards this end, the BLGF shall establish mechanisms for the electronic submission of the required documents. Upon the creation of the RPIS, the private sector may access the database subject to the guidelines of the BLGF and the payment of a reasonable amount as an administration fee.

    This electronic database will centralize data on real estate transactions and shall be an important tool for all valuers – especially private appraisers who can now accurately prepare Appraisal Reports based on actual data of “comparables” in a given property location. No more educated guesses with the aid of Google and real estate listing sites.

    3. Streamlined Government Services: The RPVARA mandates all LGUs to automate their real property tax administration operations, such as but not limited to, tax mapping technology, maintaining software-enabled valuation systems, undertaking regular data cleansing, and computerized records management, with the guidance of the BLGF, in coordination with the Department of Information and Communications Technology (DICT). This could benefit the clients of RESPs involved in transactions requiring these services.

    Moreover, automating processes through the RPIS could expedite government activities related to property, such as right-of-way acquisition and land transfer tax administration which will redound to the benefit of its stakeholders.

    4. Taxpayer Relief: Republic Act No. 12001 grants a two-year amnesty on penalties, surcharges, and interest on real property taxes and special levies that were unpaid before the Act took effect (Section 30). The amnesty may be availed of within two years after the Act’s effectivity. A delinquent owner may pay the taxes in one lump sum or in installments. The amnesty does not apply to properties already sold at public auction for tax delinquency, properties whose delinquencies are covered by a compromise agreement, or properties subject to pending court cases on real property tax delinquencies. As noted above, this provision was not indicated in SBN 2386 or HBN 6558, but it appears in the enacted law, and it is a welcome addition to this important piece of legislation.

    This provides an opportunity for clients to settle outstanding tax obligations without extra charges and fend off the levy of the property and its public auction by the concerned LGU. It is a timely relief for landowners as they battle the effects of inflation and high-interest rates from 2021 up to the present. Because the window runs for two years from the Act’s effectivity, clients should confirm the exact deadline with the concerned LGU.

    5. Increase Collection of Real Property Taxes: The reform will broaden the tax base for local and national property and property-related taxes. With a wider tax base, the collection of real property taxes is expected to increase based on updated property values, which is most important to increase collection efficiency, and overall tax revenue by LGUs and the Bureau of Internal Revenue (BIR).

    Oftentimes, outdated property values result in unrealized revenues and socio-economic benefits from delayed projects, and conflicting land values which result in right-of-way (ROW) compensation problems, lengthy court litigations arising from valuation disputes, delayed projects, and cost overruns.

    With the increased collection efficiency, it is expected that LGUs will be able to translate this into better basic services for its constituents and critical infrastructure projects by the National Government based on the increased revenue-based national real property transfer taxes.

    With fairer valuations and a more transparent system, RPVARA would lead to a steady increase in market values of real properties in the Philippines at regular intervals without increasing the tax rates or introducing new taxes. Therefore, it is incumbent on RESPs to advise our clients as to the timing of such increases to take advantage of relatively low prices when they desire to purchase real properties.

    In conclusion, the Real Property Valuation and Assessment Reform Act brings several positive changes in the valuation system and the real estate sector in the Philippines in general. The reform bill shall implement a more efficient valuation system and will use a single valuation base, which will eliminate wide disparities caused by overlapping valuations.

    This would lead to consistency in real property valuation as well as the predictability of valuation. As such, the adoption of true market-based values for taxation purposes will increase revenues without necessarily adopting new tax measures.

    RPVARA endeavors to increase the capacity of the government to generate revenues from real property through the RPT, national government real property transfer taxes, and other related taxes. In addition, RPVARA aims to reduce government costs particularly unnecessary expenses incurred due to conflicting appraisals which lead to court litigations, project delays, and cost overruns.

    As RPVARA aims to implement uniform standards and efficient processes in the real property tax system, the government hopes that this will instill more confidence in the country’s real estate industry. In the end, the government desires to motivate and inspire real estate investors and public confidence because the valuation is done professionally, properly, and following current local and international standards.

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    Atty. Jojo is a real estate attorney, an estate planning attorney, a licensed real estate broker, and a PRC-accredited Lecturer/ Speaker for Training Programs in Real Estate. He is committed to helping new and veteran real estate service practitioners be well-informed of the latest laws, rules, regulations, and information relevant to the real estate service sector.