You may encounter a situation where a close friend or relative offers you to buy his or her property for various reasons. He or she may be leaving the country and opted not to leave any properties in the Philippines. Or the person may want to dispose of the property to be able to purchase another. Or you may be actively looking for a property to purchase available in the market for personal use or as an investment.
One of the things that you have to ensure is that the certificate of title is clean.
What is a Certificate of Title?
The certificate of title is a document that proves that the person who has it has ownership over the property indicated therein. Thus, the certificate of title is the best evidence to prove who owns the property. The most common certificate of titles are: the original certificate of title, the transfer certificate of title, and the condominium certificate of title.
When purchasing property already previously registered under the original owner, you wish that, as a buyer, your name will now be reflected on the new title. There may, however, encumbrances or liens, annotated on the certificate of title. If these are not removed or lifted, the said encumbrances or liens will likewise be transferred or carried over to the new title under the new owner’s name.
What are these encumbrances or liens?
Liens or encumbrances are any claims or charges that appear at the back portion of the Certificate of Title. Liens or encumbrances annotated at the back portion of the certificate of title thus serves as a notice to the interested buyer that the said property comes with a claim, an example of which is a mortgage.
This is in line with Section 59 of Presidential Decree No. 1529 Amending and Codifying the Laws Relative to Registration of Property and For Other Purposes also known as the Property Registration Decree which states that, “If, at the time of any transfer, subsisting encumbrances or annotations appear in the registration book, they shall be carried over and stated in the new certificate or certificates; except so far as they may be simultaneously released or discharged.”
Another example is Rule 74. This applies when the property was transferred to the current owner via extrajudicial settlement of estate.
There can also be an adverse claim. There can also be annotations relating to a reconstitution of titles.
The above mentioned liens or encumbrances may be removed. In fact it is preferred that these are removed prior to the transfer of title to the new owner. Otherwise, if the liens or encumbrances were removed after the title has been transferred, the entry on liens will be carried over on the new title and the removed will be another entry that shows the cancellation or removal of the said lien or encumbrance.
The entries on the title serve as a notice to the public as to the cleanliness of the title. The title shows if the title has encumbrances or liens. Hence, it is important for buyers to take a good look at the certificate of title if it comes with any liens or encumbrances. Otherwise, the rights of those 3rd parties whose interests are protected shall have priority over all other annotations. Annotations on the title usually sends potential buyers away or the purchase price will be drastically reduced. Hence the need to remove the annotations or liens or encumbrances, if possible.
Need further information and assistance regarding the importance of removal of encumbrances in the Philippines? Talk to our team at FILEDOCSPHIL to know more about the requirements and process. Call us today at (+632) 8478 5826 or send an email to info@filedocsphil.com for more information.