Must real estate in the Philippines
Who doesn’t want to retire in paradise? Spending days in a land of sun-kissed beaches, swaying palms, and a laid-back culture is a dream many aspire to. And the dream can come true by moving to an island in the Philippines. However, there is the not-so-small matter of owning the property in which you will be living.
Like many countries that emerged from colonial rule in the 20th century, the Philippines is sensitive to foreign acquisition of domestic assets and has passed laws restricting land ownership to Filipino citizens. While this has prevented foreign megacorporations from acquiring prime real estate, it has also made things a bit more difficult for people looking to purchase property for their personal use.
However, expatriates, who are welcomed by the government, can become de facto owners of land in the Philippines. So how does it work?
First, consider the limitations. The law stipulates that foreign interests (whether individuals or corporations) cannot own more than 40 percent of Philippine land.
But for most people, owning 40 percent of a parcel of land is not enough; you want to control all your land. So how do you get the remaining 60 percent?
The most common way to solve this problem is to put the property in the name of your spouse, partner or friend. In particular, many expat men put their real assets in the names of their Filipino wives and girlfriends. While it is undoubtedly easy and fast, it is not a good option. Quite often, couples or friends end up on bad terms, due to cultural differences, communication problems, or simply a mutual incompatibility that was not apparent at first (especially since many couples nowadays tend to meet through the Internet).
When problems arise, the foreign party is left at the mercy of the Filipino party, which legally controls the property. He could end up losing his wife, his house, and a place to stay, all at once. Therefore, I do not recommend putting the property in his partner’s name unless he has been married for at least ten years.
A safer option is to form a paper company. A corporation can own the land, and you can own up to 40 percent of the corporation. If the corporation is set up carefully, you can effectively control the entire corporation and therefore own the land. A company cannot be incorporated by one person, and you will need Filipino incorporators who technically own sixty percent of your company. Although you will provide all of the capital for the corporation, on paper it will appear that your friends invested 60 percent to form the company.
The foreigner must make sure that the incorporators who own sixty percent of the company are not only friendly with him/her, but, and this is very important, that they do not know each other. If he gets his friend and his relatives to sign off on the full 60 percent, he may end up with nothing, just as he does when he puts 100 percent of the property in someone else’s name. To prevent those who own 60 percent from joining you and pooling their influence and sidelining you in your own company, it’s critical that you only ask friends who don’t have mutual contact to become founders of your company. In addition, you can ask your acquaintance to pre-sign a blank deed of sale for his or her shares in your company. That way, if you eventually have a fight, or your acquaintance moves abroad, you can easily transfer shares from him to another friend.
A company incorporation can be handled by any competent lawyer and costs around US$500, not including the program money required for capitalization (which will need to stay in a bank account for about a week). Perhaps the biggest difficulty is the task of finding six people who know you well enough to be willing to register as part owners of your business. Since founders are responsible for the activities of the corporation they own, it’s natural for people to be reluctant to sign on to own a company controlled by an acquaintance they don’t know well.
A third loophole that is often taken advantage of is to lease the property instead of buying it. A perpetual lease can be arranged and, as long as the legal paperwork has been handled by an experienced and capable lawyer, it is a good way to gain control of the property. There are only two potential problems. First, the seller may not feel comfortable selling the land on a lease basis. Second, some buyers may feel somewhat insecure about living on land that they do not technically own. It should be noted, however, that buildings can be owned regardless of who owns the land on which the building stands.
In addition to these methods, it is also possible to legally own real estate in the Philippines.
Foreigners may own 100 percent of a condominium unit, as long as total foreign ownership of the condominium building does not exceed 40 percent. It’s a bit tricky as you’ll be relying on the developer to maintain the legality of your property by restricting foreign ownership of the development to 40 percent. And there’s the question of what happens when individual condo unit owners start selling their condos on the secondary market.
A stronger option, perhaps, is to make use of an offer from the Philippine government. Foreign citizens can come to the Philippines as officially authorized immigrants, either retirees or investors. The main drawback is that a substantial amount of cash must be placed on a dollar time deposit in the Philippines in either case.
Details are available on the Philippine Retirement Authority website (www.plra.gov.ph); Basically, you are allowed to own land if you have a SRRVisa (Special Retiree Resident Visa). Under this program, the foreign immigrant can own up to 1,000 square meters of urban (residential) land or one hectare of rural (agricultural) land, but must be able to place USD 50,000 in a dollar time deposit in a bank in the Philippines. . The SSRVisa is a good program, but unfortunately there is a lot of paperwork to process and one must be able to freeze a large amount of money without losing it.
In conclusion, while there are bureaucratic restrictions, a serious buyer can easily take advantage of any number of methods to own land in the Philippines and a future in paradise.