CONFLICT OF FOREIGN AND LOCAL LAWS IN REAL PROPERTY

HOW TO DEAL WITH REAL PROPERTY IF THERE IS A FOREIGN ELEMENT

Article 15 of the New Civil Code of the Philippines provides that “real property xxx is subject to the law of the country where it is situated.”

The following are the matters governed by the law of the country where the real property is situated:

The required format of the instruments concerning the property as well as the validity of the provisions contained in said instruments.

More specifically, 1) alienations; 2) transfers and mortgages; 3) capacity of the contracting parties; 4) interpretation of documents; 5) effects of ownership; 6) co-ownership; 7) accession; 8) usufruct; 9) lease; 10) easement; 11) quieting of title; 12) property registration; 13) prescription; 14) police power; 15) eminent domain; and 16) real property taxation must follow the laws of the country where the real property may be found ( Handbook on Conflict of Laws, Sempio-Dy, 2004 ed., page 114).

Nevertheless, according to Justice Sempio-Diy, the above rule admits of the following exceptions :

1. Succession. In the Philippines, real property involved in either testate or intestate succession, wherever located, follows the personal law of the deceased. The law of the country where the property is situated is not taken into consideration.
2. Real property contracts other than titling. Contracts involving rights and liabilities where real property is theobject, follow the law intended by the parties to govern said contracts. For instance, service contracts concerning the development of private residential lands are governed by the law set forth in the contract, not the law of the place where the property is situated.
3. Principal contracts with real property mortgage. Said principal contract is governed by the law intended by the parties, even though the mortgage still follows the law of the place where the property is situated.
4. Contracts to transfer real property. These contracts are personal in nature; hence, are governed by the law intended by the parties.

Indeed, rules regarding the proper laws applicable to real property transactions must be studied carefully. A thorough knowledge of the matter is an effective aid in asserting one’s property rights.