UNLEASHING DEAD CAPITAL: Extending Free Patents to Residential Lands

La Salle Institute of Governance

LAND MARKETS DEVELOPMENT PROJECT

UNLEASHING DEAD CAPITAL:Extending Free Patents to Residential Lands

La Salle Institute of Governance LAND MARKETS DEVELOPMENT PROJECT

Current Situation•As many as 46% of the total land parcels in

the country is untitled

•Of the estimated 24 M land parcels, 11 M are held without formal rights

•Approximately 70% or 7.8 million untitled parcels are residential lands

•About 39 million Filipinos live on these untitled residential parcels

*Data from the LAMP Land Tenure Status Report – Book 1

LAMP: Land Administration & Management Program


The Cost of Untitled Lands•Limited opportunities for bank lending

▫BSP disallows rediscounting against tax declarations▫Residential homeowners are unable to borrow from

banks using their residences as collateral, crimping the mortgage market

• Inability to enter into formal land market transactions▫Landowners cannot transact to their best advantage ▫Urban planning and development is hampered ▫The supply of land in the land market is restricted,

affecting land developers and the like


The Cost of Untitled Lands• Insecurity of land tenure

▫Land parcels with only tax declarations as proof of ownership are vulnerable to fake titling and land grabbing

•Rights over untitled lands are unrecorded causing conflicts and uncertainty (between family members, neighbors, etc.)

•Economic growth stifled▫Few titles few loans less investment lower

economic growth lower job creation


Current Policy EnvironmentTwo options for titling the 7.8 million

residential parcels1. Judicial Titling Process

▫ Confirmation of an Imperfect Title2.Administrative Process

▫ Sales Patent or Miscellaneous Sales Patent Applications


Findings1. Judicial Titling Process

▫ Complicated and costly Highly technical Non-lawyers cannot appear in court Expensive professional fees, filing and

publishing fees, other costs▫ Time consuming and tedious

Rules of Evidence, Adversarial, Appeals Months to many years; 5 or more years


Findings2. Administrative Process (Sales Patent)

▫ Expeditious ▫ Can be costly

Land parcel is subject to appraisal Landowner has to pay the government to

“purchase” parcel from government▫ Some uncertainty

In certain cases, parcel may be subject to bidding


Year Court Issued Titles

DENR Issued Residential

Sales Patents

DENR Issued Agricultural Free Patent

2003 1,325 4,057 98,4862004 1,761 2,918 110,9602005 975 2,607 101,1432006 892 3,125 113,620

Untitled Residential Lands = Estimated at 7.8 million Parcels

Title issued by DENR under Residential Sales = Assume 5,000/annum

Title issued by the Court = Assume 1,000/annum

At the present rate, it will take 1,300 years to title the 7.8 million residential parcels

Findings


Findings1. The financial and administrative burden of

titling residential parcels is currently on the individual owner• Constraints prevent landowners in registering

their land, thus, many residential parcels remain untitled

» Without government assistance, individuals do not have the financial resources to undergo either a judicial or administrative process


Findings2. Government titling programs are focused on

agricultural lands• Land for the Landless, Handog Titulo, CARP• The Agricultural Free Patent under RA 9176 in

2002 was re-enacted, extending the application to December 21, 2020

» The government has the ability to properly title residential parcels


Findings3. There is no government program to address titling

of public residential lands The grant of free patent on residential lands was

authorized under Batas Pambansa 223 on April 1982 However, it was limited to 5th and 6th class

municipalities only and lapsed on December 31, 1987 Given the limited scope and time frame, BP 223 did

not effect the titling of residential lands

»It is a good public policy to create government program focused on residential land parcel titling


Policy Recommendation

•Establish a government program to enable the administrative processof titling of residential lands throughfree patents

•Re-enact and improve the Residential Free Patent Law (Batas Pambansa Blg. 223) authorizing the grant of free patent to residential lands


Proposed Key Provisions1. Establish an expeditious

administrative program (free patent) for titling residential lands

▫ Provide an alternative to the judicial process▫ Many countries title property through an

administrative but quasi-judicial process▫ An administratively granted title provides

equal security as a judicially granted title


Proposed Key Provisions2. Extend the program to all

municipalities and cities▫ Administrative titling should benefit

landowners in all cities and municipalities ▫ BP 223 was limited to 5th and 6th class

municipalities to have an impact to the economy


Proposed Key Provisions3. Remove restrictions on transfer and other

conveyances for titles acquired through the Residential Free Patent Program

▫ Allow landowners to use their properties as collateral for entrepreneurial and homebuilding/improvement activities

▫ Restrictions on Agricultural Free Patents should not be extended to the Residential Free Patent Program

No sales or mortgage for 5 year period The five-year restriction imposed in CA 141 hampers

the creation of efficient land markets


Benefits of Residential Free Patent•Boosts the banking sector

▫Increases lending activities of banks and other financial institutions with better collateral

▫Allows homeowners access to credit in banking institutions for entrepreneurial or homebuilding activities

•Provides security of tenure to as many as 39 M Filipinos

Reduces risk of fake titling and land frauds

•Greater social stability ▫Less family and social conflicts due to secure and well-

defined property rights


Benefits of Residential Free Patent•Spurs economic development

▫Increases investments in land and housing▫Allows for efficient urban and housing

development - developers can consolidate properties

• Increases revenue for the government from:▫Broadened tax base▫Increased land value▫More land transactions


Many Benefits, No Costs•Bill will involve little cost to government

except issuance of formal titles•No group or sector in society will be

adversely affected, unlike in land reform.•Win-win situation for all: landowners,

government, banks, land and housing developers and investors


Conclusion•The proposed policy will boost the banking

sector through the prospect of having more borrowers with more secure collateral

•This will spur economic growth and job creation by boosting investment in land and housing. This program will promote social cohesion by giving beneficiaries an economic stake in society

•Secure property rights are essential for a prosperous and peaceful Philippines


Legislative StatusHouse•HB 3298 filed by Rep. Rufus Rodriguez on

Dec. 13, 2007•Referred to the Committee on Justice (Rep.

Matias Defensor)

Senate•No sponsor and no bill filed to date


Call to action:

Let’s endorse the bill to our congressmen and senators

Let’s do this for the sake of the economy and the nation

Documents

UNLEASHING DEAD CAPITAL: Extending Free Patents to Residential Lands