REAL ESTATE TERMINOLOGIES
Absolute Community of Property – a property relation wherein the husband and wife are considered co-owners of all properties they brought into the marriage, i.e., properties they owned when they were single as well as those properties acquired during the marriage are co-owned by them.
Excluded are properties acquired during marriage through “gratuitous” means, e.g., inheritance including fruits or income therefrom. Also excluded are properties acquired before marriage by a spouse with legitimate descendants from a previous marriage; personal properties for exclusive use of either spouse, e.g., dresses, bags and shoes except jewelry.
In the absence of a marriage settlement, Absolute Community of Property shall automatically govern if the marriage is celebrated after August 3, 1988, the effectivity of the Family Code.
Acceleration Clause – a provision in the contract that allows the lender to require the borrower to immediately repay all or part of an outstanding loan if certain requirements are not met. The most common reason for accelerating a loan is when the borrower defaults on the loan.
Administrative Reconstitution – an act (Republic Act No 6732) allowing for the reconstruction of original copies of certificate of titles lost or destroyed due to fire, flood and other force majeure.
Administrative reconstitution can only be effected if 10% or more or a minimum of 500 of all titles in the Register of Deeds have been damaged or lost..
The most recent memorable case of Administrative Reconstitution of titles happened after the Quezon City Hall including its Office of Register of Deeds burned down during the term of Mayor Brigido Simon Jr on July 11, 1988. By the way, the title or TCT a property owner holds in his possession is not the original; it’s a duplicate. All original titles are held at the Office of the Register of Deeds.
Amortization – the gradual elimination of a liability or debt, such as a mortgage, in regular payments over a specified period of time. Such payments must be sufficient to cover both principal and interest
Annotation – a critical comment or explanatory note attached to a particular document; in our case to a title of a property. Such explanatory notes may include a lien or encumbrance.
Antichresis – a contract whereby the creditor takes possession, not ownership, of a property and gives him the right over the fruits or income of the property. Such fruits, however, are deducted from the principal and interest payment of the debtor.
E.g., Person A borrows money from Person B with the former putting his 5-door apartment as collateral for his debt. Person B takes possession of the apartment but the title to the property remains with Person A. For the duration of indebtedness, Person B keeps for himself the rentals from the apartment. The accumulated rental, however, shall form part of the debtor’s payment aside from the agreed upon periodic payments.
Antichresis should not be confused with mortgage. In mortgate, the debtor remains in possession of the property and pays taxes for it; he also keeps for himself whatever fruit or income is generated by the property and is responsible for the maintenance of the property. In antichresis, all the aforementioned benefits and responsibilities go to the creditor.
Appraised Value – is the financial worth placed on a property based on a report done by an appraiser.
Appraiser – a professional practitioner who has the knowledge and expertise necessary to estimate the value of an asset, or the likelihood of an event occurring, and the cost of such an occurrence
Assessed Value – is the financial worth placed on a property by the town or city’s assessor’s office for the purpose of determining the tax due said property. Assessed Value is computed by multiplying Fair Market Value by Assessment Level (FMV x AL). Assessment Level is determined either by the provincial, city or municipal council where the property is located.
Balloon Payment – is the final installment on a loan to be paid in an amount that is disproportionately larger than the regular installment.
Bedrock- a subsurface layer of earth that is suitable to support a structure
Board foot- a unit of measure for lumber equal to 1 inch thick by 12 inches wide by 12 inches long. Examples: 1″ x 12″ x 16′ = 16 board feet, 2″ x 12″ x 16′ = 32 board feet
Capital Asset – refers to real property or properties which are not being used in the trade or business of the property owner or seller; not an inventory in a person’s business. Sale of Capital Asset is subject to 6% capital gains tax; example of capital asset is a person’s personal residence. (Compare with Ordinary Asset)
Capital Gains Tax – is a tax imposed on the gains (or profit) “presumed” to have been realized by the property owner from the sale, exchange, or other disposition of capital assets
A person who sells his principal residence is exempt from paying capital gains tax if the proceeds of which is fully utilized in purchasing or constructing his new principal residence within 18 months from the date of sale of said asset.
Capital Property – property that belongs exclusively to the husband
Certificate of Occupancy – is issued by the local government and is required before anyone can occupy and live in a house. It requires “certificates of completion” from the architect, engineer, plumber and electrician who built the house. In the Philippines, compliance with the Certificate of Occupancy is not normally followed by people who have their houses built by their own contractors; developers, however, do.
Circuit Breaker – a device which looks like a switch and is usually located inside the electrical breaker panel or circuit breaker box. It is designed to (1) shut off the power to portions of or to the entire house and (2) to limit the amount of power flowing through a circuit (measured in amperes)
Closed Mortgage – one wherein the mortgagor’s obligation cannot be paid earlier than maturity; doing so will make him incur a prepayment penalty
Cloud on Title – is any document, claim, unreleased lien or encumbrance that might invalidate or impair the title to real property or make the title doubtful; also called a defect on title
Comparable Sales – recent sale of similar properties within the vicinity or in nearby areas and used to determine the market value of a property
Condemnation – the taking of private property for public use by the government with the owner given “just compensation.” For example, the government may condemn a private property for use as a Right of Way for the construction of a highway. If the owner refuses to sell, the government may take him to court where the government has to prove that the monetary offer is reasonable and the property is indeed being taken for public use.
Condominium – is often mistakenly thought of as a type of building, construction or development. It is actually a form of property ownership wherein a home owner owns the title to the interior of his unit and owns in common with all other unit owners, through a condominium corporation, the building, its common areas, open spaces and the land on which it stands.
Condotel – or condominium hotel; similar to a condominium in so far as each unit is owned by an individual. An owner, however, can use his unit for a limited period, say two or three weeks a year. The rest of the year, his unit is rented out like a hotel. Revenue is shared between the owner and the condotel operator, usually, at a ratio of 70%:30% with 70% going to the unit owner.
Condonation – a pardon by treating the offender as if the offense had not occurred. E.g. “The offices of Home Development Mutual Fund or Pagibig shall accept applications from delinquent borrowers or employers for its penalty condonation program.”
Conjugal Partnership of Gains – property relations between spouses, under which the husband and wife place in a common fund the proceeds, products, fruits and income from their separate properties and those acquired by either or both spouses through their efforts or by chance. Upon dissolution of the marriage, the net gains or benefits obtained by either or both spouses shall be divided equally between them.
For example, while single, the future husband owned a fleet of 10 taxis (capital property) while the future wife owned a 5-door apartment (paraphernal property). These are their exclusive and separate properties even after they get married. If after 5 years, because of the fruits or income derived by the husband from his ten taxis, he is able to buy 7 more taxis. On the other hand, from the income of the wife’s 5-door apartment, she is able to buy another 4-door apartment. The fruits of their separate and exclusive properties – the additional 7 taxis and the 4-door apartment become their conjugal properties. These shall be divided equally upon dissolution of their marriage.
Conjugal Partnership of Gains is the default property relation that governs spouses who got marriedbefore the effectivity of the Family Code on August 3, 1988.
Construction Contract – a legal document which specifies the what-when-where-how-how much and by whom in a construction project; a good construction contract will include:
Dacion en Pago – is a special mode of payment whereby the debtor offers another thing to the creditor who accepts it as equivalent payment of an outstanding obligation; also called payment in kind.
Decedent – a person who died and whose properties are transferred to another or to others by will or by operation of law; a decedent who left a will is called a testator
Dedicated Circuit – an electrical circuit that serves only one appliance (i.e., dishwasher) or a series of airconditioners or smoke detectors
Deed of Sale (DOS) – is a document executed when the buyer pays the developer in cash (whether using his or her own funds or through funds borrowed from bank or financing institutions). Unlike in a Contract to Sell , the DOS obligates the developer to transfer ownership of the property to the buyer, subject to the compliance by the buyer with the Deed of Restrictions or Master Deed with Declaration of Restrictions governing the project and the other terms and conditions of the sale.
De Facto Relationship – there are two types
1. Live-in relationship – is when a man and a woman live together without the sanctity of marriage even if there is no legal impediment for both to marry each other. Also called a void marriage. In case of separation or dissolution of the relationship, wages and salaries and fruits thereof (or properties bought through said wages) shall be divided equally between them even if just one of party earned the wages and the other did not contribute for lack of work.
2. Illegal relationship – involves a man and a woman who are incapacitated to marry each other. It refers to a bigamous marriage, adulterous relationship, concubinage or when either or both man and woman are married to other persons. In case of separation or dissolution of the relationship, wages or salaries earned by each party belongs to him or her exclusively. Only properties acquired by both the parties through “actual joint contribution of money, property or industry shall be co-owned in proportion to their respective contributions.
Divination – the art or practice that seeks to foresee or foretell future events or to discover hidden knowledge usually by the interpretation of omens or by the aid of supernatural powers (seegeomancy and feng shui)
Double Sale – is when the same property is bought , in good faith, by more than one person. In such a case, who owns the property? In order of importance, the owner is the
1. One who registers the title first at the Register of Deeds, if none
2. One who holds possession of the property, if none
3. One with the oldest title
Dropped Ceiling – is often a secondary ceiling, hung below the main (structural) ceiling. It may also be referred to as a drop ceiling, T-bar ceiling, false ceiling, or suspended ceiling, and is a staple of modern construction and architecture. The area above the dropped ceiling is called theplenum space, as it is sometimes used for HVAC air return. The plenum space is also very commonly used to conceal piping, wiring, and/or ductwork
Dry wall partition – a type of construction in which the interior wall finish is applied using a dry material, generally in the form of sheet materials or wood paneling as contrasted to “wet” plaster or concrete
Earnest Money – money put down or deposited by a potential buyer to show that he is serious about purchasing a real property; it becomes part of the purchase price if the offer is accepted, is returned if the offer is rejected, or is forfeited if the buyer pulls out of the deal. (see option money)
Economic Housing – under Batas Pambansa 220, these are dwelling types with the minimum LOT area of 72 square meters for single-detached, 54 square meters for duplex/single attached and 36 square meters for rowhouses (see Socialized Housing)
Eminent Domain – the right of the government to take over private properties for public use (seeCondemnation)
Encumbrance – refers to any charge or claim against a property. The person or entity that issues the encumbrance acquires a legal right to the property but does not necessarily give him the right to seize the property. This encumbrance remains in effect until the actual owner satisfies a debt or resolves the issue with the other party. Because encumbrances create an unclear title (it is annotated on the title), it impacts the transferability of the property and can restrict its free use until the encumbrance is removed. (See Lien)
An unusual case I personally know of is an encumbrance in favor of Meralco on a factory whose owner used “jumper” for several years and was penalized for millions of pesos for doing so.
Environmental Impact – are the probable effects or consequences of a proposed project on the physical, biological and socioeconomic environment that can be direct or indirect, cumulative, positive or negative
Equity- the “valuation” that you own in your home, i.e., the property value less the outstanding mortgage loan.
Escrow – A financial instrument held by a third party on behalf of two other parties in a transaction. The funds are held by the escrow service (usually a bank) until it receives the appropriate written or oral instructions or until obligations have been fulfilled. E.g., the buyer and seller of a house and lot may agree to put the former’s payment in escrow until the title to the property is put in the name of the buyer.
Estate – properties or property rights of the person who died (decedent) and is the subject ofsuccession; also called inheritance; it is the total of all properties of the decedent including real estate, chattels, shares of stocks and bank accounts LESS obligations including indebtedness
Estate Tax – is a tax on the right of the deceased person to transmit his/her estate to his/her lawful heirs and beneficiaries at the time of death. It is not a tax on property; it is a tax imposed on the privilege of transmitting property upon the death of the owner.
Allowed deductions on Estate Tax
1. Actual funeral expense or 5% of gross estate whichever is lower but not to exceed P200,000
2. Judicial expenses, e.g. expenses incurred in case of a probate
3. Claims by creditors provided the instrument of indebtedness is notarized and the debt was contracted within 3 years before death
4. Fair market value of the decedent’s family home, certified by the barangay, not to exceed P1 million
5. Standard deduction of P1 million
6. Receipted medical expenses not more than P500,000 incurred by the decedent within one years prior to death
Exposed aggregate finish- a method of finishing concrete whereby cement/sand mixture is washed off the top layer of the aggregate to expose, usually, gravel. Often used in driveways, patios and other exterior surfaces
Fair Market Value – is an estimate of the price of a property based on what a knowledgeable, willing, and unpressured buyer would probably pay to a knowledgeable, willing, and unpressured seller. Thus, in the extreme case of condemnation, the property owner is not paid at fair market value since he is under pressure to sell. In such a case, he is paid “just compensation.”
Feng Shui – is a Chinese form of divination whereby objects such as graves, buildings, rooms or furnitures are positioned based on the belief that the patterns of the Yin and Yang and the flow of Chi have positive or negative effects on one’s fortune.
Former Natural Born Filipino Citizens – Filipinos who have acquired foreign citizenship are qualified to buy land in the Philippines under the following terms:
Residential land – maximum of 1,000 square meters if the property is located in the urban area and 1 hectare if located in the rural area (it can be 2 or 3 parcels of land as long as their aggregate area is 1,000 square meters or 1 hectare as the case may be)
For Business – 5,000 square meters if located in urban area and 3 hectares if in rural area
He should decide carefully before buying land. For whatever purpose, whether for residential or business, if he decides to buy urban land, he can no longer buy rural land and vice versa.
General Contractor – a contractor who enters into a contract with the owner of a project for the construction of the project and who takes full responsibility for its completion. The general contractor, however, may enter into subcontracts with others for the performance of specific parts or phases of the project.
Geomancy – divination or art of foretelling the future by means of figures or lines or geographic features
HVAC- an abbreviation for Heat, Ventilation, and Air Conditioning
Hectare – one hectare is equivalent to 10,000 square meters
Holographic Will – a kind of will that is entirely written by hand, dated and signed by the person who decides how his estate shall be managed and distributed after his death. It is the strongest kind of will.
Infiltration – changes in neighborhood uses and character over time due to shifting economic and social forces; a situation when people are displaced from their territory by those of lower economic status. (see Squatters)
Juridical Person – an entity, such as a company, not a natural person or human; but like a natural person or human, it has identity, legal personality, and duties and rights; think of Ayala Land, DMCI and SMDC
Landing- a platform between flights of stairs or at the termination of a flight of stairs; often used when stairs change direction
Letter of Guarantee – is a type of contract issued by a bank to a developer on behalf of property buyer (mortgagor) promising to meet the latter’s financial obligations to the developer in the event of a default
Lien – is an encumbrance on a person’s property that gives a creditor the right to seize or take his property if he is unable to keep up with payments or pay off debts. Such debt may include property taxes owed to the local government, contractors, materials suppliers and even laborers who put value of work or materials installed on the property.
Lis Pendens, Notice of – an annotation in the title that serves as a notice to third parties that a particular real property in involved in litigation
List Price – is the price of the property that usually occurs on the brochures of developers. They are exclusive of incidental costs such as Miscellaneous Fee and VAT (if applicable)
Load Bearing Wall – includes all exterior walls and any interior wall that is aligned above a support beam or girder
Loan to Value Ratio – the amount of mortgage expressed in percentage of the value of the property you want to buy. E.g., if you want to buy a house and lot with a value of P5 million and the bank is willing to lend you P3.5 million, your Loan to Value Ratio is 70%
Marriage Settlement – a legal agreement entered into by a would-be husband and wife as to the type of Property Relation that will govern their marriage. It is widely known as pre-nuptial agreement. The marriage settlement, to be valid, must be
1. in writing
2. signed by both parties
3. executed before the celebration of marriage and
4. must be registered in the Local Civil Registry where the marriage contract is recorded as well as in the registry of properties
Master Deed – an instrument used by a condominium developer to convert a single property to a scheme of individually-owned units in multi-unit buildings that share an ownership in common areas
Mechanics lien – a lien or claim on real property, in favor of persons supplying labor or materials for a building or structure, for the value of labor or materials supplied by them. Clear title to the property cannot be obtained until the claim for the labor, materials, or professional services is settled.
Mortgage – a debt instrument that is secured by the collateral of specified real estate property and that the borrower is obliged to pay back with a predetermined set of payments
- temporary, conditional pledge of property to a creditor as security for performance of an obligation or repayment of a debt.
- mortgage does not necessitate change of possession
Mortgagee – the lender, creditor or the party to a mortgage who extends the loan
Mortgagor – a person who borrows money by mortgaging his property to the lender as security
Net Worth – is what remains when you deduct what you owe (liabilities) from what you own (assets)
Non-Bearing Wall- a wall that does not support any load other than its own weight
Open Mortgage – one wherein the mortgagor can pay off his obligation before maturity
Option Money – the amount paid by a person to a property owner in consideration of giving the former the exclusive right to buy the property within a specified period at the agreed price and term. During said period, the property owner cannot sell the property to another person; does not form part of the purchase price.
Ordinary Asset – property held by a person or company primarily for sale to customers in the ordinary course of his trade or business; . The house and lots, townhouses and condominium projects that are held by a developer for sale to customers are ordinary assets. (see Capital Asset) It is important to distinguish between ordinary and capital assets because of the different types of tax involved in their sale.
Pacto de Retro Sale – a contract of sale with the stipulation that the seller has the right to buy back the property within an agreed period of time
Parapet- a wall placed at the edge of a roof to prevent people from falling off.
Paraphernal Property – property that belongs exclusively to the wife
Party wall – a wall erected between adjoining properties for use by both properties. E.g. A duplex or single attached houses are divided by a party wall.
Percolation Test – a test that a soil engineer performs to determine if the soil on a proposed building lot is capable of absorbing the liquid effluent from a septic system
Portland Cement – cement made by heating clay and crushed limestone into a brick and then grinding to a pulverized powder state
Principle of Conformity – an appraisal principle which holds that the maximum value of a property is realized when a reasonable degree of homogeneity (sameness) exists in a neighborhood.
Principle of Regression – an appraisal principle which holds that a property of higher value is negatively affected through comparison with lower value properties. E.g. A house and lot that was built for P4 million will have an appraised value of, say, P3 million if it is located near a squatters’ area.
Probate – a court proceeding to establish if a last will and testament is valid. A will may be authentic but it may contain provisions that are not according to law. E.g., There are so-called “compulsory heirs” that a testator may not arbitrarily disinherit without due cause.
Property Relations – rules on how properties should be divided when a marriage, civil union or de facto relationship ends. (see also Marriage Settlement; Absolute Community of Property; Conjugal Properties of Gains; De Facto Relations)
Punch List – is a list created at the end of a construction that shows what still needs to be done or what needs to be repaired before the property is turned over to the owner or buyer. It is every home buyer’s right to demand from the developer that cabinet doors that do not open or close properly, peeling paint, roofs that leak, superficial cracks on the wall, etal, be repaired before the buyer accepts the property. (see Walk Through)
Real Estate – is the land and all those items that are attached to it. It is the physical, tangible object together with all additions or improvements on, above or below the ground, including undiscovered hidden treasure.
Real Estate Service Act (or the RESA Law) of June 29,2009 – is a law that regulates the practice of real estate service in the Philippines. It aims to develop and nurture through proper and effective regulation and supervision a corps of technically competent, responsible and respected professional real estate service practitioners.
RESA Law bans brokers or agents not licensed by the Professional Regulation Commission from engaging in the practice of real estate service. The law is not properly enforced, though, as great majority of those selling real estate, even for well-known developers, are unlicensed. You can see most of them in malls distributing flyers.
Real Property Tax (or Realty Tax or amelyar) – is the tax imposed yearly by the local government on real estate properties. It is broken down into the following:
Register of Deeds – the public repository of records or instruments affecting registered and unregistered land and chattel mortgages in the province or city wherein such office is located
Rent-to-Own – is an arrangement wherein the person who rents a house has the option to buy it. He is therefore called a lessee/buyer; also called a Contract of Lease with Option to Purchase. But unlike in any rental arrangement, the lessee is required a deposit what is tantamount to paying a down payment for the house, at least 10% of the price of the house. In some instances, the deposit is up to 30%.
Another difference is the lessee or renter pays for repair or maintenance of the house + the property tax. Some rent-to-own arrangement provides that at the end of the contract of, say, 36 months during which the lessee has been paying rent, he is then given the option to buy the house. All his previous rents including deposit shall accrue and he shall be required to pay the balance of say, 70% of the total price of the house.
In case the lessee does not exercise his option to purchase, all his payments including the deposit will be considered as rent. He shall, however, be reimbursed for the property taxes he paid.
Retention- is the amount that a home owner withholds from the contractor’s progress billings until the house or project is finally and satisfactorily completed
Roughing-in – the initial stage when plumbing, electrical, heating, carpentry, and/or other projects are done so that all their components will be hidden when the components of the second finishing phase are assembled
Socialized Housing – under Batas Pambansa 220, these are dwelling types with a minimum LOT area of 64 square meters for single detached, 48 square meters for duplex/single attached and 28 square meters for rowhouses (see Economic Housing)
Sound attenuation – sound proofing a wall or subfloor, generally with fiberglass insulation
Squatters – people who settle on unoccupied land without legal claim. They include those who occupy public land in order to acquire title to it.
Standard practices of the trade – one of the more common basic and minimum construction standards. This is another way of saying that the work should be done in the way it is normally done by the average professional in the field
Stick built - a house built without prefabricated parts; also called conventional building
Stop Order – a formal, written notification to a contractor to discontinue some or all work on a project for reasons such as safety violations, defective materials or workmanship, or cancellation of the contract
Succession – is the transfer of property owned by person, through his death, to another or others either by will or by operation of law; also called inheritance
Successor/s – the person or persons to whom the decedent’s properties or property rights shall be transferred. Also called heirs.
Testator – a decedent (a person who died) whose properties are to be transferred to his successor or heirs through a written will. A person who died without living a will is said to have died intestate.
Torrens System – is a system of registration of titles to land introduced in South Australia by Sir Robert Torrens. Its essential feature is the guaranty by the government of properly registered titles. It is one of the two land registration systems now used in the Philippines.
Transfer Certificate of Title – refers to the property title of a land, or a land with property of improvement built on it including its airspace. It details the property’s location (coordinates and geographical address), plus the size of the land, the registration number and the owner. It also details the previous TCT’s that were cancelled due to change of ownership.
Walk-Through – a final inspection of a home before “Closing” to look for and document problems that need to be corrected (also see Punch List)
Water Closet – is another name for toilet; in other countries it is called latrine, although, in third world countries, a latrine can be nothing more than a “hole in the ground.”
Will – is the legal instrument that permits a person to make decisions on how his estate will be managed and distributed among his heirs after his death.
Excluded are properties acquired during marriage through “gratuitous” means, e.g., inheritance including fruits or income therefrom. Also excluded are properties acquired before marriage by a spouse with legitimate descendants from a previous marriage; personal properties for exclusive use of either spouse, e.g., dresses, bags and shoes except jewelry.
In the absence of a marriage settlement, Absolute Community of Property shall automatically govern if the marriage is celebrated after August 3, 1988, the effectivity of the Family Code.
Acceleration Clause – a provision in the contract that allows the lender to require the borrower to immediately repay all or part of an outstanding loan if certain requirements are not met. The most common reason for accelerating a loan is when the borrower defaults on the loan.
Administrative Reconstitution – an act (Republic Act No 6732) allowing for the reconstruction of original copies of certificate of titles lost or destroyed due to fire, flood and other force majeure.
Administrative reconstitution can only be effected if 10% or more or a minimum of 500 of all titles in the Register of Deeds have been damaged or lost..
The most recent memorable case of Administrative Reconstitution of titles happened after the Quezon City Hall including its Office of Register of Deeds burned down during the term of Mayor Brigido Simon Jr on July 11, 1988. By the way, the title or TCT a property owner holds in his possession is not the original; it’s a duplicate. All original titles are held at the Office of the Register of Deeds.
Amortization – the gradual elimination of a liability or debt, such as a mortgage, in regular payments over a specified period of time. Such payments must be sufficient to cover both principal and interest
Annotation – a critical comment or explanatory note attached to a particular document; in our case to a title of a property. Such explanatory notes may include a lien or encumbrance.
Antichresis – a contract whereby the creditor takes possession, not ownership, of a property and gives him the right over the fruits or income of the property. Such fruits, however, are deducted from the principal and interest payment of the debtor.
E.g., Person A borrows money from Person B with the former putting his 5-door apartment as collateral for his debt. Person B takes possession of the apartment but the title to the property remains with Person A. For the duration of indebtedness, Person B keeps for himself the rentals from the apartment. The accumulated rental, however, shall form part of the debtor’s payment aside from the agreed upon periodic payments.
Antichresis should not be confused with mortgage. In mortgate, the debtor remains in possession of the property and pays taxes for it; he also keeps for himself whatever fruit or income is generated by the property and is responsible for the maintenance of the property. In antichresis, all the aforementioned benefits and responsibilities go to the creditor.
Appraised Value – is the financial worth placed on a property based on a report done by an appraiser.
Appraiser – a professional practitioner who has the knowledge and expertise necessary to estimate the value of an asset, or the likelihood of an event occurring, and the cost of such an occurrence
Assessed Value – is the financial worth placed on a property by the town or city’s assessor’s office for the purpose of determining the tax due said property. Assessed Value is computed by multiplying Fair Market Value by Assessment Level (FMV x AL). Assessment Level is determined either by the provincial, city or municipal council where the property is located.
Balloon Payment – is the final installment on a loan to be paid in an amount that is disproportionately larger than the regular installment.
Bedrock- a subsurface layer of earth that is suitable to support a structure
Board foot- a unit of measure for lumber equal to 1 inch thick by 12 inches wide by 12 inches long. Examples: 1″ x 12″ x 16′ = 16 board feet, 2″ x 12″ x 16′ = 32 board feet
Capital Asset – refers to real property or properties which are not being used in the trade or business of the property owner or seller; not an inventory in a person’s business. Sale of Capital Asset is subject to 6% capital gains tax; example of capital asset is a person’s personal residence. (Compare with Ordinary Asset)
Capital Gains Tax – is a tax imposed on the gains (or profit) “presumed” to have been realized by the property owner from the sale, exchange, or other disposition of capital assets
A person who sells his principal residence is exempt from paying capital gains tax if the proceeds of which is fully utilized in purchasing or constructing his new principal residence within 18 months from the date of sale of said asset.
Capital Property – property that belongs exclusively to the husband
Certificate of Occupancy – is issued by the local government and is required before anyone can occupy and live in a house. It requires “certificates of completion” from the architect, engineer, plumber and electrician who built the house. In the Philippines, compliance with the Certificate of Occupancy is not normally followed by people who have their houses built by their own contractors; developers, however, do.
Circuit Breaker – a device which looks like a switch and is usually located inside the electrical breaker panel or circuit breaker box. It is designed to (1) shut off the power to portions of or to the entire house and (2) to limit the amount of power flowing through a circuit (measured in amperes)
Closed Mortgage – one wherein the mortgagor’s obligation cannot be paid earlier than maturity; doing so will make him incur a prepayment penalty
Cloud on Title – is any document, claim, unreleased lien or encumbrance that might invalidate or impair the title to real property or make the title doubtful; also called a defect on title
Comparable Sales – recent sale of similar properties within the vicinity or in nearby areas and used to determine the market value of a property
Condemnation – the taking of private property for public use by the government with the owner given “just compensation.” For example, the government may condemn a private property for use as a Right of Way for the construction of a highway. If the owner refuses to sell, the government may take him to court where the government has to prove that the monetary offer is reasonable and the property is indeed being taken for public use.
Condominium – is often mistakenly thought of as a type of building, construction or development. It is actually a form of property ownership wherein a home owner owns the title to the interior of his unit and owns in common with all other unit owners, through a condominium corporation, the building, its common areas, open spaces and the land on which it stands.
Condotel – or condominium hotel; similar to a condominium in so far as each unit is owned by an individual. An owner, however, can use his unit for a limited period, say two or three weeks a year. The rest of the year, his unit is rented out like a hotel. Revenue is shared between the owner and the condotel operator, usually, at a ratio of 70%:30% with 70% going to the unit owner.
Condonation – a pardon by treating the offender as if the offense had not occurred. E.g. “The offices of Home Development Mutual Fund or Pagibig shall accept applications from delinquent borrowers or employers for its penalty condonation program.”
Conjugal Partnership of Gains – property relations between spouses, under which the husband and wife place in a common fund the proceeds, products, fruits and income from their separate properties and those acquired by either or both spouses through their efforts or by chance. Upon dissolution of the marriage, the net gains or benefits obtained by either or both spouses shall be divided equally between them.
For example, while single, the future husband owned a fleet of 10 taxis (capital property) while the future wife owned a 5-door apartment (paraphernal property). These are their exclusive and separate properties even after they get married. If after 5 years, because of the fruits or income derived by the husband from his ten taxis, he is able to buy 7 more taxis. On the other hand, from the income of the wife’s 5-door apartment, she is able to buy another 4-door apartment. The fruits of their separate and exclusive properties – the additional 7 taxis and the 4-door apartment become their conjugal properties. These shall be divided equally upon dissolution of their marriage.
Conjugal Partnership of Gains is the default property relation that governs spouses who got marriedbefore the effectivity of the Family Code on August 3, 1988.
Construction Contract – a legal document which specifies the what-when-where-how-how much and by whom in a construction project; a good construction contract will include:
- the contractor’s license number
- statement of work quality
- set of blue prints or plans
- construction timetable including starting and completion dates
- set of specifications
- fixed price for the work, or a time and materials formula
- payment schedule
- any allowances
- clause which outlines how any disputes will be resolved
- written warranty
Dacion en Pago – is a special mode of payment whereby the debtor offers another thing to the creditor who accepts it as equivalent payment of an outstanding obligation; also called payment in kind.
Decedent – a person who died and whose properties are transferred to another or to others by will or by operation of law; a decedent who left a will is called a testator
Dedicated Circuit – an electrical circuit that serves only one appliance (i.e., dishwasher) or a series of airconditioners or smoke detectors
Deed of Sale (DOS) – is a document executed when the buyer pays the developer in cash (whether using his or her own funds or through funds borrowed from bank or financing institutions). Unlike in a Contract to Sell , the DOS obligates the developer to transfer ownership of the property to the buyer, subject to the compliance by the buyer with the Deed of Restrictions or Master Deed with Declaration of Restrictions governing the project and the other terms and conditions of the sale.
De Facto Relationship – there are two types
1. Live-in relationship – is when a man and a woman live together without the sanctity of marriage even if there is no legal impediment for both to marry each other. Also called a void marriage. In case of separation or dissolution of the relationship, wages and salaries and fruits thereof (or properties bought through said wages) shall be divided equally between them even if just one of party earned the wages and the other did not contribute for lack of work.
2. Illegal relationship – involves a man and a woman who are incapacitated to marry each other. It refers to a bigamous marriage, adulterous relationship, concubinage or when either or both man and woman are married to other persons. In case of separation or dissolution of the relationship, wages or salaries earned by each party belongs to him or her exclusively. Only properties acquired by both the parties through “actual joint contribution of money, property or industry shall be co-owned in proportion to their respective contributions.
Divination – the art or practice that seeks to foresee or foretell future events or to discover hidden knowledge usually by the interpretation of omens or by the aid of supernatural powers (seegeomancy and feng shui)
Double Sale – is when the same property is bought , in good faith, by more than one person. In such a case, who owns the property? In order of importance, the owner is the
1. One who registers the title first at the Register of Deeds, if none
2. One who holds possession of the property, if none
3. One with the oldest title
Dropped Ceiling – is often a secondary ceiling, hung below the main (structural) ceiling. It may also be referred to as a drop ceiling, T-bar ceiling, false ceiling, or suspended ceiling, and is a staple of modern construction and architecture. The area above the dropped ceiling is called theplenum space, as it is sometimes used for HVAC air return. The plenum space is also very commonly used to conceal piping, wiring, and/or ductwork
Dry wall partition – a type of construction in which the interior wall finish is applied using a dry material, generally in the form of sheet materials or wood paneling as contrasted to “wet” plaster or concrete
Earnest Money – money put down or deposited by a potential buyer to show that he is serious about purchasing a real property; it becomes part of the purchase price if the offer is accepted, is returned if the offer is rejected, or is forfeited if the buyer pulls out of the deal. (see option money)
Economic Housing – under Batas Pambansa 220, these are dwelling types with the minimum LOT area of 72 square meters for single-detached, 54 square meters for duplex/single attached and 36 square meters for rowhouses (see Socialized Housing)
Eminent Domain – the right of the government to take over private properties for public use (seeCondemnation)
Encumbrance – refers to any charge or claim against a property. The person or entity that issues the encumbrance acquires a legal right to the property but does not necessarily give him the right to seize the property. This encumbrance remains in effect until the actual owner satisfies a debt or resolves the issue with the other party. Because encumbrances create an unclear title (it is annotated on the title), it impacts the transferability of the property and can restrict its free use until the encumbrance is removed. (See Lien)
An unusual case I personally know of is an encumbrance in favor of Meralco on a factory whose owner used “jumper” for several years and was penalized for millions of pesos for doing so.
Environmental Impact – are the probable effects or consequences of a proposed project on the physical, biological and socioeconomic environment that can be direct or indirect, cumulative, positive or negative
Equity- the “valuation” that you own in your home, i.e., the property value less the outstanding mortgage loan.
Escrow – A financial instrument held by a third party on behalf of two other parties in a transaction. The funds are held by the escrow service (usually a bank) until it receives the appropriate written or oral instructions or until obligations have been fulfilled. E.g., the buyer and seller of a house and lot may agree to put the former’s payment in escrow until the title to the property is put in the name of the buyer.
Estate – properties or property rights of the person who died (decedent) and is the subject ofsuccession; also called inheritance; it is the total of all properties of the decedent including real estate, chattels, shares of stocks and bank accounts LESS obligations including indebtedness
Estate Tax – is a tax on the right of the deceased person to transmit his/her estate to his/her lawful heirs and beneficiaries at the time of death. It is not a tax on property; it is a tax imposed on the privilege of transmitting property upon the death of the owner.
Allowed deductions on Estate Tax
1. Actual funeral expense or 5% of gross estate whichever is lower but not to exceed P200,000
2. Judicial expenses, e.g. expenses incurred in case of a probate
3. Claims by creditors provided the instrument of indebtedness is notarized and the debt was contracted within 3 years before death
4. Fair market value of the decedent’s family home, certified by the barangay, not to exceed P1 million
5. Standard deduction of P1 million
6. Receipted medical expenses not more than P500,000 incurred by the decedent within one years prior to death
Exposed aggregate finish- a method of finishing concrete whereby cement/sand mixture is washed off the top layer of the aggregate to expose, usually, gravel. Often used in driveways, patios and other exterior surfaces
Fair Market Value – is an estimate of the price of a property based on what a knowledgeable, willing, and unpressured buyer would probably pay to a knowledgeable, willing, and unpressured seller. Thus, in the extreme case of condemnation, the property owner is not paid at fair market value since he is under pressure to sell. In such a case, he is paid “just compensation.”
Feng Shui – is a Chinese form of divination whereby objects such as graves, buildings, rooms or furnitures are positioned based on the belief that the patterns of the Yin and Yang and the flow of Chi have positive or negative effects on one’s fortune.
Former Natural Born Filipino Citizens – Filipinos who have acquired foreign citizenship are qualified to buy land in the Philippines under the following terms:
Residential land – maximum of 1,000 square meters if the property is located in the urban area and 1 hectare if located in the rural area (it can be 2 or 3 parcels of land as long as their aggregate area is 1,000 square meters or 1 hectare as the case may be)
For Business – 5,000 square meters if located in urban area and 3 hectares if in rural area
He should decide carefully before buying land. For whatever purpose, whether for residential or business, if he decides to buy urban land, he can no longer buy rural land and vice versa.
General Contractor – a contractor who enters into a contract with the owner of a project for the construction of the project and who takes full responsibility for its completion. The general contractor, however, may enter into subcontracts with others for the performance of specific parts or phases of the project.
Geomancy – divination or art of foretelling the future by means of figures or lines or geographic features
HVAC- an abbreviation for Heat, Ventilation, and Air Conditioning
Hectare – one hectare is equivalent to 10,000 square meters
Holographic Will – a kind of will that is entirely written by hand, dated and signed by the person who decides how his estate shall be managed and distributed after his death. It is the strongest kind of will.
Infiltration – changes in neighborhood uses and character over time due to shifting economic and social forces; a situation when people are displaced from their territory by those of lower economic status. (see Squatters)
Juridical Person – an entity, such as a company, not a natural person or human; but like a natural person or human, it has identity, legal personality, and duties and rights; think of Ayala Land, DMCI and SMDC
Landing- a platform between flights of stairs or at the termination of a flight of stairs; often used when stairs change direction
Letter of Guarantee – is a type of contract issued by a bank to a developer on behalf of property buyer (mortgagor) promising to meet the latter’s financial obligations to the developer in the event of a default
Lien – is an encumbrance on a person’s property that gives a creditor the right to seize or take his property if he is unable to keep up with payments or pay off debts. Such debt may include property taxes owed to the local government, contractors, materials suppliers and even laborers who put value of work or materials installed on the property.
Lis Pendens, Notice of – an annotation in the title that serves as a notice to third parties that a particular real property in involved in litigation
List Price – is the price of the property that usually occurs on the brochures of developers. They are exclusive of incidental costs such as Miscellaneous Fee and VAT (if applicable)
Load Bearing Wall – includes all exterior walls and any interior wall that is aligned above a support beam or girder
Loan to Value Ratio – the amount of mortgage expressed in percentage of the value of the property you want to buy. E.g., if you want to buy a house and lot with a value of P5 million and the bank is willing to lend you P3.5 million, your Loan to Value Ratio is 70%
Marriage Settlement – a legal agreement entered into by a would-be husband and wife as to the type of Property Relation that will govern their marriage. It is widely known as pre-nuptial agreement. The marriage settlement, to be valid, must be
1. in writing
2. signed by both parties
3. executed before the celebration of marriage and
4. must be registered in the Local Civil Registry where the marriage contract is recorded as well as in the registry of properties
Master Deed – an instrument used by a condominium developer to convert a single property to a scheme of individually-owned units in multi-unit buildings that share an ownership in common areas
Mechanics lien – a lien or claim on real property, in favor of persons supplying labor or materials for a building or structure, for the value of labor or materials supplied by them. Clear title to the property cannot be obtained until the claim for the labor, materials, or professional services is settled.
Mortgage – a debt instrument that is secured by the collateral of specified real estate property and that the borrower is obliged to pay back with a predetermined set of payments
- temporary, conditional pledge of property to a creditor as security for performance of an obligation or repayment of a debt.
- mortgage does not necessitate change of possession
Mortgagee – the lender, creditor or the party to a mortgage who extends the loan
Mortgagor – a person who borrows money by mortgaging his property to the lender as security
Net Worth – is what remains when you deduct what you owe (liabilities) from what you own (assets)
Non-Bearing Wall- a wall that does not support any load other than its own weight
Open Mortgage – one wherein the mortgagor can pay off his obligation before maturity
Option Money – the amount paid by a person to a property owner in consideration of giving the former the exclusive right to buy the property within a specified period at the agreed price and term. During said period, the property owner cannot sell the property to another person; does not form part of the purchase price.
Ordinary Asset – property held by a person or company primarily for sale to customers in the ordinary course of his trade or business; . The house and lots, townhouses and condominium projects that are held by a developer for sale to customers are ordinary assets. (see Capital Asset) It is important to distinguish between ordinary and capital assets because of the different types of tax involved in their sale.
Pacto de Retro Sale – a contract of sale with the stipulation that the seller has the right to buy back the property within an agreed period of time
Parapet- a wall placed at the edge of a roof to prevent people from falling off.
Paraphernal Property – property that belongs exclusively to the wife
Party wall – a wall erected between adjoining properties for use by both properties. E.g. A duplex or single attached houses are divided by a party wall.
Percolation Test – a test that a soil engineer performs to determine if the soil on a proposed building lot is capable of absorbing the liquid effluent from a septic system
Portland Cement – cement made by heating clay and crushed limestone into a brick and then grinding to a pulverized powder state
Principle of Conformity – an appraisal principle which holds that the maximum value of a property is realized when a reasonable degree of homogeneity (sameness) exists in a neighborhood.
Principle of Regression – an appraisal principle which holds that a property of higher value is negatively affected through comparison with lower value properties. E.g. A house and lot that was built for P4 million will have an appraised value of, say, P3 million if it is located near a squatters’ area.
Probate – a court proceeding to establish if a last will and testament is valid. A will may be authentic but it may contain provisions that are not according to law. E.g., There are so-called “compulsory heirs” that a testator may not arbitrarily disinherit without due cause.
Property Relations – rules on how properties should be divided when a marriage, civil union or de facto relationship ends. (see also Marriage Settlement; Absolute Community of Property; Conjugal Properties of Gains; De Facto Relations)
Punch List – is a list created at the end of a construction that shows what still needs to be done or what needs to be repaired before the property is turned over to the owner or buyer. It is every home buyer’s right to demand from the developer that cabinet doors that do not open or close properly, peeling paint, roofs that leak, superficial cracks on the wall, etal, be repaired before the buyer accepts the property. (see Walk Through)
Real Estate – is the land and all those items that are attached to it. It is the physical, tangible object together with all additions or improvements on, above or below the ground, including undiscovered hidden treasure.
Real Estate Service Act (or the RESA Law) of June 29,2009 – is a law that regulates the practice of real estate service in the Philippines. It aims to develop and nurture through proper and effective regulation and supervision a corps of technically competent, responsible and respected professional real estate service practitioners.
RESA Law bans brokers or agents not licensed by the Professional Regulation Commission from engaging in the practice of real estate service. The law is not properly enforced, though, as great majority of those selling real estate, even for well-known developers, are unlicensed. You can see most of them in malls distributing flyers.
Real Property Tax (or Realty Tax or amelyar) – is the tax imposed yearly by the local government on real estate properties. It is broken down into the following:
- Basic Real Property Tax – for properties in the provinces, maximum 1% of the assessed value while for those in Metro Manila, tax is maximum of 2% of the assessed value of the properties
- Special Education Fund (SEF) –maximum of 1% of the assessed value. Said tax goes to the provincial, city or municipality school board
- Ad Valorem Tax on Idle lands – imposed upon the discretion of the local government at the rate not exceeding 5% of the assessed value of the property.
Register of Deeds – the public repository of records or instruments affecting registered and unregistered land and chattel mortgages in the province or city wherein such office is located
Rent-to-Own – is an arrangement wherein the person who rents a house has the option to buy it. He is therefore called a lessee/buyer; also called a Contract of Lease with Option to Purchase. But unlike in any rental arrangement, the lessee is required a deposit what is tantamount to paying a down payment for the house, at least 10% of the price of the house. In some instances, the deposit is up to 30%.
Another difference is the lessee or renter pays for repair or maintenance of the house + the property tax. Some rent-to-own arrangement provides that at the end of the contract of, say, 36 months during which the lessee has been paying rent, he is then given the option to buy the house. All his previous rents including deposit shall accrue and he shall be required to pay the balance of say, 70% of the total price of the house.
In case the lessee does not exercise his option to purchase, all his payments including the deposit will be considered as rent. He shall, however, be reimbursed for the property taxes he paid.
- Other rent-to-own arrangements offer more liberal payment terms.
- Retaining wall- A structure that holds back a ground slope and prevents erosion
Retention- is the amount that a home owner withholds from the contractor’s progress billings until the house or project is finally and satisfactorily completed
Roughing-in – the initial stage when plumbing, electrical, heating, carpentry, and/or other projects are done so that all their components will be hidden when the components of the second finishing phase are assembled
Socialized Housing – under Batas Pambansa 220, these are dwelling types with a minimum LOT area of 64 square meters for single detached, 48 square meters for duplex/single attached and 28 square meters for rowhouses (see Economic Housing)
Sound attenuation – sound proofing a wall or subfloor, generally with fiberglass insulation
Squatters – people who settle on unoccupied land without legal claim. They include those who occupy public land in order to acquire title to it.
Standard practices of the trade – one of the more common basic and minimum construction standards. This is another way of saying that the work should be done in the way it is normally done by the average professional in the field
Stick built - a house built without prefabricated parts; also called conventional building
Stop Order – a formal, written notification to a contractor to discontinue some or all work on a project for reasons such as safety violations, defective materials or workmanship, or cancellation of the contract
Succession – is the transfer of property owned by person, through his death, to another or others either by will or by operation of law; also called inheritance
Successor/s – the person or persons to whom the decedent’s properties or property rights shall be transferred. Also called heirs.
Testator – a decedent (a person who died) whose properties are to be transferred to his successor or heirs through a written will. A person who died without living a will is said to have died intestate.
Torrens System – is a system of registration of titles to land introduced in South Australia by Sir Robert Torrens. Its essential feature is the guaranty by the government of properly registered titles. It is one of the two land registration systems now used in the Philippines.
Transfer Certificate of Title – refers to the property title of a land, or a land with property of improvement built on it including its airspace. It details the property’s location (coordinates and geographical address), plus the size of the land, the registration number and the owner. It also details the previous TCT’s that were cancelled due to change of ownership.
Walk-Through – a final inspection of a home before “Closing” to look for and document problems that need to be corrected (also see Punch List)
Water Closet – is another name for toilet; in other countries it is called latrine, although, in third world countries, a latrine can be nothing more than a “hole in the ground.”
Will – is the legal instrument that permits a person to make decisions on how his estate will be managed and distributed among his heirs after his death.