DUE DILIGENCE

INTRODUCTION

In our modern society, it is inevitable that we undergo contracts, deals or agreements. Although when
negotiating a business deal or any kind of deal for that matter is founded upon trust ad confidence to be
reposed to each of the contracting party, we cannot just brush off the possibilities of issues sorrounding
a particular negotiation. For one, due to the rising number of victims of scams nowadays, there is an
imperative need for us to conduct the proper inquiries before delving in deeper to a transaction.
Although a seller must be dealt with trust and confidence, we, on our part must avoid negligence. As the
famous saying goes, “It’s better safe than sorry” which we think is founded in the principle of law which
states “Caveat Emptor”. This paper is a discussion about due diligence when it comes to titled and
untitled lands for sale.

WHY IS THIS IMPORTANT?

Consider this, you just got married and looking to buy a property to start a new life with your soon to be
family. There is this seller who offered you his property, however, without conducting any inquiries on
your part, you trusted the seller without knowing that there are legal implications concerning the
property involved. The moment when burden is placed upon you because of the property, regret comes
in, this will affect not just only you, but also your family. It is not a secret that in our country, getting
involved in litigation costs a lot of resources and time, and for that matter, would you want to take this
risk especially that you are just starting your own family? Good thing the law affords us protection and
we shall discuss the necessary steps on how to conduct due diligence on the part of the buyer and seller.

HOW IS IT DONE?

In order for us to have a better picture on how to conduct due diligence on our part, it is better to put it
in a table. The table below are the necessary documentary requirements that needs to be acquired prior
the transaction. There are two types of property commonly dealt with, Titled and Untitled..

For UNTITLED property.

Certified True Copy of Latest Tax Declaration
Tax Clearance
DENR Certification of Lot Status or Land Status
This should be secured at the assessors office. We
can see here the metes and bounds of the
property.
This is used to determine that the real property
taxes due on the said land or improvement had
been paid.
This should be done by a prospective buyer to
know if there are other applicants for registration,
because if there are some, you have to undergo
the hassle process of contacting the registrant to
withdraw his registration and there is a possibility
that a land dispute case will arise.
 DENR Certification for Alienable and Disposable Land status proves that the land is A&D.
Incidental to this process is to go to Department
of Agrarian Reform to get a notice of non
coverage under CARPER Law, because if it is
covered, most likely, it has been awarded to their
beneficiaries.
City/Municipality Zoning Certification
Approved Survey Plan/Lot Plan The Survey Plan should be approve by the Bureau
of Lands because if there is no survey plan, you
have to engage the services of a geodetic
engineer to conduct a survey in the land for
purposes of titling in the future.
Barangay Clearance
MTC and RTC clearance
Deed of Conveyance
SPA
Others:
Lien/Encumbrance
Right of Way/Access
Illegal Settlers/Tenants/Dwellers
Property History/Traceback If the name of the seller is not the one indicated
in the tax declaration because he may be an heir,
we have to do traceback. Look for tracer, because
you can see there the previously issued tax
declarations and you will see the succession of
owners. This is toprevent a situation that there
may be an heir that has an interest to the
property which is not the seller.

For TITLED property

Extra Judicial Settlement, if applicable
Owner’s duplicate original of the Certificate of
Title
Certified true copy of theTax Declaration
This is applicable if you are dealing with the heirs
of a registered owner. Its purpose is to know that
the land has been partitioned among the heirs.
Otherwise, there should be a judicial partition.
This document is needed for transfer because
concerned government agencies require this
document as a requirement to transfer the
ownerhip of the land to the legal heirs of the
deceased registered owner.
This document is used to reconcile the metes and
bounds of the land as opposed to the certificate
of title. This document is also used to trace
ownership.
Certificate of no-building improvement,if This is only applicable there are no improvements
applicable introduced or built in that particular land.
Tax clearance certificate This is used to determine that the real property
taxes due on the said land or improvement had
been paid.
Certificate of death for registered owner and/or This is important to avoid fraud. This is to
legal heirs ascertain that the registered owner is really
deceased as well as to ascertain the death of
some the legsl heirs, if applicable. It is because in
some cases, when selling a whole property with
several heirs, especially one that has not been
partitioned, it is to make sure that all heirs
concurred with the sale of the property to avoid
future claims and litigation involving the same
land.
MTC Clearance To answer the question whether or not the
property is attached to any pending cases.
RTC clearance
Deed of conveyance (Deed of Sale, Donation, This is applicable in dealing with a Certificate of
Extrajudicial) Title to know how the property was acquired from
one person to another.
SPA, if acting as a representative Applicable in cases when there are several heirs
and want to appoint someone to process and deal
with the sale of the property and as well to deal
with the government agencies in the transfer of
ownership on the land.
Government Ids of the owners with 3 specimen For security reasons, it is a must.
signature
Marriage Contract, if married Because there are legal implications, the property
may be part of absolute community property
therefore consent of both spouses is needed. We
have to ascertain the date of marriage for us to
determine how to properly proceed with the sale
Others:
Liens and Encumbrances See the annotations, if any in the certified true
copy presented. To make sure that the property is
free from all liens and encumbrances.
Right of Way/Access This shall also be annotated in the certificate of
title.
Illegal Setllers/Tenants/Dwellers This is where the ocular inspection takes place. It
is possible that the land has been occupied by
settlers/tenants/dwellers. The legal implication is,
you have to file a case to eject said
settlers/tenant/dwellers.
Property History/Traceback