Buying Property with Adverse Claims: Legal Considerations in the Philippines

When purchasing real property in the Philippines, one of the critical checks a prospective buyer must perform is whether the title or records of the property carry any form of adverse claim. An adverse claim signals that someone other than the registered owner has a legal or equitable interest in the property, which could jeopardize the buyer’s rights later on. This article comprehensively discusses the nature of adverse claims, the governing laws, and the practical considerations for buyers dealing with properties encumbered by such claims.

1. Overview of Adverse Claims

1.1 Definition

An adverse claim is a formal notice entered on a certificate of title, asserting a right or interest in registered land that is adverse to the title of the registered owner. In Philippine law—specifically under the Property Registration Decree (Presidential Decree No. 1529)—an adverse claim operates as notice to third parties, warning them that another person (the adverse claimant) asserts a claim or interest over the property.

1.2 Purpose

The purpose of an adverse claim is to protect the claimant’s interest. By registering (annotating) the claim on the title, the claimant ensures that anyone who later attempts to buy or otherwise deal with the property will have constructive notice of the claim. This prevents future buyers or mortgagees from alleging good faith ignorance of the claim.

1.3 Legal Basis

Presidential Decree No. 1529 (“Property Registration Decree”) governs land registration in the Philippines and addresses the registration of adverse claims.
Sections 70 and 71 of P.D. 1529 lay down the rules for filing, annotating, and canceling adverse claims on Torrens titles.

2. Legal Effects of an Adverse Claim

Constructive Notice: An annotated adverse claim on the title is deemed notice to all persons that the claimant has a right or interest in the property. The principle of “caveat emptor” (buyer beware) applies, putting the buyer on guard to investigate further before proceeding with the transaction.
Possible Litigation: Often, an adverse claim hints at an existing or potential dispute over the property. If unresolved, this dispute may escalate into litigation (e.g., actions for partition, reconveyance, or annulment of title). A buyer who proceeds without resolving or clarifying the adverse claim could be drawn into future lawsuits.
Implication for Innocent Purchaser for Value: One who buys property with an adverse claim annotated cannot later claim to be an innocent purchaser for value without notice. Courts would likely hold that the buyer had “constructive notice” of the adverse interest due to its annotation on the title.
Potential Delay or Denial of Registration: The Register of Deeds may require additional documentation or a court order before transferring and registering the property fully in the buyer’s name, especially if the adverse claim is active and uncontested.

3. Procedures for Filing and Canceling an Adverse Claim

3.1 Filing of an Adverse Claim

Under Section 70 of P.D. 1529, any person claiming any part or interest in registered land adverse to the registered owner may file a verified statement with the Register of Deeds of the province or city where the property is located. This statement must contain:

The alleged interest of the claimant and how it was acquired.
A description of the land in which the interest is claimed.
The registration details of the title involved (e.g., Transfer Certificate of Title number).
A request that the adverse claim be registered.

Upon receiving the verified statement, the Register of Deeds will annotate the adverse claim on the owner’s duplicate certificate of title and on the original certificate of title on file.

3.2 Validity and Expiry of Adverse Claim

An adverse claim is generally valid for 30 days from the date of registration.
If the claimant does not take appropriate legal action (e.g., filing a case in court to establish the right claimed) within the 30-day period, the annotation may be cancelled upon petition of the registered owner.
Some claims, however, may continue beyond 30 days if the claimant promptly files the relevant court action and secures a court order or if there is another legal basis to keep the annotation until the resolution of a case.

3.3 Cancellation of an Adverse Claim

An adverse claim may be cancelled:

By Court Order: If the claimant fails to substantiate the claim in court, or if the parties reach a settlement or a judgment is rendered declaring that the claimant has no valid interest in the property.
By Register of Deeds on Petition: If, after 30 days from annotation, the claimant fails to take the requisite judicial action or renew the claim in compliance with law.
Voluntary Cancellation by the Claimant: The claimant can file a verified declaration or affidavit of desistance.

4. Common Types of Adverse Claims

Heirship or Successional Rights: A person claiming to be an heir of the deceased owner might file an adverse claim asserting a share in the property.
Unregistered Sale or Unrecorded Transaction: Someone who purchased the property under a private document (but was not able to register the sale) might file an adverse claim to protect their interest.
Lease or Tenancy Rights: In certain cases, agricultural tenants or lessees assert rights under agrarian laws or long-term lease agreements.
Lien or Trust Claims: A creditor or a person who financed the purchase may annotate an adverse claim to secure an equitable lien.
Pending Litigation: If a property is subject to a lawsuit (e.g., action for reconveyance, partition, or annulment of title), an adverse claim may be filed or a notice of lis pendens may be annotated to ensure that subsequent buyers cannot claim ignorance of the litigation.

5. Legal Considerations for Buyers

5.1 Due Diligence Steps

Title Verification: Obtain a Certified True Copy of the Transfer Certificate of Title (TCT) or Original Certificate of Title (OCT) from the Register of Deeds. Review all annotations, especially adverse claims, encumbrances, and liens.
Document Examination: Check the documents supporting the adverse claim. Request copies of the verified statement or any court pleadings. Consult a lawyer to evaluate the viability of the claim.
Survey and Ocular Inspection: Confirm the boundaries and current physical possession of the property. Speak with neighbors or barangay officials to discover any pending disputes, claims, or occupant issues.
City/Municipal Assessors’ Office: Verify the property’s tax declarations and assessment records for any tax delinquencies or pending issues.

5.2 Negotiations with the Seller

Disclosure by the Seller: Require the seller to disclose all known claims and legal disputes involving the property.
Warranties: Include contractual warranties and representations in the Contract to Sell or Deed of Absolute Sale stating that the property is free from liens, encumbrances, and adverse claims, or that the seller will undertake to clear them.
Indemnity Clause: Include provisions compelling the seller to indemnify you against losses arising from any undisclosed claim.

5.3 Legal Risks If You Proceed Without Clearing the Claim

Possibility of Court Litigation: You may be compelled to defend ownership in court, incurring legal costs.
Title Transfer Issues: The Register of Deeds could suspend or refuse to register the property in your name until the adverse claim is resolved or canceled.
Loss of Good Faith Purchaser Protection: Because the adverse claim provides public notice, you cannot claim you bought the property in good faith if the claimant’s right or interest is later established.

5.4 Seeking Professional Help

Lawyer: Engage a real estate lawyer or property law expert to interpret complex claims and handle negotiations with the claimant.
Real Estate Broker: A licensed broker with local knowledge can provide practical insights and facilitate discussions with stakeholders.
Judicial Relief: If the adverse claim is questionable or spurious, you can file for its cancellation in court under Section 70 of P.D. 1529 or seek a declaratory relief/quieting of title to clarify property rights.

6. Resolving Disputes Arising from Adverse Claims

6.1 Amicable Settlement

Many disputes can be resolved through direct negotiation or mediation. The parties may come to an agreement wherein the seller and claimant clarify their respective rights, potentially resulting in withdrawal or cancellation of the adverse claim.

6.2 Court Action

If extrajudicial solutions fail, the dispute typically goes to the Regional Trial Court with jurisdiction over the property’s location. Common remedies include:

Action for Quieting of Title: To remove clouds or doubts on the ownership of the property.
Action for Reconveyance: If a party claims they are the rightful owner and that the current title holder obtained the title through fraud or mistake.
Specific Performance or Rescission: If there is a breach of contract regarding the sale or non-disclosure of adverse claims.

6.3 Final Judgment

A court decision resolving the rights of the parties can lead to the issuance of an order to the Register of Deeds for cancellation of the adverse claim or for the amendment of the TCT to reflect the true ownership or interest in the property.

7. Practical Tips for Buyers

Never Rush: The presence of an adverse claim warrants extra caution. Do not rush into payments or sign final documents without legal advice.
Obtain a Written Undertaking: Have the seller commit, in writing, to cause the removal or resolution of the adverse claim at their own expense.
Consider Escrow Arrangements: Place the purchase funds in escrow until the title is cleared of the adverse claim or until the parties come to an arrangement.
Check for Other Liens or Notices: Aside from adverse claims, review the title for any notice of lis pendens, mortgages, annotations of attachment, or other encumbrances.

8. Conclusion

Buying property with an adverse claim in the Philippines requires meticulous due diligence and a solid understanding of the legal framework under Presidential Decree No. 1529. An adverse claim on a title is a significant red flag—one that buyers ignore at their peril. By recognizing that it serves as constructive notice, prospective buyers can undertake the necessary steps to investigate or clear any disputed interests. Seeking professional guidance—both legal and technical—remains the best strategy for ensuring a secure real estate transaction. If handled properly, a property with an adverse claim may still be acquired safely, but only after the adverse claim is resolved or adequately addressed to protect the buyer’s ownership rights.

Disclaimer: This article is for general informational purposes only and does not constitute legal advice. Philippine real estate and property law can be complex, and circumstances vary from case to case. Readers are encouraged to consult a qualified attorney for advice tailored to their specific situation.