REM- PROCESS

Objectives & purposes of Process & Planning

INTRODUCTION TO REAL ESTATE PROCESS, PLANNING & DEVELOPMENT
Real estate transaction
Is the process whereby rights in a unit of property (or designated real estate) is transferred between two or more parties,
e.g. in case of conveyance one party being the seller(s) and the other being the buyer(s). It can often be quite
complicated due to the complexity of the property rights being transferred, the amount of money being exchanged, and
government regulations.

Step-by-Step Real Estate Transaction

Written by Lee Grayson; Updated June 26, 2018

Buying a home is a big purchase with many different components being juggled all at once. While a good real estate
agent helps buyers navigate the process as it occurs, having a solid understanding of what happens prevents confusion
and frustration. Missing deadlines for can lead to costly mistakes and even losing a dream home. Know what your
responsibilities are and how you can exit the deal if something doesn't seem right.

Purchase Offer
The written, formal real estate contract lists the price and the ideal terms for a potential sale. The buyer presents a
formal, written offer stating the offered price in the next step. The buyer also agrees or counters the terms of the sale
as outlined by the seller, including the length of time allowed to close the sale. When the two sides come to an
agreement on all points, both sign the official sales contract.

Escrow Process
Opening escrow is the next step after both buyer and seller sign the sales contract. Escrow describes the neutral party
holding the contracts and funds involved in the transaction. Not all areas use escrow, and in some places an attorney
serves as an escrow officer. Escrow ensures all parties meet the terms as outlined in the contract. All money channels
through escrow and is released according to the sales agreement. Some escrow offices combine the legal title search
of the property to ensure the owner has the right to sell the real estate. Some regions use a separate title office that
submits the property title report to the escrow service for official approval by both the lender and the new buyer.
Inspections Contingencies
Inspections occur within the first few days of the contract agreement. Possible inspections include a search for insect
infestation, quality of the roof and an inspection covering appliances and heating and cooling systems. Some inspectors
handle multiple evaluations during a single general inspection. The buyer must include the request to hire professional
inspectors in the contract agreement, and the buyer generally pays the cost for the inspections. As a secondary set of
contingencies that may result in further inspections is the seller's disclosures of what they have done to the home and
what is known to be a problem.

Lender Approval
The next step involves mortgage approval. The sales contract lists the number of days allowed to obtain a new loan
when the buyer needs a mortgage to pay for the property. The lending process typically requires an escrow period of
between 30 and 60 days to complete the underwriting examination of the worth of the house and the creditworthiness
of the new buyer.

Final Closing
The final step to close the transaction requires the seller to transfer the legal title, or the deed in some states, to the
new owner. At the closing, both buyer and seller receive the final closing documents, including title and loan paperwork,
and the house keys change hands. The title company will record the transaction with the county assessor's or recorder's
office to put the new owner's name on record.

Fundamental of Property Management

Principles of Land Ownership

RIGHT TO OWN

1. General Rule – Only Filipino citizens and corporations at least 60% capital of which is owned by Filipinos
are entitled to acquire and own land in the Philippines.

2. Exceptions to the General Rule – Alien acquisition of real estate in the Philippines is allowed in the following
cases:
a) Acquisition before the 1935 Constitution.
b) Acquisition thru hereditary succession if the acquiree is a legal heir.
c) Purchase of not more than 40% interest in a condominium project
d) Purchase by former natural born Filipino citizens subject to limitations prescribed by B.P. 185 and R.A.
8179.
 Residential Purposes allowed:
Urban land 1,000 sqm
Rural land 1 hectares

 For Business Purposes:

Urban land 5,000 sqm
Rural land 3 hectares
 3. A Filipina who marries an alien retains here Philippine citizenship (unless the law of her husband’s country
makes her assume the citizenship of her husband because of such marriage) and can therefore acquire real
estate in the Philippines.

Real Estate Ownership

CONCEPT OF OWNERSHIP
Ownership is the independent right of a person to the exclusive enjoyment and control of a property including its
disposition and recovery subject only to the restrictions established by law and rights of others.

RIGHTS INCLUDED IN OWNERSHIP

Fee simple consists of the so called “bundle of rights” which are inherent in or appurtenant to ownership, without any
limitations or restrictions other than those imposed by law or contract. The bundle of rights include the following: 1)
Right to possess 2)Right to use and enjoy 3) Right to the fruits 4) Right to dispose 5) Right to vindicate or recover

LIMITATIONS ON RIGHT OF OWNERSHIP

1) Those imposed in general by the State in the exercise of the power of taxation, police power, and power of
eminent domain.

2) Those imposed by law such as legal easement, requirement of legitimate succession, zoning, building code, rent
control, urban and agrarian reform, subdivision regulations, escheat.

Escheat - is a common law doctrine that transfers the real property of a person who has died without heirs to the
Crown or state. It serves to ensure that property is not left in "limbo" without recognized ownership.

3) Those imposed by the grantor of the property on the grantee by contract, such as donation, last will, or usufruct.
4) Those imposed by the owner himself, such as voluntary easement, lease, mortgage.

SURFACE, SUBSURFACE AND AIR RIGHT

Land, in its legal signification, extends from the surface downwards to the center of the earth and extends upwards
indefinitely to the skies. The surface and subsurface of rights of an owner entitle him to construct thereon any works or
make any plantations and excavations without detriment to servitudes and special laws. Air right is the right of an owner
to use and control the air space over his land subject to the requirements of aerial navigation, laws, or contract.

RIGHT TO HIDDEN TREASURE

Hidden treasure belongs to the owner of the land, building, other property on which it is found. When the discovery is
made on the property of another, or of the State or any of its subdivisions, and by chance, one-half of the treasure shall
be allowed to the finder. If the finder is a trespasser, he shall not be entitled to any share of the treasure. If the things
found be of interest to science or arts, the State may acquire them at their just price, which shall be divided in conformity
with the rule above stated. Hidden treasure, for legal purpose, is understood to be any hidden unknown deposit of
money, jewelry, or other precious objects, the lawful ownership of which does not appear.

RIGHTS OF ACCESSION
1) In General – The ownership of property gives the right by accession to everything which is produced thereby, or
which is incorporated or attached thereto, whether naturally or artificially.
2) With Respect to Produce of Property – To the Owner belongs the:

a) Natural fruits – the spontaneous product of the soil

b) Industrial fruits – those produced by land cultivation or labor
c) Civil fruits – the rental income of buildings and /or lands

Modes of acquiring title

Private Grant –voluntary transfer or conveyance of private property by a private owner, such as sale or donation.
Public Grant – acquisition of alienable lands of the public domain by homestead patent, free patent, sales patent, or
other government awards.

Involuntary Grant – acquisition of private property against the consent of the former owners, such as foreclosure sale,
execution sale, or tax sale

Inheritance – acquisition of private property through hereditary succession

Reclamation - filling of submerged land, subject to existing laws and government regulations.

Accretion – acquisition of more lands adjoining the banks of rivers due to the gradual deposit of soil as a result of the
river current. +

The term accretion is used in real estate law to refer to an increase of land due to the accumulation of soil on the
shoreline of a lake, stream, or the sea. While accretion is a gift bestowed on landowners by Mother Nature, land can
also decrease in size through erosion and avulsion.

Prescription – acquisition of title by actual, open, continuous, and uninterrupted possession in the concept of owner for
the period required by law.

Rule in case of double sale: The priority of rights in case of double sale of titled property shall be governed by the
following rules:

1. The buyer who acquired in good faith and was the first to register the sale shall have a better right.

2. If none of the buyers registered the sale, the buyer who acquired to good faith and was the first one in
possession shall have a better right.
3. If none of the buyers registered the sale or took possession, then the buyer who acquired in good faith and has
the oldest title shall have a better right

Contract of Sale and Contract to Sell

1. Distinction: In a contract of sale, there is already a transfer or ownership.

2. In a contract to sell, there is no transfer of ownership yet but merely a mutual promise to buy and sell

Criterion: The test to determine whether a contract is a contract of sale or a contract to sell is not the manner of payment
– whether cash or installment, but whether or not there is conveyance of ownership in the dispositive or grant clause
of the deed. There is transfer of ownership when the dispositive clause states that the vendor “hereby sells, transfers
and conveys unto the vendee in a manner absolute and irrevocable x x x

FOREIGN OWNERSHIP OF CONDOMINIUM UNIT

In the condominium concept of ownership, absolute ownership by a foreigner is allowed not to exceed forty percent
interest in the project. The unit owner is the absolute owner of the space within the interior surface of his unit, but is
only a co-owner of the exterior façade of the unit.

RIGHTS OF A CONDOMINIUM UNIT OWNER

Absolute ownership of his unit
Co-ownership of land and common areas
Exclusive easement of the space of his unit
Non-exclusive easement to common areas for ingress or egress
Right to sell, lease, or mortgage his unit
Right to repair, paint, decorate the interior surface of his unit
Right to participate and vote in condominium corporation meetings

OBLIGATIONS OF A CONDOMINIUM UNIT OWNER

Pay the realty tax on his unit
Pay the insurance on his unit
Pay the shared monthly dues for maintenance of common areas/amenities/garbage disposal
Comply with use restrictions

P.D. 957 When the developer fails to complete the development within the required period
The refund is 100% of total payments less penalty interest plus legal interest of money

“Maceda Law (PD 957) will be discuss separately next topic”

REAL ESTATE PRACTICE & REAL ESTATE TAXES

Capital Gains Tax - Income tax payable to the BIR for the sale, transfer, or other disposition of real estate classified as
capital asset. .

Transfer Tax - A tax payable to the local government unit for sale, transfer or other disposition of real estate, whether
capital or ordinary asset
Withholding Tax - A tax payable to the BIR on the sale, transfer or other disposition of real estate classified as ordinary
asset.

Cost approach - a method of estimating the fair market value of an improvement by estimating present reproduction
cost and deducting depreciation.

Economic life - The period during which a property can be profitably used or expected to generate more income than
expenses.

Principle of diminishing returns - States that the application of more factors of production will tend to increase net
income up to a certain point, beyond which the introduction of more factors of production will tend to decrease net
income.

Principle of Progression - An appraisal principle which holds that the value of a property tends to be enhanced by
association with superior properties

Principle of Regression - An appraisal principle which holds that the value of a property tends to be adversely affected
by association with inferior properties.

Principle of Substitution - an appraisal principle which holds that the value of a replaceable property is inferred from
the value of an equally desirable substitute property.

Presentation: concept – It is an orderly written or oral explanation of facts and figures that make a given property
attractive to a prospect. Scope of coverage: 1. Property Identification – location, block number, lot number, lot area
and dimensions, floor area, type of property, terrain, view, description of improvements, zoning classifications, facilities
and amenities, titled or to be titled, price, terms, discounts, financing. 2. Advantages and benefits – quality of
neighborhood, availability of public transportation, proximity to public marker / schools / hospitals, reasonableness of
price. 3. For income properties – present potential income, return of investment. 4. Lot and vicinity plan, subdivision
map, and pictures of the property

Demonstration: concept – It is the process of showing the property and pointing out its physical qualities and other
advantages and benefits to arouse the desire to own it. Preparing for demonstration: Preparation of checklist of
physical attributes and other data which may be the object of prospect’s inquiry. Update availability with the developer.

Planning and Gola Setting in Real Estate Practice

Section 33, RA 9646 states the following:

“Section 33. Display of License in the Place of Business. – Every registered and licensed real estate service practitioner
shall establish and maintain a principal place of business and such other branch offices as may be necessary, and
shall conspicuously display therein the original and/or certified true copies of his/her certificate of registration as well
as the certificates of registration of all the real estate service practitioners employed in such office.”

RESA does not only require licensed professionals like us to establish a place of business, it also requires us “to
indicate the certificate of registration, professional identification card, PTR number, and APO receipt number, and the
date of issuance and the duration of validity on the documents he/she signs, uses or issues in connection with the
practice of his/her profession.”

Source: Atty. Ernesto C. Perez II

Reading relaxation:
https://www.crowdspring.com/blog/how-to-start-a-real-estate-business/

Land Use Planning

Land-use planning

= is the process of regulating the use of land in an effort to promote more desirable
social and environmental outcomes as well as a more efficient use of resources.

Comprehensive land use plan

= is a planning document prepared by LGUs to rationalize the allocation and proper use
of land resources. It projects public and private land uses in accordance with the future
spatial organization of economic and social activities.

Zoning
=is the process of dividing land in a municipality into zones (e.g. residential, industrial) in which certain
land uses are permitted or prohibited. In addition, the sizes, bulk, and placement of buildings may be
regulated. The type of zone determines whether planning permission for a given development is
granted.

Purpose of Land use planning:

a. Environmental conservation
b. Restraint of Urban sprawl
c. Minimization of transport costs
d. Prevention of land use conflict
e. Reduction of exposure to pollutants

The exercise of police power by the government:

 Zoning codes and land use maps
Eq. (R-1) classification for residential, growing livestock for commercial not allowed.
 Building codes
Eq. set back allowed for building construction
 Subdivision
Eq. Minimum lot area impose by HLURB
TRAIN LAW AFFECTING REAL ESTATE TRANSACTION

Pointers only:

1. ESTATE TAX CHANGES:

 Before = Net Estate of P200,000 and over was taxed between 5% to 20%
 Now = Flat Rate of 6%

 Before = Family Home deduction P1,000,000.00 whichever is lower.

 Now = Family Home deduction P10,000,000.00 whichever is lower.
 Now = Estate properties with net value of P5,000,000.00 and below now
exempt from estate tax.

2. ESTATE TAX DEDUCTIONS:

 Before = Standard Deduction P1,000,000.00
 Now = Standard Deduction P5,000,000.00 (only for Citizens and resident
alien)
 Now = Standard Deduction P500,000 on for non-resident alien

 Now = Funeral expenses, Judicial Expenses and Medical Expenses was

removed from allowable deductions.

3. ESTATE TAX RETURNS:

 Before = CPA Certification mandatory gross estate exceed P2M
 Now = CPA Certification mandatory if gross estate exceed P5M

Filing:
 Before = Deadline 6 Months from decedent’s death
 Now = Deadline 1 year from decedent’s death
 Payment:
 Before = 6Months only
 Now = 2years

4. VAT EXEMPT REAL ESTATE TRANSACTIONS:

 Sale of real properties utilized for socialized housing RA 7279
 Sale of residential lot P1,500,000.00 and below
 Sale of residential house and lot P2,500,000.00 and below
 Lease of a residential unit with monthly rental not exceeding P15,000.00

Subdivision Development

Basic Features of PD 957:

1. Registration and License to Sell – requires developers to secure development permit, registration certificate,
and license to sell from the HLURB.

Note: Development Permit = issuance for subdivision projects were devolved to the LGU
License to Sell = issuance for subdivision project still from HLURB

2. Selling a subdivision or condominium project, which requires HLURB license to sell, is defined under PD 957
to include, offering to sell, advertising to sell, and receiving reservation deposits.

3. Exemption from License to Sell:

a. Sale of subdivision lot resulting from partition of the land among co-owners or co-heirs.
b. Sale of a subdivision lot or condominium unit by the original purchaser, and any subsequent sale of the
same lot or unit.
c. Sale of subdivision lot or condominium unit by or for the account of a mortgagee in the ordinary course
of business to liquidate a bona-fide obligation.

4. Non-Forfeiture of Payments. No installment payment of the buyer may be forfeited by the developer when the
buyer who is not delinquent, and after due notice desists from further payment due to failure of the developer
to complete the development within the required period.

The buyer may, at his option, be reimbursed with the total amount paid including amortization interest, with
interest thereon at the legal rate. (6% per Annum RA 2209, In 2013, the Monetary Board issued Circular No.
799 providing that the legal rate of interest shall be back from 12% BSP rule to 6%).

5. Mortgage of Project. No mortgage of any lot by the project owner / developer without “permit to Mortgage from
the HLURB”.
In case a mortgage was executed by the owner / developer pursuant to an HLURB permit to mortgage, the
buyer may opt to pay his installment directly to the mortgagee.
 6. Representation in Ads. Representation by the developer on development facilities and infrastructure
appearing in advertisement, brochures, leaflets and other announcement are deemed part of the main
contract and enforceable against the developer.

7. Alteration of Plans. Any alteration in the approved plan relating to roads, open spaces, facilities and other
forms of development require prior approval of HLURB (now LGU) and written consent of Homeowner’s
Association.

8. Realty Tax. The realty tax on the lot shall be paid by the developer without recourse to the buyer for as long
as title has not yet passed to the buyer. However, if the buyer has taken possession of the lot although title
has not yet been transferred, the realty tax shall be for the account of the buyer effective the year following
said taking of possession.

9. Right of Way. When the project is without access to any existing public road, the developer must secure a
right of way which must be developed and maintained according to the requirements of the government
authorities concerned.

Basic Features of Presidential Decree 1216

1. Subdivision developers are required to develop at least 30% of the gross area of the project, inclusive of
roads, alleys and other service areas, for park and recreation.
2.
3. Minimum percentage of gross area for park is as follows:
Type of Sudivision Density(Lot/Ha) % of Parks

Open Market 20 & Below 3.5%

21-25 4.0%

26-35 5.0%

36-50 6.0%
51-65 7.0%

Type of Sudivision Density(Lot/Ha) % of Parks

Economic and 150 & Below 3.5%

Socialized 151-160 4.0%

160-175 5.0%

176-200 6.0%

201-225 7.0%

Above 225 9.0%