5.1 Legal Aspects of Sale, Mortgage & Lease
5.1 Legal Aspects of Sale, Mortgage & Lease
5.1 Legal Aspects of Sale, Mortgage & Lease
LEGAL
ASPECTS
OF SALE
2
Contract of Sale
A contract whereby one of the parties (vendor)
obligates himself to deliver something to the
other (vendee) who, on his part, binds himself to
pay therefor a sum of money or its equivalent.
Essential requisites of a contract of sale
Consent or meeting of the minds
Object or subject matter
Cause or consideration
Relevant Terms
Policitacion an unaccepted unilateral promise
to buy or sell. Even if accepted by the other
party, it is not binding upon the promissor and
maybe withdrawn at anytime.
Right of First Refusal an innovative juridical
relation. If such right is incorporated in a
contract, it is enforceable by specific
performance. Otherwise, the injured party can
only sue for damages. (Equatorial Realty, Inc.
vs. Carmelo, et al)
9
Option Money
1. option money is separate and
distinct from the purchase
price
2. sale is not yet perfected even if
option money is paid
3. optioner is not required to pay
the balance after payment of
the option money
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Unpaid seller
A seller is an unpaid seller
when the whole price has not been paid or tendered;
when a check is issued and then refused payment by the
dishonor of the instrument
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Right to Repurchase
Conventional redemption takes place when the
vendor reserves the right to repurchase the thing sold
with the obligation to return the price delivered as well as
the expenses of the contract and necessary and useful
expenses made on the thing.
The right to repurchase must be reserved in the same
deed of sale. If it is reserved in a separate instrument,
then the document is not a sale with right to repurchase.
The same is merely a promise to sell which is
discretionary on the vendee a retro.
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Redemption
In the absence of an agreement, the repurchase by the
vendor a retro must be done within four (4) years from
the date of contract. If there is an agreement, the period
cannot exceed ten (10) years.
In case of failure to redeem, there shall be consolidation
of ownership in the vendee a retro. Consolidation is a
matter of law. Such failure results in the loss of the right
to repurchase. Registration of the consolidated
ownership requires a judicial order after the vendor shall
have been notified. The seller a retro should be notified
in order to comply with the due process clause.
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Redemption (contd.)
The vendor cannot avail himself of the right to repurchase
without returning to the vendee the price of the sale, and
in addition:
the expenses of the contract, and any other legitimate payments
made by reason of the sale;
the necessary and useful expenses made on the thing sold.
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3.
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Actions by Vendee
Accion redhibitoria an action instituted by the
vendee against the vendor to avoid a sale on account of
some vice or defect in the thing sold which renders it unfit
for the use intended or which will diminish its fitness for
such use to such an extent that, had the vendee been
aware thereof, he would not have acquired it.
Accion quanti minoris an action to procure the
return of a part of the purchase price paid by the vendee
to the vendor by reason of such defect.
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LEGAL
ASPECTS
OF LEASE
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Definition of Terms
Lease is a consensual, bilateral, onerous and commutative contract
by virtue of which one person binds himself to grant temporarily the
use of a thing or to render some service to another who undertakes
to pay some rent, compensation or price.
Lease of thing one of the parties binds himself to give to another
the enjoyment or use of a thing for a price certain, and for a period
which maybe definite or indefinite. However, no lease for more than
99 years shall be valid.
Lease of work or service one of the parties binds himself to
execute a piece of work or to render to the other some service for a
price certain, but the relation of principal and agent does not exist
between them.
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Lease vs Rent
Lease it is a consensual, bilateral, onerous,
and commutative contract by which one person
binds himself to grant temporary the use of a
thing or the rendering of some service to another
who undertakes to pay some rent,
compensation, or price.
Rent is the compensation either in money,
provisions, chattels, or labor, received by the
lessor from the lessee.
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Lease vs Sale
1.
2.
3.
4.
LEASE
Only use or enjoyment is
transferred
Transfer is temporary
Lessor need not be the
owner
The price of the object,
distinguished from the
rent, is usually not
mentioned.
1.
2.
3.
4.
SALE
Ownership is transferred
Transfer is permanent
Seller must be the owner
at the time the property
is supposed to be
delivered
Usually, the selling price
is mentioned
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Ejectment (contd).
If the tenants have not paid the rentals for no reason at all except
that the case is still pending in court, or the tenant was subleasing
the property without the knowledge or consent of the owners/lessors,
the court, in the interest of justice, should not hesitate to suspend the
rules by ordering the ejectment of such tenants although such non
payment of rentals is not one of the stated grounds for the litigation.
While it is the benign policy of the State to give all possible assistance to
tenants, particularly those coming from the low income group and to help
the landless acquire their own homes, this should not be applied to the
extent of oppressing the landowners/lessors by enabling such tenants to
occupy the premises when the landowner or the immediate member of
his family needs the premises for his own use, or when the tenants have
not paid the rentals due pending litigation, or otherwise subleased the
premises without the knowledge nor consent of the owner/lessor. The
court should step in to see that the scales of justice are equitably tipped
the relieve the owner/lessor from his unfortunate plight.
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4.
Contract of Sublease
lessee does not transmit absolutely his
right and obligations to the sub lessee.
the personality of the lessee does not
disappear
there are 2 leases and 2 distinct
juridical relationships although
intimately connected and related to
each other
the sub lessee, generally, does not
have any direct action against the
owner of the premises as lessor, to
require the compliance of the
obligations contracted with the plaintiff
as lessee or vice versa.
1.
2.
3.
4.
Assignment of Lease
lessee transmits absolutely his right
and
the personality of the lessee who
assigns the lease disappears
there only remains in the juridical
relation two persons: the lessor and
the assignee, who is converted into a
lessee.
the lessee (assignee) has direct action
against the owner of the premises as
lessor, to require the compliance of the
obligations contracted with the plaintiff
as lessee or vice versa.
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Consent of Lessor
Consent of the lessor is necessary in an assignment of lease
because it involves the transfer not only of rights but also of
obligations. It constitutes a substitution of one of the parties, lessee.
In case of sublease, the sub lessee maybe liabe to the lessor in the
following instances:
all acts which refer to the use and preservation of the thing leased in the
manner stipulated between the lessor and the lessee;
the sub lessee is subsidiarily liable to the lessor for any rent due from the
lessee. However, sub lessee shall not be responsible beyond the
amount of rent due from him, in accordance with the terms of the
sublease, at the time of the extrajudicial demand by the lessor.
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Non-Payment of Rentals
Even if the contract of lease does not provide for rescission in case
of non-payment of rentals, the law itself grants the lessor such right.
(Article 1381 and 1659 NCC). It must be recalled that the right of
rescission is implied in reciprocal obligations.
A payment to the lessor by the sub lessee is not payment to the sub
lessor. The lessor is a stranger to the sublease agreement.
If the lessor refuses to accept the rentals, the remedy of the lessee is
make a proper tender of payment and consignation in order to
extinguish the debt. Failure to comply with the requirements is a
ground for ejectment. Delayed consignation or deposit will not
extinguish the obligation of the lessee.
Willingness to pay is not payment. There must be consignation.
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Lease to Aliens
Under the NCC, the period of lease is allowed up
to 99 years.
PD 471 (Fixing a Maximum Period for the
Duration of Leases of Private Lands To Aliens,
1974) , however, has limited the period to 25
years only, renewable for another 25 years.
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Extinguishment of Lease
If a building is totally destroyed, the lease is
extinguished.
If there is only partial destruction, the lessee can
choose between reduction of the rent and
rescission.
If the building and the land are leased and the
building is burned, the lease is extinguished,
unless the lease on the land is separate from the
building.
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LEGAL
ASPECTS OF
MORTGAGE
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CHATTEL MORTGAGE
a) Constituted on
movables
b) Cannot guarantee
future obligations
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1.
2.
3.
4.
5.
Pledge
pledge is a real contract
the subject of pledge is personal
the possession of the thing
pledged is vested in the creditor
the pledgee has the right to
receive the fruits of the thing
pledged, with the obligation of
applying the same to the interest
of the debt, if owing, and the
balance, if any, to the principal
the sale at public auction of the
thing pledged is always
extrajudicial
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Relevant Terms
Pending fruits or those which are not yet harvested
when the obligation becomes due are covered by the
contract of real estate mortgage, but not those which are
already harvested.
Pactum de non alienado a stipulation in a contract
of real estate mortgage prohibiting the owner of the
mortgaged property from alienating the property during
the pendency of the mortgage
Tipo or up set price stipulation in a mortgage of
real property fixing a minimum price at which the property
shall be sold, to become operative in the event of a
foreclosure sale at public auction. It is, however, void for
the property must be sold to the highest bidder.
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Redemption
Redemption of foreclosed property a transaction by which the
mortgagor reacquires or buys back the property which may have
passed under the mortgage or diverts the property of the lien which
the mortgage may have created. It is allowed in case of foreclosures
in favor of banking and credit institutions and in extrajudicial
foreclosures.
Equity of redemption a right of the mortgagor to redeem the
mortgaged after his default in the performance of the conditions of
the mortgage but before the sale of the mortgaged property or
confirmation of the sale
Right of redemption a right of the mortgagor to redeem the
mortgaged property within a certain period after it was sold for the
satisfaction of the mortgage debt. It is supposed to be exercised
within one (1) year from registration of the sale.
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Defeasance Clause
The provision in a mortgage contract that
ends the mortgage when all payments are
made, transferring title to the property back
to the mortgagor or terminating the
lender's interest in the property
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Antichresis
Antichresis is a contract whereby a person
borrowing money of another, hands over
his property to the creditor, allowing the
use and occupation thereof, for the interest
on the money lent.
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Mortgage vs antichresis
Real Estate Mortgage
a mortgagor retains
possession of the
property as to fruits
a creditor does not
receive the fruits
the debtor-mortgagor
usually pays the property
taxes
Antichresis
the debtor surrenders
possession of the
property to the creditor
the creditor generally
receives fruits
the creditor is obliged to
pay the property taxes
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MACEDA LAW
RA 6552
(Realty Installment Buyer
Protection Law)
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Cancellation of Contract
In case of cancellation of the contract, buyers under
the Maceda Law (RA#6552) are entitled to receive
refund of the cash surrender value equivalent to fifty
percent (50%) of the installments made but not to
exceed ninety percent (90%) of total payments made.
If the contract is under Maceda Law (RA#6552), buyer
who has paid two (2) years installments shall be
refunded an amount equivalent to fifty percent
(50%)of the total payments made and shall also be
entitled to a grace period of 60 days.
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SAMPLE
BOARD EXAM
QUESTIONS
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79
The expenses for the execution and the registration of the sale
of real estate shall always be borne by the vendor.
TRUE
FALSE
FALSE (depends on agreement)
A deed of sale with mortgage is covered by Maceda Law
because it is in essence still an installment sale.
TRUE
FALSE
FALSE
A real estate mortgage can only secure financial obligations.
TRUE
FALSE
FALSE (can secure all kinds of obligations)
Parents have the exclusive right to be appointed guardian of the
property of their minor child.
TRUE
FALSE
FALSE
80
81
82
83
84
85
The de facto separation of the spouses shall not affect the regime of
absolute community, except when there is a formal agreement to the
contrary.
TRUE
FALSE
FALSE (agreement must be made before marriage)
The Statute of Fraud is applicable when by virtue of an oral contract of sale,
the seller delivered to the buyer a parcel of land which was only partially
paid.
TRUE
FALSE
FALSE (Statute of Fraud does not apply when there is partial performance)
Both Pactum commission and Pactum de non aliendo are valid if stipulated
in the mortgage contract.
TRUE
FALSE
FALSE
86
87
88
89
A TCT is null and void if the foreigners name who is married to a Filipina
appears on the title.
TRUE
FALSE
Answer: FALSE
Consent is one of the elements of conveyance. Therefore, a deed of
sale must always be signed by both the seller and buyer in order to be
valid.
TRUE
FALSE
Answer: FALSE (not in unilateral deed of sale)
Open mortgage is a kind of mortgage which can be paid even before
maturity.
TRUE
FALSE
Answer: TRUE
90
91
92
In interstate succession, the estate of the deceased person is divided among the
heirs in accordance with the last will he has executed.
TRUE
FALSE
Answer: FALSE (in interstate succession, the decedent has no will)
A notice of adverse claim annotated on the title is valid only for 30 days.
TRUE
FALSE
Answer: TRUE
Usufruct is a contract where property is hypothecated to secure an obligation where
the creditor is given the right to possess the property and collect the fruits thereof.
TRUE
FALSE
Answer: FALSE
93
Under R. A. 6552, a buyer who has paid less than two years of installment is
entitled to grace period of no less than 30 days.
TRUE
FALSE
Answer: FALSE (60 days)
Extrajudicial foreclosure is undertaken in accordance with the provisions of Rule 68
of the Rule of Court.
TRUE
FALSE
Answer: FALSE (Rule 68 of the Rules of Court applies to judicial foreclosure)
Ferdinand Lopez, son of Filipino migrants in California, acquired American
citizenship by virtue of his being born in USA. As such, his rights to acquire real
properties in the Philippines are restricted by the prevailing laws on ownership by an
alien.
TRUE
FALSE
Answer: FALSE (not natural born Filipino citizen)
94
The lessor of an apartment in Malabon can legally increase the monthly rental
from P5, 000 to P6, 000 starting January 2002 consistent with the 5-year lease
contract expiring 31 December 2005.
TRUE
FALSE
Answer: FALSE (answer is based on rent control law which expired December 31,
2005 underwhich maximum annual increase is only 10 %)
A lessor is entitled to eject the lease upon the ground that the leased premises
had been sold to a third person, if the sale is registered.
TRUE
FALSE
Answer: FALSE (problem does not state that lease registered, or buyer has
knowledge of lease, or sales contract provides buyer should recognized the
leasehold problem does not state that lease registered, or buyer has knowledge of
lease, or sales contract provides buyer should recognized the leasehold)
95
96
An illegitimate child is also a compulsory heir and entitled to one-third the share
of a legitimate child.
TRUE
FALSE
Answer: FALSE (1/2 share of legitimate child)
In case area is different from that stated in the contract, if the sale is for a lump
sum there shall be no increase or decrease in the price.
TRUE
FALSE
Answer: TRUE
Lease of lands and building within ECOZONE to entities owned by aliens shall
not exceed fifty (50) years extendible once for a period of not more than 25
years.
TRUE
FALSE
Answer: TRUE
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98
MULTIPLE CHOICE
A buyer of real estate has already paid in 8 years of installment a
total amount of P520, 000.00 inclusive of P20, 000.00 penalty
interest. The cash surrender value of the property based on
Maceda Law is:
a. P200,000.00
Computation
b. P250,000.00
50% x P500,000
= P250,000
c. P325,000.00
d. None of the above ADD 5% per year after 5 yrs
5% x 3 yrs x P500,000
c. P325,000.00
TOTAL
75,000
= P325,000
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100
d. Antichresis
101
102
103
104
107
108
The following liens can be found at the back of the title except:
a.Real estate tax liens
b.Mechanics liens
c. Mortgage lien
d.Judgment liens
e.None of the above
b. Mechanics liens
109
110
111
112
113
114
115
116
117
118
119
120
121
Under the Rent Control Law, the lessor may ask for a deposit
rental not exceeding:
a. 1 month
b. 2 months
c. 3 months
b. 2 months
Note: Answer is base on rent control law which expired December 31,
2004.
122
123
124
125
126
127
128
Husband and wife can sell property to each other in the following
circumstances, except when:
a. A separation of property was agreed upon in the prenuptial
agreement
b. There has been a judicial separation of property
c. There has been a legal separation
d. Spouses have been separated for more than 10 years.
d. Spouses have been separated for more than 10 years.
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