House and Lot Lease

house and lot lease

House and Lot Lease

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I wanted to share a few points about a house and lot lease for long term, to hopefully clarify how and why this is done here in the Philippines.

First off, we need to discuss the restrictions of foreign ownership of land in the Republic of The Philippines. Basically, but clearly, the law reads that no foreigner shall be entitled to hold title to land in the country. This is a hard and fast rule that cannot be avoided, and any broker, agent or salesperson who tells you differently, either is not experienced in the real estate industry, or is trying to put one over on you. The issue of foreign ownership of land is a testy subject, with some very nationalistic emotions at play to protect Filipino land for Filipinos. If you try and skirt the law using “dummies”, be very, very careful. If you get caught, you will probably get the book thrown at you.

The Basics Frequently Asked Questions on House and Lot Lease:

  • How long can I lease for? – The maximum allowable term of a house and lot lease is 25 years , renewable for another 25 years. After the second 25 years, the possession of the property reverts back to the landowner
  • What price should I be paying for a House and Lot Lease? – If it is a long term lease, the reasonable expectation is that you would pay the current market value of the property as if it were a sale
  • Can I Pay Monthly? – Yes, legally you can, but in reality this rarely happens, unless it is a short term lease. No landowner would want to tie up his equity in the property  for 50 years with the payout strictly being the current market value. An owner on rare occasions might consider monthly payments, but expect to pay multiple times what the current market value is over the term of the contract.
  • Can I own the house, and lease just the land? – Absolutely, and this would be the best way for you to maintain some value for your equity. There are no legal restrictions against foreigners owning a structure. Ownership of the house would be shown through Tax Declaration registered at the local municipal treasury office. Note that if you are using this lease to satisfy conditions of an SRRV through the Philippines Retirement Authority, it has to be a house and lot lease, not a land only lease.
  • Do I have to pay taxes on the lease? – Yes you do. The total lease contract amount is subject to the same taxes as a sale
  • What happens if the landowner dies, sells the property or the company goes bankrupt? – This concerns should definitely be addressed clearly in the house and lot lease contract. There would  need to be a clause in the contract that states that that all heirs, assignees etc, are bound by the agreement
  • Can my rights be protected? – Yes, absolutely. The house and lot lease contract should be drafted by a trusted Attorney, notarized , and then an annotation registered on the title at ROD(Registry of Deeds). This way, the property cannot be sold, mortgaged or transferred without your authorization to remove the annotation.

For more information on house and lot lease or to see what we at Metro Dumaguete Estates have to offer, please visit our contact page and send us a quick email. We are here to help you ! If you want to to know more about what would be in store for you if you do make the commitment for retirement in Dumaguete, please visit the retiredumaguete website

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The Subdivision Community Trap

Living in a subdivision community can evoke pleasant images of camaraderie with friendly neighbors in an idyllic  setting with neatly trimmed and well landscaped yards, and maybe even with convenient amenities such as a pool or tennis court, protected by vigilant security guards. Sadly, in the Dumaguete City area, you will be hard pressed to find a place where this vision can be a reality. Though you will find some communities that are built by large scale developers, like Camella Homes, Richcraft and Aldea, these developments usually target the lower end  mass market. If you are looking for a more upscale mid luxury home, with decent yard space, you will not find what you are looking for with them. For the sake of this article, we will be focusing primarily on the non-nationally recognized developers.

Typically, subdivision communities here are rarely clean, organized and friendly. If you look around the city, you will find that though they may be numerous, they are  hardly what you were expecting. When you pull up to some, they may have a gated entrance, however the gates are in disrepair, manned by minimum wage , non attentive guards who would prefer to ignore unknown visitors and let them pass rather than get up off their conveniently chairs conveniently located in a run down guard shack or the most strategically placed shade tree. As you drive along the subdivision roads, they are dotted with potholes and every second lot you pass is covered with overgrown vegetation. The houses that are there, may be a  mismatch of not only style, but also grandeur. You may find a little shack, sitting next to, and dragging down the property value of the 30 million peso mansion sitting next door. Some homes will have have 2 meter  high concrete walls, topped with broken glass or barbed wire, built right out to where the property line meets the road, giving the impression that you will be living in a crime infested and claustrophobic prison type setting.

Digging deeper, you will find probably find that if there are community regulations, they are widely ignored, and common costs are not evenly shared by all members of the community. When the ones who are paying get tired with the ones who are not, everybody stops paying, and the management and upkeep of the community spirals into total neglect.

The Most Common Reasons Subdivision Communities in Dumaguete Can Become a nightmare

  1. The developer is only in it for a quick buck – This usually someone who buys a bigger piece of land, subdivides it into smaller cuts then sells off the sub-lots willy-nilly to any buyer who has the cash. Their tie to the community, and its residents stops the minute they have sold all the lots and collected their profit. As this is probably a “one-off” they have no cares about long term reputation or liability
  2. The developer lacks vision – If the developer does not have a image in his head of what he wants to achieve, then it is impossible for him to not only describe what the finished community will be like, but also screen potential buyers to ensure that they fit into the community. If the community is filled with people who have differing visions, then there will never be any consensus on what is best for the group as a whole
  3. Inadequate community guidelines, agreed to at time of purchase – If there is a vision right from the start, there can be some very simple guidelines drafted which are presented to potential buyers before they purchase. This would act as a screening process that would filter out potential clients who do not share a common vision
  4. Disparity in affluence – if the developer sells lots to clients of differing financial capabilities, in all likelihood there will be problems. The first problem will be one mentioned earlier, where the size and grandeur of the house will differ so  dramatically that property values will suffer. a second problem could be that if some buyers are struggling financially, they might not build for a while and could very well refrain form doing the simplest of lot maintenance, like grass cutting. A further problem is that they may not have the capabilities to contribute their fair share to cost costs.
  5. Differing cultural backgrounds – This is a common problem in the Dumaguete area as there are a many foreign expats coming from many different countries. Each of these different countries, along with Filipinos, typically have different standards as well as visions of what they expect their community to look like. This especially becomes a problem when there are community decisions to bee made and can be compared to asking all the countries of the United Nations to agree on common goals or how to reach them.

Though this may all seem overwhelming and depressing do not get to down. With the increasing attractiveness of Dumaguete as a retirement destination, great strides have been made of the past few years. More and more small scale developers have seen opportunity and are now getting doing good work to serve this previously under-served niche market. We at MDEI do feel that we lead the pack and hope that you will give us a good hard look.

 

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