Three Ways Foreigners Can Own Land & Buy Real Estate in the Philippines

1. Purchase of a condo unit

This first scenario is perhaps the easiest to understand since this has been typically cited as the most common way for a foreigner to own property in the Philippines. Under the Condominium Act of the Philippines or Republic Act (RA) 4726, foreign citizens are allowed to buy condo units in any condominium project, as long as foreign ownership of that project does not exceed 40%.

For example, let’s say Condominium Project X is currently offering 100 units for sale. Under the law, all 100 unit owners become owners of Project X Condominium Corporation, the residual owner of the condo building. The condo developer may market and sell condo units to foreigners as long as the percentage of foreign ownership in that project will not exceed 40%.

So if for example, the following groups of foreigners bought the following units of Condominium Project X:

• 20 American citizens bought 1 condo unit each = total of 20 units
• 8 German citizens bought 2 condo units each = total of 16 units
• 1 Dutch citizen bought 4 condo units = total of 4 units

Total condo units in Project X owned by foreigners = 40 units

Given that the foreigners’ ownership in the condo project is a combined total of 40 units out of 100, the required 40% foreign ownership limit is met and this is, therefore, allowed. Anything above that, say 41 units or more, is illegal and a violation of the law. But who’s in charge of monitoring the foreign ownership percentage of the condo? Definitely, it will be unfair to pass that burden to the foreigner buying the unit. This responsibility lies with the management of the condominium corporation or the condominium homeowners’ association. They are in charge of regularly and religiously checking that foreigners only own up to 40% of the units sold in that condo project. 

That does not mean that since foreigners can own condo units, they also own the land where the condo is situated on!

The land where the condo was built is not owned by any individual owner. In reality, the land is owned by the Condominium Corporation. (However, in cases where the land is merely leased and not bought and acquired by the condominium corporation, the land is likely owned by another company and will revert to the latter upon extinction of the lease of the condo building.)

For lands owned by the Condominium Corporation, upon termination of the corporation (usually after 50 years from its incorporation), the unit owners will vote and decide what to do with the land. These are their typical options:

• choose to demolish the building and erect a brand-new condo, while simultaneously instituting a new condominium corporation that will own the new building; or
• decide to sell the land where the existing building is situated on, while sharing among themselves the proceeds of the sale depending on their ownership stake in the condominium corporation.

2. Purchase of land by a corporation

A valid and legal loophole used by foreigners looking to own land in the Philippines is through the creation of a domestic corporation. This simply requires the establishment of a company to be registered with the Securities and Exchange Commission (SEC). The only requirement is that the corporation must still abide by the 40% foreign ownership rule, which means Filipinos must still have majority ownership — at least 60% stake in that corporation.

Once approved by the SEC, the corporation may now purchase any real estate property, including land, house and lot, condominium units, or commercial buildings. As part-owner of this corporation, the foreigner can enjoy the use and benefits of the acquired property. However, the foreigners’ combined stake in the ownership is limited to just 40%.

Upon dissolution of the corporation, the foreigner is entitled to receive his proportionate share in the remaining assets of the company, but this doesn’t mean he can get to own the land owned by the corporation. The land may be sold and the cash proceeds distributed to the owners, including the foreigner.

3. Purchase by a foreigner married to a Filipino

If a foreigner is married to a Filipino citizen, the foreigner is allowed to buy land but — here’s the catch! — the title of the land (called the TCT or Transfer Certificate of Title) will be in the name of the Filipino spouse. The foreigner’s name may be included in the Contract or Deed of Sale, but it cannot be in the TCT or land title.

Yes, the foreigner may have purchased and acquired the land but in reality, he does not “own” it. For one, he is not allowed to dispose the land unilaterally, that is, without the explicit permission of the Filipino spouse who is the actual “owner” as per the land title.

In the event of death of the Filipino spouse, the foreigner becomes the natural heir of the property. Since the foreigner is not allowed to own land, the available options include:

• Disposing the property within a reasonable amount of time and collecting the proceeds of the sale;
• Passing ownership to the children or legal heirs; or
• Passing ownership to the Filipino spouse’s relatives, in case the couple is childless.(3)