Suppose you are going to sell your land or condominium in the Philippines. A buyer has expressed interest in your property, and you are now engaged in talks for its purchase in the Philippines, but you discover an annotation on the land title. Many property owners only realize this issue when a buyer is already ready to proceed, only to realize that the title is not clean due to a Rule 74 Annotation.
If you inherited property or acquired it through an Extrajudicial Settlement of Estate, chances are your title carries an annotation under Section 4, Rule 74 of the Rules of Court. This article explains what is annotation in land title, why it appears, and most importantly, how to cancel annotation in land title legally and efficiently.
What is an Annotation in Land Title?
An annotation in land title is a legal note written at the back of the Transfer Certiificate of Title (TCT) or Condominium Certificate of Title (CCT). It serves as public notice that the property is subject to a claim, restriction, condition, or legal circumstances, such as mortgage with a bank notice of a pending court or lis pendens, adverse claim, or in the case of inherited properties, that may affect ownership.
Annotations are recorded by the Registry of Deeds to protect third parties and ensure transparency in property transactions.
Rule 74 Annotation in the Philippines
A Rule 74 annotation is a specific annotation placed on a land or condominium title when ownership is transferred thorugh an Extrajudicial Settlement of Estate. Under Section 4, Rule 74 of the Rules of Court, when heirs divide an estate without court proceedings, the law allows other heirs or creditors to file claims within two (2) years from the date of registration. This period allows any excluded heirs or creditors of the deceased to come forward and contest the distribution of the property.
Simply, this annotation is to protect undisclosed heirs, allow creditors of the deceased to collect unpaid debts, and warn buyers that ownership may still be contested within the 2-year period.
Why You Must Remove the Rule 74 Annotation?
While the property is legally yours, a property with a Rule 74 Annotation is often considered high-risk, and most buyers, banks, and financing institutions require a clean title. Here’s why cancellation of annotation in land title is strongly recommended.
- Bank Financing Disapproval: Most Philippine banks will not accept a property as collateral if it has a Rule 74 encumbrance.
- Buyer Hesitation: Buyers fear that a “lost heir” might suddenly appear within the two-year window and claim a portion of the land.
- Market Value Impact: Properties with clean titles command higher prices and faster closing times.
How to Cancel an Annotation in Land Title: Step-by-Step Process
The good news is that this annotation is not permanent. Once the two-year prescriptive period from the date of the registration of the Extrajudicial Settlement has passed without any claims being filed, the title holder can petition for its removal.
Step 1: Verify the Two-Year Lapse
Check the date stamped on your title specifically for the Rule 74 entry. The two-year period starts from the date the EJS was registered with the Register of Deeds, not the date of death or the date the EJS was signed before a notary. If two years have not passed, you generally cannot have it removed unless you provide a bond, which is a separate, more complex legal route.
Step 2: Filing for Petition for Cancellation of Encumbrance
To file a Petition for Cancellation of Encumbrance, you will need to gather the following:
- Original Owner’s Duplicate Copy: The TCT or CCT in your name.
- Verified Petition for Cancellation: This is a legal document, usually prepared by a lawyer, requesting the Register of Deeds to cancel the encumbrance.
- Affidavit of Publication: Proof that the Extrajudicial Settlement was published in a newspaper of general circulation for three consecutive weeks (this is a requirement of the EJS process itself).
- Certification from the Clerk of Court: A certification stating that no claims or cases have been filed against the estate within the two-year period.
- Valid IDs: At least two government-issued IDs of the petitioner.
- RD Application Form: Available at the specific Registry of Deeds where the property is located.
Step 3: Filing and Payment
Submit your petition to the Registry of Deeds. You will be required to pay the entry fee and the registration fee. These fees are relatively minimal compared to the value added by having a clean title.
Step 4: Issuance of the New Title or Notated Title
Depending on the practice of the specific RD, they may either:
- Cancel the annotation by stamping it “CANCELLED” on the existing title.
- Issue a brand-new “clean” title without the Rule 74 mention.
Sounds Overwhelming? It doesn’t have to be!
Annotation removal can be done before the transfer of land title or condominium title in the Philippines. Consider securing assistance from a title transfer service provider in the Philippines, such as FileDocsPhil, to assist you in filing your Petition for Cancellation of Encumbrance. This way, you are ensured that your lifting of encumbrance is done timely and correctly so that you do not lose your potential buyer.
Otherwise, if the condominium title or land title has already been transferred to the name of the buyer, the buyer may still have this removed by also filing a Petition for Cancellation of Encumbrance in the appropriate Registry of Deeds. Either way, the Cancellation of Encumbrance is recommended so that your future heirs or buyers will not have an issue with multiple encumbrances.
Let FileDocsPhil Do the Work!
FileDocsPhil can assist you with cancellation of annotation in land title, title verification, and end-to-end title transfer services anywhere in the Philippines.
What is the purpose of an annotation?
The purpose of an annotation is to provide public notice that a property is subject to a legal condition, claim, or limitation that may affect ownership or transfer.
How do you annotate an extrajudicial settlement of estate?
After the notarization of the Extrajudicial Settlement of Estate, it must be registered with the Registry of Deeds along with the required taxes and documents, after which the Rule 74 annotation is automatically entered on the title.
How to annotate an adverse claim?
To annotate an adverse claim, the claimant must file a sworn statement with the Registry of Deeds stating the basis of ownership or interest, along with valid IDs and payment of fees; the annotation is valid for 30 days unless extended by court order.
Who is the rightful heir to the estate?
The rightful heirs are determined by law (intestate succession) or by a valid will, and typically include the surviving spouse, legitimate children, illegitimate children, and parents, depending on the circumstances.
Can a property with an adverse claim be sold?
Yes, but it is highly risky. While legally allowed, most buyers and banks will not proceed unless the adverse claim is cancelled or resolved, as it clouds ownership.
