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Thursday, April 25, 2024

Can foreigners own land in the Philippines?

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"Foreigners can stay, enjoy, and have fun in the Philippines so long as they comply with Philippine laws."


With the big number of Filipinos working and studying abroad, there is a high chance that some of them will get to marry foreigners. In fact, the number of Overseas Filipino Workers (OFWs) for the period of April to September 2019 alone was estimated to be at 2.2 million (Philippine Statistics Authority, Reference 2020-099, Release Date: June 4, 2020).

We often see Filipinos married to foreigners acquiring residential properties, beach and vacations houses, and agricultural lands in our country. These properties are registered in the name of the Filipino spouse because his or her foreign spouse is prohibited from acquiring lands in the Philippines.

Under the 1987 Constitution “… 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 (Matthews v. Taylor, G.R. No. 164584, June 22, 2009).

The right to acquire lands of the public domain is reserved only for Filipino citizens or corporations of which at least 60 percent of the capital is owned by Filipinos. 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 (Matthews v. Taylor, G.R. No. 164584, June 22, 2009).

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An instance when a foreigner is allowed to acquire private lands in the Philippines is by hereditary succession (Section 7, Article XII, 1987 Philippine Constitution). Another instance is when a natural-born citizen of the Philippines who has lost his Philippine citizenship may be a transferee of a private land (Section 8, Article XII, 1987 Philippine Constitution).

Under Batas Pambansa No.185, any natural-born citizen of the Philippines who has lost his Philippine citizenship may acquire up to 1,000 square meters of urban land, or one hectare of rural land for residential purposes (Section 2). However, if the acquisition is for business and other purposes, the upper limit will be increased to 5,000 square meters of urban land and three hectares of rural land (Section 5, Republic Act No. 8179).

The Parity Amendment of the 1935 Constitution allowed Americans to dispose, exploit, develop and utilize the agricultural, timber, and mineral lands of the public domain. Under the same amendment, Americans can exploit and utilize the waters, minerals, coal, petroleum and other sources of potential energy in the Philippines.

The rights granted to the citizens of the United States or to corporations or associations owned by said citizens was terminated on July 3, 1974. The titles to private lands acquired by such persons shall be valid as against other private persons (Section 11, Article XVII, 1973 Constitution).

In the Matthews v. Taylor case, the Supreme Court had to determine the validity of an Agreement of Lease of a parcel of land in Boracay entered into by a Filipino wife without the consent of her British husband. The property was previously acquired by the Filipino wife and was declared for taxation purposes under her name.

When the property was leased by the Filipino wife to another person, the British husband sought the nullification of the contract on two grounds: first, that he was the actual owner of the property since he provided the funds used in purchasing the same; and second, that the Filipino wife could not enter into a valid contract involving the subject property without his consent.

The Supreme Court declared that the British husband has no right to nullify the Agreement of Lease entered into by his Filipino wife. The British husband is absolutely prohibited from acquiring private and public lands in the Philippines. Considering that the Filipino wife was the "vendee" in the Deed of Sale of the subject property, she acquired its sole ownership.

This is true even if the British husband claims that he provided the funds for such an acquisition. By allowing the Filipino wife to enter into such a contract knowing that it was illegal, no implied trust was created in his favor; no reimbursement for his expenses can be allowed; and no declaration can be made that the subject property was part of the conjugal/community property of the spouses (Matthews v. Taylor, G.R. No. 164584, June 22, 2009).

In another case involving the purchase of a property in Olongapo City by an American husband and a Filipino wife, the former acquired no right whatsoever over the property. In attempting to acquire a right or interest in land vicariously and clandestinely, he knowingly violated the Constitution; the sale to him is null and void.

Having no right over the property, the American husband had no capacity or personality to question the subsequent sale of the property by his Filipino wife. The American husband advanced the theory that he is merely exercising the prerogative of a husband with respect to the conjugal property.

According to the Supreme Court, to sustain the theory would permit indirect circumvention of the constitutional prohibition. If the property were to be declared conjugal, this would accord to the alien husband a not insubstantial interest and right over land, as he would then have a decisive vote as to its transfer or disposition. This is a right that the Constitution does not permit him to have (Cheesman v. Intermediate Appellate Court G.R. No. 74833, January 21, 1991).

In yet another case, an Australian national had a common law relationship with a Filipina. They bought several properties which were all placed in the name of the Filipina partner. The Australian claimed that the funds used to purchase the properties were all from him and were used by the Filipina partner without his knowledge and consent.

The Australian filed a Complaint against the Filipina for the recovery of the real and personal properties located in the Philippines. Even if the sales in question were entered into by the Australian as the real vendee, the said transactions are in violation of the Constitution. A contract that violates the Constitution and the law is null and void and vests no rights and creates no obligations.

Aside from this, the Australian was fully aware that he was disqualified from acquiring and owning lands under Philippine law even before the properties were purchased. To skirt the constitutional prohibition, the Australian had the deed of sale placed under the Filipina's name as the sole vendee. (Frenzel v. Catito, G. R. No. 143958 – July 11, 2003)

In the case of Sadhwani v. Sadhwani, Spouses Sadhwani, being Indian nationals, were absolutely disqualified from owning lands in the Philippines, whether actually or beneficially. Hence, they cannot transmit by hereditary succession any right over their Bel Air, Makati property (G.R. No. 217365, August 14, 2019).

To further circumvent the constitutional prohibition, some foreigners use corporations to own lands in the Philippines. They make their wives, her relatives, househelpers or drivers as incorporators, directors and officers to satisfy the requirement of a 60-percent Filipino ownership for a corporation to own land in the country.

The foreigner may appear to be a minority shareholder but he wields control and makes all the decisions for the corporation involving the property. However, the Philippine SEC recently issued Memorandum Circular No. 1, series of 2021 requiring, among others, all nominees to disclose his or her principal, trustor, nominator or on whose behalf they act as shareholders, directors or trustees.

This is to promote the transparency of beneficial ownership to minimize misuse of the corporations for illegal activities. The SEC through the Memorandum Circular also wants to ensure that corporations are used only for legal purposes and “not to defeat public convenience, justify a wrong, protect fraud, defend a crime, or confuse legitimate issues.”

Foreigners can stay, enjoy, and have fun in the Philippines so long as they comply with Philippine laws. When in doubt, they have to seek proper advice and guidance from appropriate government agencies or lawyers who can counsel them on Philippine law. 

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