Right of First Refusal Among Heirs in the Philippines: A Comprehensive Discussion

Disclaimer: This article is for general informational purposes only and does not constitute legal advice. For specific concerns and proper guidance, it is always best to consult a qualified lawyer.

I. Introduction

When a person passes away, their property, rights, and obligations (to the extent not extinguished by death) are transmitted to their heirs through a process known as succession. In the Philippines, succession is primarily governed by the Civil Code of the Philippines (Republic Act No. 386) and, to a certain extent, by the Family Code and special laws. One of the concepts that arises during the settlement of an estate—especially when there is co-ownership among heirs—is the “right of first refusal” or, more precisely under Philippine law, the right of legal redemption or legal pre-emption in favor of co-heirs or co-owners.

This article aims to explain the nature, basis, scope, and procedure of the right of first refusal among heirs in the Philippine context. It will also highlight relevant provisions of law and jurisprudence.

II. Terminology: Right of First Refusal vs. Legal Redemption

Although commonly referred to in ordinary parlance as a “right of first refusal,” the Philippine Civil Code typically uses the terms legal redemption and pre-emption. In general:

Right of First Refusal (contractual context): A stipulation granting a party the preferential right to buy a property before it is offered to an outside purchaser. This often arises from contracts or agreements among parties.
Legal Redemption or Pre-emption (statutory context): The right granted by law to certain persons (co-owners, co-heirs, adjoining landowners in certain rural/urban settings, etc.) to be subrogated to the position of a buyer/third person who purchased or intends to purchase a property under certain specific conditions.

In matters of inheritance, the Civil Code grants co-heirs a right to “step in the shoes” of a third-party buyer when another heir sells (or intends to sell) their hereditary share or interest to someone outside the co-ownership. This statutory right is often loosely called a “right of first refusal” among heirs, although the Civil Code text refers to it as a right to be “subrogated in the rights of the purchaser” or, in some instances, to exercise legal redemption.

III. Legal Basis Under the Civil Code

1. Article 1088 of the Civil Code

“Should any of the heirs sell his hereditary rights to a stranger before the partition, any or all of the co-heirs may be subrogated to the rights of the purchaser by reimbursing him for the price of the sale, provided they do so within one month from the time they were notified in writing of the sale.”

This provision is specifically about co-heirs before the partition of the estate. Key points under Article 1088:

Applicability: It applies when no partition has yet been made, meaning the estate is in a state of co-ownership among the heirs.
Right to Redeem: If an heir sells his share to a third person (a “stranger” to the co-heir relationship), the other co-heirs have one month from the time of written notice to exercise their statutory right to redeem.
Price and Conditions: To redeem, the co-heir must reimburse the third-party buyer for the purchase price (or proportionate share thereof if only some of the co-heirs wish to exercise the right).

2. Article 1620 and Related Provisions

Outside inheritance-specific rules, the Civil Code also recognizes rights of redemption among co-owners in general (e.g., Article 1620). Some Supreme Court decisions have analogized or cross-referenced these provisions to fill in procedural gaps. However, for inheritance cases specifically, Article 1088 remains the more direct provision.

3. Time Limits and Requirement of Notice

A critical element is the written notice requirement. The selling co-heir (or the third-party buyer) should give notice to the other co-heirs, triggering the one-month period for redemption under Article 1088. In the absence of notice, the redemption period does not begin to run.

IV. Nature and Purpose of the Right of First Refusal Among Heirs

Preservation of the Family Estate: The underlying policy reason is to protect the integrity of the hereditary estate from being fragmented or introduced into the hands of non-family members.
Avoiding Involuntary Co-ownership with Outsiders: By giving heirs a preferential right to buy out a co-heir’s share, the law prevents forcing them to co-own inherited property with a stranger.
Promoting Amicable Settlements: Providing a mechanism for heirs to “buy out” another’s share fosters more straightforward and less contentious settlements before formal partition is concluded.

V. Requisites for the Exercise of the Right

For co-heirs to validly exercise the right of legal redemption under Article 1088, the following elements must be present:

Existence of an Inheritance Co-ownership: The decedent’s property must still be under a state of undivided co-ownership. No formal partition or distribution of shares should have been effected.
Sale or Transfer to a Stranger: An heir must have sold or transferred (onerous title, typically sale) their hereditary share to a person who is not a co-heir.
Written Notice: There must be a notice in writing to the other co-heirs informing them of the sale, its price, and other relevant conditions.
Exercise Within the Prescribed Period: Co-heirs have one month from receipt of written notice to exercise the right of redemption. This short time-frame is strictly applied.
Reimbursement of the Purchase Price: The redeeming heir(s) must reimburse the buyer for the exact purchase price (or the proportionate amount, if some but not all co-heirs redeem).

If these conditions are not met, the right of first refusal (legal redemption) cannot be enforced.

VI. Procedure to Exercise the Right

Notification and Start of Redemption Period
- The selling co-heir or the buyer should formally notify the other co-heirs in writing of the fact of sale, the purchase price, and the principal terms and conditions of the sale.
Demand to Redeem
- If the other co-heirs decide to exercise their right of redemption, they must inform both the selling co-heir and/or the buyer (usually in writing to have proof) within one month of receiving the notice.
Payment of the Purchase Price
- The redeeming heir(s) must promptly reimburse the buyer in full for the purchase price stated in the sale document. If only some heirs redeem, they pay a proportionate share based on their hereditary interest.
Documentation and Transfer of Rights
- Once payment is completed, the buyer’s rights are effectively transferred to the redeeming heir(s). A deed of assignment or a notarized acknowledgment of redemption is often executed to reflect the subrogation in the Register of Deeds or other relevant records.
Possible Court Action
- If the buyer or the selling co-heir refuses to honor the redemption, the co-heir seeking redemption may file a court action to enforce their legal right under Article 1088. The court will then order the buyer to convey the interest to the redeeming heir(s) upon payment of the price.

VII. Effects of Partition on the Right of First Refusal

Once the estate is partitioned—whether by an extrajudicial settlement or a judicial partition—each heir’s share becomes individually owned, and the special rule under Article 1088 (for heirs) no longer applies. Any co-ownership that remains after partition (if, for instance, some heirs chose to remain co-owners voluntarily) may be governed by the general provisions on co-ownership (Articles 484, 494, 1620 of the Civil Code), not by the inheritance-specific rule of Article 1088.

VIII. Relevant Jurisprudence

Several Supreme Court cases have discussed the nature of legal redemption among co-heirs, though many revolve around the procedural aspect (particularly the need for written notice and the timeframe):

Heirs of Valera vs. Velasco
- Emphasized the importance of written notice in triggering the redemption period. Oral notice or actual knowledge alone may be insufficient to bar redemption if strict compliance with the notice requirement was not given.
Dela Merced-Feria vs. CA
- Clarified that until the heirs formally partition the property, they remain co-owners by virtue of their undivided interests. This co-ownership triggers Article 1088’s redemption right when a share is sold to a non-heir.
Alonzo vs. IAC
- Although more focused on co-ownership generally, it underscored that redemption rights are strictly regulated by law and must be exercised within the period set by law after proper notice.

While specific case names or doctrines may vary, the Supreme Court consistently upholds the policy that heirs should be given a fair and reasonable opportunity to preserve family property before allowing outsiders to intervene in an estate.

IX. Practical Considerations and Common Pitfalls

Failure to Provide Written Notice
- Some sellers or buyers neglect to give the required written notice, overlooking that failure to do so prolongs the possibility of redemption. In effect, co-heirs may still redeem even much later if they can prove they were never formally notified in writing.
Running of the Redemption Period
- Co-heirs must be vigilant in checking if and when a co-heir sells their share to a third person. The one-month period is strict; once it lapses after proper notice, the right to redeem is forever lost.
Proving the Actual Purchase Price
- In disputes, the declared purchase price could be challenged as undervalued or overvalued. Courts will look into the real price, but the co-heir is generally required to pay the price stated in the deed of sale unless fraud is proven.
Partial vs. Full Redemption
- If multiple co-heirs exercise redemption, they can share in the cost proportionately. If only one heir redeems, that heir essentially “steps into the shoes” of the buyer for the entire sold share.
Subsequent Partition
- Once redemption is completed (or waived), it is prudent to proceed with partition to finalize everyone’s shares and avoid further complications.

X. Conclusion

The “right of first refusal among heirs”—more accurately framed under Philippine law as the statutory right of redemption or subrogation in inheritance cases—is a powerful mechanism that protects heirs from involuntary co-ownership with outsiders. Grounded primarily in Article 1088 of the Civil Code, this right seeks to preserve the unity of the family estate and foster smoother settlement of the decedent’s property.

Key takeaways:

Timing and Notice Are Critical: The law imposes a short one-month window from written notice to exercise the right.
Purpose is Protective: It ensures heirs retain control over inherited property without unwanted external parties.
Strict Construction: Because it is in derogation of the general freedom to contract (the right of an heir to sell to whomever he wishes), courts tend to interpret redemption rules strictly, requiring precise compliance with the statute.

Heirs facing issues of inheritance property sales should remain vigilant about the possibility of redemption rights, consult legal counsel when necessary, and comply strictly with Civil Code requirements to avoid forfeiting—or violating—this preferential right.

Ultimately, understanding and properly invoking the right of legal redemption among heirs helps maintain family harmony, avoid lengthy litigation, and ensure that inherited property is handled in a manner consistent with the law and the decedent’s wishes.