The Constitution provides in Article XII Section 7 that, “Save in cases of hereditary succession, no private lands shall be transferred or conveyed except to individuals, corporations, or associations qualified to acquire or hold lands of the public domain.” Case law tells us the reason: “[It] is to preserve the nation’s lands for future generations of Filipinos [x x x].” (Vasquez v. Li Seng Giap, G.R. No. L-3676 (1955))

This prohibition applies to a conjugal partnership, thus the alien spouse cannot even have the right to consent or disapprove of any disposition by the Filipino spouse (Cheesman v. Intermediate Appellate Court, G.R. No. 74833 (1991)). The prohibition in the Constitution applies only to ownership of land; it does not extend to other immovable or real property as defined under Article 415 of the Civil Code (J.G. Summit Holdings, Inc. v. Court of Appeals, G.R. No. 124293 (2005)). Nevertheless, temporary rights over land such as a lease (Krivenko v. Register of Deeds, G.R. No. L-630 (1947)) or a usufruct (Ramirez v. Vda. de Ramirez, G.R. No. L-27952 (1982)) may be obtained by aliens.

Subsequent transfers to Filipinos are valid. In, Halili v. Court of Appeals, G.R. No. 113539 (1998), the Supreme Court said, “Jurisprudence is consistent that ‘if land is invalidly transferred to an alien who subsequently becomes a citizen or transfers it to a citizen, the flaw in the original transaction is considered cured and the title of the transferee is rendered valid.’ [x x x] [S]ince the disputed land is now owned by [x x x] a Filipino citizen, the prior invalid transfer can no longer be assailed. The objective of the constitutional provision—to keep our land in Filipino hands—has been served.”

As to corporations, in J.G. Summit Holdings, Inc., the Court declared, “In fact, it can even be said that if the foreign shareholdings of a landholding corporation [exceed] 40%, it is not the foreign stockholders’ ownership of the shares which is adversely affected but the capacity of the corporation to own land—that is, the corporation becomes disqualified to own land.” This is because the Constitution mandates that, “The exploration, development, and utilization of [all lands of the public domain and] natural resources shall be under the full control and supervision of the State. The State may directly undertake such activities, or it may enter into co-production, joint venture, or production-sharing agreements with Filipino citizens, or corporations or associations at least 60 per centum of whose capital is owned by such citizens.” Aliens, whether individuals or corporations, have been disqualified from acquiring public lands; hence, they have also been disqualified from acquiring private lands (Muller v. Muller, G.R. No. 149615 (2006)).

It is thus the general rule that foreigners may not own land to preserve it for future Filipino generations. There are several exceptions, nevertheless.

Intestate Succession

The Constitution itself provides for the first exception with the proviso, “Save in cases of hereditary succession [x x x].” In Ramirez, the Court clarified that this only applies to intestate succession (when the deceased does not leave a will). It explained, “We are of the opinion that the Constitutional provision which enables aliens to acquire private lands does not extend to testamentary succession for otherwise the prohibition will be for naught and meaningless. Any alien would be able to circumvent the prohibition by paying money to a Philippine landowner in exchange for a devise of a piece of land.”

Lands Transferred to Natural-Born Filipinos Who Have Lost Their Citizenship

The next section in the Constitution provides another exception: “Section 8. Notwithstanding the provisions of Section 7 of this Article, a natural-born citizen of the Philippines who has lost his Philippine citizenship may be a transferee of private lands, subject to limitations provided by law.” This means that a former natural-born citizen who is now a foreigner may still acquire lands.

For residential purposes, Batas Pambansa Blg. 185 provides in Section 2, “Any natural-born citizen of the Philippines who has lost his Philippine citizenship and who has the legal capacity to enter into a contract under Philippine laws may be a transferee of a private land up to a maximum area of one thousand square meters, in the case of urban land, or one hectare in the case of rural land, to be used by him as his residence.”

For business or other purposes, Rep. Act No. 8179, which amended the Foreign Investments Act of 1991 provides that, “Any natural-born citizen who has lost his Philippine citizenship and who has the legal capacity to enter into a contract under Philippine laws may be a transferee of a private land up to a maximum area of five thousand (5,000) square meters in the case of urban land or three (3) hectares in the case of rural land to be used by him for business or other purposes.”

In Republic v. Court of Appeals, G.R. No. 108998 (1994), the Supreme Court said “For the purpose of transfer and/or acquisition of a parcel of residential land, it is not significant whether private respondents are no longer Filipino citizens at the time they purchased or registered the parcels of land in question. What is important is that private respondents were formerly natural-born citizens of the Philippines, and as transferees of a private land, they could apply for registration in accordance with the mandate of Section 8, Article XII of the Constitution.”

In Pari Delicto

The Court, in Vasquez, ruled “[T]he majority of this Court has ruled that in sales of real estate to aliens incapable of holding title thereto by virtue of the provisions of the Constitution, both the vendor and the vendee are deemed to have committed the constitutional violation and being thus in pari delicto [(“in equal fault”)] the courts will not afford protection to either party.”

This does not mean that the alien may hold the land indefinitely. The Court continued, “In the United States the rule is that in a sale of real estate to an alien disqualified to hold title thereto the vendor divests himself of the title to such real estate and has no recourse against the vendee despite the latter’s disability on account of alienage to hold title to such real estate and the vendee may hold it against the whole world except as against the State. It is only the State that is entitled by proceedings in the nature of office found to have a forfeiture or escheat declared against the vendee who is incapable of holding title to the real estate sold and conveyed to him.” Thus, the State must commence escheat proceedings to reacquire the land.

Lands Acquired Before the 1935 Constitution

The prohibition against foreign ownership of lands began with a similar provision in the 1935 Constitution. Thus, lands owned by foreigners acquired before then are an exception to the general rule.

When the Foreigner Later Becomes a Naturalized Filipino

In Yap v. Grageda, G.R. No. L-31606 (1983), The Court cited earlier rulings when it authorized the transfer to a former alien, “The litigated property is now in the hands of a naturalized Filipino. It is no longer owned by a disqualified vendee. Respondent, as a naturalized citizen, was constitutionally qualified to own the subject property. There would be no more public policy to be served in allowing petitioner [vendor] to recover the land as it is already in the hands of a qualified person.” The Court reiterated the policy behind the provision—it is to keep lands for the benefit of Filipinos.

Foreigners Who Acquire Condominium Units

Republic Act 4726, as amended, or “the Condominium Act” provides that, “A condominium is an interest in real property consisting of separate interest in a unit in a residential, industrial or commercial building and an undivided interest in common, directly or indirectly, in the land on which it is located and in other common areas of the building. A condominium may include, in addition, a separate interest in other portions of such real property. Title to the common areas, including the land, or the appurtenant interests in such areas, may be held by a corporation specially formed for the purpose (hereinafter known as the "condominium corporation") in which the holders of separate interest shall automatically be members or shareholders, to the exclusion of others, in proportion to the appurtenant interest of their respective units in the common areas.”

As discussed in J.G. Summit Holdings, Inc., since the prohibition applies only to lands and not to other immovable or real property, foreigners may own condominium units (up to 40%) since it is the condominium corporation that actually owns the land.

American and American Corporate Acquisitions Before 4 July 1946

In Moss v. Director of Lands, G.R. No. L-27170 (1977), the Court discusses the Ordinance appended to the 1935 Constitution, “Notwithstanding the provisions of the foregoing Constitution, pending the final and complete withdrawal of the sovereignty of the United States over the Philippines [x x x] (17) Citizens and corporations of the United States shall enjoy in the Commonwealth of the Philippines all the civil rights of the citizens and corporations, respectively, thereof.” Thus, the land acquisitions made by Americans and American corporations prior to 4 July 1946 are valid.

For any legal assistance you may need, you may send your inquiries and other legal concerns to info@gqlaw.com.ph.