Guidelines and precautions in buying church property

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Consider the following situations and problems that some pastors have met in purchasing property for their churches:

[1] A veteran pastor-missionary paid half a million pesos for a property which his church started using at once. Later on, when he asked me for advice, it turned out that he paid the money without a Deed of Sale, whether absolute or conditional, or any kind of writing as proof of the payment. The whole piece of land was titled but the portion sold to the church did not have its own title. The pastor suffered months of worry and tension waiting for the landowner to have the whole area surveyed and the release of the subdivided title.

[2] A pastor from a province south of Metro Manila entered into a contract for the purchase of a land worth one million pesos. The church made a down payment of one hundred fifty thousand pesos. There was no deed of sale or any kind of document for that contract or the down payment. When the pastor asked me for advice and I asked him for a copy of the land title, he said that he did not have even a xerox copy. He said that the landowners promised to give him a xerox copy only when the complete payment had been made.

[3] A Baptist church in Metro Manila wanted to construct a new building for its church and ministries. The church secured a loan from a bank by putting up the title to its land as collateral. The church defaulted in its payments, the bank foreclosed the property, and the land is now owned by the Mormons.

[4] A faithful, unmarried old woman allowed this church in a province just outside Metro Manila to construct its buildings for the church and school on her property. Years later, the old woman was already in the States, the property had been fully developed, and the relatives of the old woman had become very interested in the valuable property. When I asked the pastor for the documents, he said that there was only a “verbal donation” made by the old woman.

[5] A pastor made a down payment of fifty thousand pesos for two condominium units which he wanted to turn into a church. The titles turned out to be fake.

[6] A church in Metro Manila entered into a lease contract for a land. The lease expired but the church continued using and developing the property. The church is now being evicted.

[7] A pastor entered into a contract for the purchase of a land in the heart of Metro Manila not with the owner but with the agent of an agent. The pastor went on deputation in the US to raise the money for the purchase of the land and the construction of the church. It turned out that the basis of the ownership of the land was a questionable court decision which claims almost the whole Philippines. The church is now being evicted by the sheriff’s office of that city.

[8] When this church in a northern province bought its property, it had not yet been registered with the SEC. The members agreed that the land be titled in the name of the pastor. When the pastor died, his children demanded that the church vacate the property since it was now their inheritance.

[9] The church bought the property and had the title transferred to its name after complying with the requirements of the Register of Deeds. Years later, the church received a notice of assessment from the Assessor's Office for failure to pay real estate taxes. It turned out that while the record of ownership of the land had been updated with the RD, the records in the Assessor's Office have not been transferred from the previous owner to the church.

[10] Numerous churches have built their structures within private subdivisions. The homeowners associations of these subdivisions are questioning the existence of a church within a residential area.

[11] A pastor wanted to buy the property the church was using. The land did not have a title with the owner merely having “rights” to the land. There were, however, other lands in that northern province which already had titles.

Posted below are some guidelines and precautions that pastors and churches must follow in purchasing land for their churches:

1. Get a certified true xerox copy of the land title. Do not depend on the copy provided by the landowner, even if it is certified. According to one media report, there are more than 100,000 fake land titles circulating in the Philippines.

If possible, check also if the person saying that he is the landowner is really the person mentioned as the registered owner. Meaning, the person saying that he is the landowner may just be posing as the real landowner. Ask for a valid ID.

If the title says that the registered owners are the parents of the person saying he is the landowner, that is a problem. There might be other heirs to that property. If there are several heirs claiming ownership of the land, and some heirs want to sell while others do not, that is a problem. The majority of the heirs cannot simply outvote those who do not want to sell. The heirs who want to sell must file a petition in court under Rule 69 of the 1997 Rules of Civil procedure.

If the landowner is married, then marital conformity is needed for the sale of the land.

If the person selling the land to you is merely an agent and not the registered owner, that is a problem. Ask to meet and deal with the real owner.

If the landowner is a member of the church, you must insist that you do things in a legal manner, for the protection of all parties concerned. The church is protected and the pastor cannot be accused later on that he took advantage of that member.

2. Check the back portion of the title to see if there are annotations for liens or encumbrances like adverse claim, notice of lis pendens, mortgage,etc. If there are liens or encumbrances on the title, then do not buy the property.

3. If the copy of the title on file with the Register of Deeds is clean of any lien or encumbrance, then bring the certified copy of the title to the Land Registration Authority (LRA) in Quezon City, opposite the Land Transportation Office. Ask the LRA Task Force on Spurious Land Titles to verify if the title is genuine.

4. If the LRA says that the title is genuine, then check with the Assessor’s Office if the “amilyar” or real estate taxes are paid up (no arrears or back taxes). If there are arrears, then talk to the landowner. You can propose for example to pay for the arrears but this should be part of the purchase price already. You need a written notarized document for this agreement on the payment of back taxes.

5. Ask the landowner permission to have the land surveyed. The purpose of the survey is to determine the actual land area. If the title says that the land area is 2,000 square meters but the survey only shows that the area is 1,500 then you can ask for a proportional reduction in the price.

6. Do an ocular inspection of the land for potential problems (for examples, if the area is prone to floods, if the property has access roads or right of way, etc).

7. Clarify with the landowner as to who will shoulder the payment of the taxes (transfer, capital gains, etc). If it is the landowner who will pay for all the taxes, then he might ask you to sign two deeds of sale. One deed of sale will be for the actual amount you agreed upon, while the second deed will state a price much lower than the agreed amount. The landowner will submit to the BIR the deed with the lower price so that he will be paying lower taxes. Will you as a pastor or as a church agree to this illegal and immoral way of doing things?

You have to clarify also with the landowner as to who will pay the notarial fee for the deed of sale. The notary public usually charges one percent of whatever the price mentioned in the deed is. For example, if the price mentioned in the deed of sale is two million pesos, the notary public will charge Php 20,000.00 as notarial fee.

8. In the actual payment, paying in cash is not recommended. You must have a paper trail of your payment. You can ask your bank to issue a manager’s check or cashier’s check. Before signing the deed of sale, the landowner can verify from the bank if the check is genuine or is funded, etc.

“Dapat kaliwaan”, as we say in the vernacular. When you present the check for payment, the landowner must at the same time give you the title. After you receive the title, “dapat malinis na”. Meaning, all you have to do after payment and receiving the title, is to work on the transfer of the title to your name.

9. In transferring the title to the church’s name, you will have to submit all the documents to the Register of Deeds (RD). Beforehand, you need to get the confirmation receipts from the BIR and the Assessor’s office. If the documents are complete and the BIR and Assessor’s office issue the proper documents saying that the taxes have been paid, then the RD will now transfer the title to the church’s name. The RD will require that you submit the church’s SEC registration papers, board resolutions, Deed of sale, etc.

10. There is no such thing as “verbal donation” when it comes to lands. The New Civil Code of the Philippines requires donations worth more than five thousand pesos and the acceptance of such donation to be made in a notarized document. In a donation, the donor’s tax (20% of the value of the property) must be paid within 30 days from the time the deed of donation is executed.

11. If the church has already bought a property but the landowner for one reason or another refuses to hand over the title, you should file immediately an “affidavit of adverse claim” with the Register of Deeds. Within 30 days after the adverse claim was annotated on the back of the title on file with the RD, you should file in court either a case for specific performance (for the landowner to comply with the terms and condition of the contract) or for rescission (cancellation) of the contract, both with damages.

12. In a contract of sale by installments, there is usually a part of the contract which provides for an “acceleration clause.” This means that failure to pay one or more installments will make the whole amount due and demandable. For example, your church is bound to pay two million pesos in 24 monthly installments for the land. Your church paid its January and February installments, failed to pay the March installment, and then continued paying again. If there is an acceleration clause in the contract, then that failure to pay the March installment, for example, gives the landowner the right to demand that your church pay the WHOLE amount at once.

You might ask, why would the church agree to have an acceleration clause in the contract? Well, the church might not be aware of such a clause in the contract, if it was the landowner who prepared the deed of sale, or if the church (if it was the one which prepared the contract) merely copied a deed of sale or downloaded it from the Internet. The point is, the church should consult a lawyer before buying any property.

Related articles:

• Registering a local Baptist church with the SEC either as corporation sole or religious society or aggregate
• Sample Constitutions and by-laws which local churches can use instead of the SEC-issued forms
• SEC registration of churches

If your Bible school, church or group of pastors wants to know more about these guidelines and precautions, please email me at gtgalacio@yahoo.com for a free half-day seminar. My other contact information is in the sidebar. You can also download a free PDF of this article.