REM 121: FUNDAMENTALS IN REAL ESTATE
Estate - refers to the totality of the assets
owned by a person which includes real
estate and personal properties.
Real State - refers to the land and all
permanent improvements thereon.
Real Estate vs Real Property
▪ Real estate is a term that refers to the
physical land, structures, and resources
attached to it.
▪ Real property includes the physical
property of the real estate, but it expands
its definition to include a bundle of
ownership and usage rights. Real property
includes real estate, and it adds a bundle of
rights. This bundle of rights is a broad term
used to organize property rights—as they
relate to real estate.
▪ The real property consists of both physical
objects and common law rights; real estate
only consists of physical objects.
Real Property vs Personal Property
▪ Personal property is a class of property
that can include any asset other than real
estate. The distinguishing factor between
personal property and real estate, or real
property, is that personal property is
movable; that is, it isn't fixed permanently
to one particular location. It is generally not
taxed like fixed property.
▪ Personal property is often converted to real
property when it is affixed to real property.
There are three tests that courts use to
determine whether a particular object has
become a fixture and thus has become real
property: annexation, adaptation, and
intention.
Key Participants in a Real Estate
1. Space Producers – developers,
contractors, engineers, architect, interior
designer, etc.
2. Space User –
Direct users: owners, tenants
Indirect users: shoppers, clients
3. Space Facilitator – infrastructure
providers, amenities provider, social
security, people regulating construction,
etc.
Who can own real estate? Only Filipino Citizens
EXCEPTIONS
1. Former Filipino
• Residential: 1,000 sqm urban 1 ha.
Rural
• Business: 5,000 urban 3 ha. rural
2. Corporations
▪ 60% Filipino 40% Foreigners
3. Interest of 40% in a condominium project
(foreign land acquisition)
4. Acquisition through hereditary succession if
the acquiree is a legal heir.
5. Filipinos who are married to aliens and able to
retain their Filipino citizenship (unless by their
act or omission they have renounced their
Filipino citizenship)
6. Acquisition before the 1935 Constitution.
OWNERSHIP IN GENERAL
Art. 427. Ownership may be exercised over things or
rights. (n)
Ownership. Independent and general right of a
person to control a thing particularly in his
possession, enjoyment, disposition and
recovery, subject to no restrictions except those
imposed by the state or private persons, without
prejudice to the provisions of the law
KINDS OF OWNERSHIP
1. Full ownership—all rights of an owner
2. Naked ownership—ownership where the
right to the use and the fruits have been
denied
3. Sole ownership—ownership is only vested
in one person
4. Co-ownership—two or more owners, right
depends on the agreement, ideal
ownership
Art. 428. The owner has the right to enjoy and dispose
of a thing, without other limitations than those
established by law.
The owner has also a right of action
against the holder and possessor of the thing in
order to recover it. (348a)
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REM 121: FUNDAMENTALS IN REAL ESTATE
7 RIGHTS OF AN OWNER UNDER ROMAN LAW (bundle
of rights)
Jus possidendi -The right to possess
Jus utendi -The right to use
Jus fruendi -The right to the fruits
Jus abutendi -The right to consume
Jus disponendi -The right to dispose
Jus vindicandi -The right to recover
Jus accessiones -The right to accessories
Usufruct is a real right by virtue of which a person
is given the right to enjoy the property of another
with the obligation of preserving its form and
substance, unless the title constituting it or the law
provides otherwise.
What are the three fundamental Rights Appertaining
to Ownership?
Ownership consists of three fundamental rights, to
wit:
- jus disponende (right to dispose)
- jus utendi (right to use)
- jus fruendi (right to the fruits)
Of the above-mentioned fundamental rights, what
consists usufruct and naked ownership?
The combination of the jus utendi and jus fruendi
is called usufruct. The remaining right jus
disponendi is really the essence of what is termed
―naked ownership.
What right is transferred to the usufructuary and what
right is remained with the owner?
In a usufruct, only the jus utendi and jus fruendi
over the property is transferred to the usufructuary.
The owner of the property maintains the jus
disponendi or the power to alienate, encumber,
transform, and even destroy the same. (Hemedes
vs. CA, 316 SCRA 347 1999).
What are the formulae with respect to full ownership,
usufruct, and naked ownership?
The following are the formulae:
-Full Ownership equals Naked Ownership plus
Usufruct
-Naked Ownership equals Full Ownership minus
Usufruct
-Usufruct equals Full Ownership minus Naked
Ownership
MODES OF ACQUIRING TITLE
1. Private Grant –voluntary transfer or
conveyance of private property by a private
owner, such as sale or donation.
2. Public Grant – acquisition of alienable lands
by government awards.
3. Involuntary Grant – acquisition of private
party against the consent of the former
owners, such as foreclosure sale, execution
sale, or tax sale
4. Inheritance – acquisition of private property
through hereditary succession
5. Reclamation - filling of submerged land,
subject to existing laws and government
regulations.
LIMITATIONS ON RIGHTS OF OWNERSHIP
1. Those imposed in general by the State
2. Those imposed by law
3. Those imposed by the owner himself
▪ RIGHT TO HIDDEN TREASURE: Hidden
treasure belongs to the owner of the land.
▪ OTHER RIGHTS SURFACE, SUBSURFACE
AND AIR RIGHT: From the surface
downwards to the center of the earth and
extends upwards indefinitely to the skies
TYPES OF REAL ESTATE
1. Residential
2. Commercial
3. Industrial
4. Mixed Use
5 PROFESSIONS IN REAL ESTATE
1. Real Estate Salesperson
2. Real Estate Broker
3. Real Estate Appraiser
4. Real Estate Assessor
5. Real Estate Consultant
PROPERTY OWNERSHIP DOCTRINES
Regalian Doctrine
Under the Regalian Doctrine, which is
embodied in our Constitution, all lands of the
public domain belong to the State, which is the
source of any asserted right to any ownership of
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REM 121: FUNDAMENTALS IN REAL ESTATE
land. All lands not appearing to be clearly within
private ownership are presumed to belong to the
State. Accordingly, public lands not shown to have
been reclassified or released as alienable
agricultural land or alienated to a private person by
the State remain part of the inalienable public
domain. Unless public land is shown to have been
reclassified as alienable or disposable to a private
person by the State, it remains part of the
inalienable public domain. Property of the public
domain is beyond the commerce of man and not
susceptible of private appropriation and
acquisitive prescription. Occupation thereof in the
concept of owner no matter how long cannot ripen
into ownership and be registered as a title. The
burden of proof in overcoming the presumption of
State ownership of the lands of the public domain
is on the person applying for registration (or
claiming ownership), who must prove that the land
subject of the application is alienable or
disposable. To overcome this presumption,
incontrovertible evidence must be established that
the land subject of the application (or claim) is
alienable or disposable.
Act No. 2874 Section 6. The Governor-
General, upon the recommendation of the
Secretary of Agriculture and Natural Resources,
shall from time to time classify the lands of the
public domain into —
(a) Alienable or disposable
(b) Timber and
(c) Mineral lands
Alienable and disposable lands refer to
those lands of the public domain which have been
the subject of the present system of classification
and declared as not needed for forest, mineral
purposes or national parks. Public Land Act
Section 9. For the purposes of their government
and disposition, the lands of the public domain
alienable or open to disposition shall be classified,
according to the use or purposes to which such
lands are destined, as follows:
(a) Agricultural (Agricultural Lands shall refer to lands
of the public domain which are neither forest, timber,
mineral or national park.)
(b) Commercial, industrial, or for similar productive
purposes.
(c) Educational, charitable, and other similar
purposes.
(d) Reservations for town sites, and for public and
quasi-public uses.
Private Agricultural Land refers to agricultural lands
as defined herein and owned by natural or juridical
persons or by the government in its propriety
capacity.
Steward Concept of Ownership
Ownership carries with it a distinct social
obligation. As stewards of their land, owners are
obliged to use their properties to promote not only
their properties to promote not only their interest
but also the general welfare. When a person's
landholdings exceed the requirements of his
needs, or their utilization is not conducive to
general welfare, the state may exercise its power
to regulate and control ownership.
A legal document which holds that a
property ownership presupposes concomitant
obligations to the State and the community, and
that property is supposed to be held by the
individual only as trustee by people in general. As
mere trustee, the property owner must exercise his
rights to the property not just for his own exclusive
and selfish interest but for the good and general
welfare of the nation as a whole. It carries the
following features and characteristics:
1. Ownership carries with it a distinct social
obligation. As stewards of their lands, the owners
are bound to use or utilize their properties in a
manner that will promote not only their welfare and
benefit but also those of the State.
2. Every citizen retains the right of private
ownership. However, when his landholdings
exceed the requirements for his essential
necessities or its utilization is not conducive to the
general welfare, the State may exercise its
authority to control or regulate such right.
3. The right of the citizen to own land
continues to be guaranteed by the New
Constitution. The guarantee extends to the
exercise of the so-called “Bundle of Rights” or
attributes which are inherent in ownership, subject
only to the limitations or restrictions imposed by
law or government regulations.
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REM 121: FUNDAMENTALS IN REAL ESTATE
MARKET SEGMENTATION
Market segmentation is a marketing term
that refers to aggregating prospective buyers into
groups or segments with common needs and who
respond similarly to a marketing action. Market
segmentation enables companies to target
different categories of consumers who perceive
the full value of certain products and services
differently from one another.
TYPES OF MARKET SEGMENTATION
1. Complete segmentation
2. No segmentation
3. Selective segmentation
Demographic segmentation is one of the simple,
common methods of market segmentation. It
involves breaking the market into customer
demographics as age, income, gender, race,
education, or occupation.
Geographic segmentation is technically a subset
of demographic segmentation. This approach
groups customers by physical location, assuming
that people within a given geographical area may
have similar needs.
Behavioral segmentation relies heavily on market
data, consumer actions, and decision-making
patterns of customers. This approach groups
consumers based on how they have previously
interacted with markets and products. This
approach assumes that consumers prior spending
habits are an indicator of what they may buy in the
future, though spending habits may change over
time or in response to global events.
Psychographic segmentation strives to classify
consumers based on their lifestyle, personality,
opinions, and interests. This may be more difficult
to achieve, as these traits (1) may change easily
and (2) may not have readily available objective
data.
Sectoral segmentation is segmentation based on
sectors of the market. A sector is a general
segment of the economy that contains similar
industries.
THEORIES IN REAL ESTATE
Bid Rent Theory
▪ The Bid-Rent Theory was made in 1960 by
William Alonso
▪ The model seeks to explain how price and
demand for land changes as the distance from
the CBD increases. Bid rent theory A theory of
land valuation based on the geographic
distance from an established point of
maximum value represented by the Central
Business District, CBD.
▪ The land lying within the CBD and immediately
adjacent to it will have the highest value or bid
rent. Demand therefore for land within and
close to the CBD will be quite high, and this will
be reflected in correspondingly greater land
costs.
▪ A series of zones or rings surrounding the CBD
in which land values decline with distance from
the CBD. Each zone is marked by a cluster of
similar users whose specific distance from the
CBD is determined by their willingness to pay
higher land rents. The innermost zone will be
dominated by high-volume, high-value retailers
who are willing to pay the maximum in land
costs, due to the higher number of consumers
and greater volume of trade made possible by
the central-most location. The outermost ring
will be occupied mostly by residential users,
who accrue only limited economic benefit by
being centrally located, in the form of lower
transportation costs.
▪ Based on Gravity Theory, which states that the
greater concentration of people in a certain
space, the more structures are built.
Urban CBD-centric Market
▪ Transportation Cost
▪ The farther the land the lesser the value
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REM 121: FUNDAMENTALS IN REAL ESTATE
Residual Land Value Theory
Residual land value is a method for
calculating the value of development land. This is
done by subtracting from the total value of a
development, all costs associated with the
development, including profit but excluding the
cost of the land. The amount left over is the
residual land value, or the amount the developer is
able to pay for the land given the assumed value of
the development, the assumed project costs, and
the developer’s desired profit. Residual land value
is a commercial real estate metric that estimates
the valuation of raw land based on the planned
improvements for it.

Residual Land Value = Gross Development Value –

(Construction Cost + Fees + Developer Profit)

FACTORS OF PRODUCTION
1. Labor
2. Materials mobile
3. Capital
4. Land — spatially stock

↑ Labor & ↑ Materials = ↓ Land Value; unless it is highly

productive

Urban Land Economics Theory

Land economics is concerned with how the
price of urban land is established and how this price will
influence the nature, pattern, and distribution of land
uses.
▪ Structure Theory — analysis of land use pattern
▪ Succession Theory — analysis in the evolution
of land use, e.g. Residential → Commercial
▪ Situs/Location Theory— analysis based on the
location of the land, analysis of decision-
making process

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