Dear Attorney,

I am in the process of transferring ownership of a property and was informed about potential fees that might be charged based on the declared value in the Deed of Absolute Sale (DOAS). Could you provide clarity on how legal fees related to DOAS transactions are generally calculated, and whether these fees are tied to the declared amount? I would also appreciate your insights into any legal implications regarding the fairness of such fees.

Sincerely,
Concerned Property Buyer

Insights

In the Philippines, a Deed of Absolute Sale (DOAS) is a critical legal document in property transactions. It signifies the transfer of ownership from the seller to the buyer, and its contents must comply with certain legal requirements to ensure its validity. One of the most significant aspects of any sale involving real property is the declared amount of the sale, which directly affects various taxes and fees, including the lawyer’s professional fees.

Legal Basis for Deed of Sale Transactions

Under the Civil Code of the Philippines, Article 1458 defines a contract of sale as one where the seller obligates himself to transfer ownership of a determinate thing and to deliver it, while the buyer is obligated to pay for the said thing at an agreed price. For real property transactions, the DOAS serves as the formal documentation of this sale, and it becomes a public document when notarized, providing legal proof of ownership transfer.

The declaration of the sale price in the DOAS is crucial not only for tax purposes but also for determining the value of the transaction, which can influence various legal and financial aspects, including the lawyer's fees, transfer taxes, and registration fees.

Lawyer’s Fees in DOAS Transactions

Lawyers in the Philippines are allowed to charge reasonable fees for their services, in accordance with the Code of Professional Responsibility and ethical standards of the legal profession. While the law does not specify a fixed rate for legal fees in Deed of Sale transactions, it is common for lawyers to charge based on the value of the property being sold. This practice is aligned with Rule 20.01 of the Code of Professional Responsibility, which requires that a lawyer’s fee should be reasonable and considers factors such as the time, effort, and skill required to handle the matter.

Commonly, legal fees for preparing, reviewing, and notarizing a DOAS are either charged at a flat rate or on a percentage basis, typically ranging from 0.5% to 1% of the declared sale price. This percentage method is often preferred for transactions involving high-value properties, as it proportionally compensates the lawyer for the complexity and potential legal risks involved in handling larger transactions.

Legal Implications of Charging Based on Declared Value

Charging legal fees based on the declared value of the property raises several legal and ethical considerations:

Fairness and Transparency: The Code of Professional Responsibility mandates that fees must be reasonable and transparent. A lawyer who charges based on a fixed percentage of the sale amount must ensure that the fee is justifiable given the work involved. Excessive or arbitrary fees may be contested, and clients have the right to negotiate or seek clarification on how fees are determined.
Notarial Fees: Notarization is a crucial step in making the DOAS binding and enforceable. The notarial fee is often included in the overall legal fee and is usually based on the value of the transaction. Section 8 of Rule VIII of the 2004 Rules on Notarial Practice provides that a notary public may charge fees in accordance with the value of the transaction. This makes it common practice for fees to scale with the declared value.
Tax Implications: The declared sale amount directly affects the taxes associated with the transaction. These include the Capital Gains Tax (6% of the sale price or the zonal value, whichever is higher), the Documentary Stamp Tax (1.5% of the sale price), and other fees. It is essential that the declared value is accurate and reflects the true consideration, as undervaluation can lead to penalties, fines, and even the nullification of the sale.
Potential Conflicts: There are instances where sellers or buyers might be tempted to declare a lower sale price to minimize taxes. Lawyers, however, are ethically bound not to assist in any form of misrepresentation. The Anti-Money Laundering Act (AMLA) and tax laws require that the true and fair value of the property is declared, and lawyers have a responsibility to ensure that the transaction adheres to these legal standards.

Factors Affecting Legal Fees

Several factors can influence the amount a lawyer charges for handling a DOAS transaction:

Nature and Complexity of the Transaction: The more complex the transaction, the higher the legal fees. This includes cases involving multiple parties, disputes, or issues related to land titles (e.g., whether the property is titled or untitled, or if there are encumbrances on the property).
Time and Effort Required: The time spent by the lawyer on drafting, reviewing, negotiating, and ensuring the compliance of the DOAS affects the fee. If the transaction requires extensive research or consultations, this may increase the fee.
Experience of the Lawyer: More experienced lawyers may charge higher fees due to their expertise and the value they bring to the transaction. Clients often pay a premium for the assurance that the transaction will proceed smoothly, with minimal risk of legal complications.
Location: Fees may vary depending on the location of the property. Legal fees in Metro Manila and other major urban centers may be higher compared to those in provincial areas, due to the difference in living costs and market standards.

Conclusion

In property transactions in the Philippines, the Deed of Absolute Sale is a legally binding document that solidifies the transfer of ownership from the seller to the buyer. Legal fees associated with the preparation, review, and notarization of this document are often calculated based on the declared value of the property, typically as a percentage of the sale price. However, these fees must be reasonable and transparent, as stipulated by the Code of Professional Responsibility.

Lawyers and clients should ensure that the fees charged reflect the true value of the service provided and that all legal and tax obligations are met. Misrepresentation or undervaluation of the sale price in the DOAS can lead to legal consequences, including penalties and the nullification of the transaction. Both parties must work closely with their legal counsel to ensure compliance with all applicable laws and to safeguard their rights throughout the transaction process.