25 Year Long Term Lease of House and Lot to Foreigner - Please help

Hello all,

I am a U.S. Citizen living the Philippines but my father is a dual citizen of US/PH. Because he was naturalized before my birth I am not a citizen of the Philippines and thus cannot own property but may be able to inherit it in the future.

He has purchased with my money a house and lot in Pampanga in his name that I currently live in. I wish to lease it from him for 25 years with an auto renew for another 25 years which is the only option available to foreigners. The reason I wish to do this is so that I can then use the investment in the long term lease to qualify for the SRRV visa.

The problem is that I really cannot seem to find anyone who can actually help me process this transaction. I've emailed all over and the best I've found is some firm that will draw up the contract to lease for 20K. This seems excesive and they won't even help with the rest of the process. I think I will just attempt to go through the process myself but I'm having trouble figuring out all the exact steps and feels.

Can any one tell me the exact steps? So far I have:

1. Notarized Contract to Lease (I really think I could find an example online or create my own, the details of this lease are not important, my father is not going to try to use it against me or anything. I just need to show that I am leasing the property for more than $50,000 USD).

2. Annotate TCT with Contract to Lease agreement - how is this even done? My father or his SPA just needs to register this at city hall?

What else would be required? What other fees and registrations would be needed ?

Please any help would be really great. I don't mind doing the legwork. Thanks!

Hello, you're on the right track.

1. Contract to Lease - yes there are a lot of online samples. You may just pick one, especially if you only need it to be annotated on the title.

2. Get the title and go to the Register of Deeds in your area with the notarized Contract to Lease. That's where you will get it annotated. I don't know how much. Bring ID's.

betchay001 wrote:Hello, you're on the right track.

1. Contract to Lease - yes there are a lot of online samples. You may just pick one, especially if you only need it to be annotated on the title.

2. Get the title and go to the Register of Deeds in your area with the notarized Contract to Lease. That's where you will get it annotated. I don't know how much. Bring ID's.

Thank you so much, it was great to hear someone affirm what I was thinking on this. I will report back with how it went (wont be for several months). If any one else has some comments please keep posting.

Love this forum!

"2. Get the title and go to the Register of Deeds in your area with the notarized Contract to Lease. That's where you will get it annotated. I don't know how much. Bring ID's."
And if they don't do it - write it at the Title document too.

"I wish to lease it from him for 25 years with an auto renew for another 25 years which is the only option available to foreigners."
Yes, except it's possible for foreigners to own max 40 % of a property through a company, but there are demands to make that legal. The business need to NEED the property for the BUSINESS, NOT only to rent to an owner.

Lunkan wrote:"2. Get the title and go to the Register of Deeds in your area with the notarized Contract to Lease. That's where you will get it annotated. I don't know how much. Bring ID's."
And if they don't do it  - write it at the Title document too.

"I wish to lease it from him for 25 years with an auto renew for another 25 years which is the only option available to foreigners."
Yes, except it's possible for foreigners to own max 40 % of a property through a company, but there are demands to make that legal. The business need to NEED the property for the BUSINESS, NOT only to rent to an owner.

True. I thought about the corporation option with my dad and some relatives (need a minimum of 5 people to form a corporation) where my dad owned 60% and me 40% but it sounded like too much work and I'm affraid of the anti dummy laws.

Also, I mean I'm supposed to be able to inherit this from him after his death, I don't want to screw that up by transferring it to corporation. I think I need a post a whole new question about the inheritance to a foreigner. I guess I will do that now.

Thanks!

Any ideas what other fees might be involved?

It looks like I will have to pay the Documentary Stamp Tax. If I'm doing the math right its gonna be some where around P75,000. That hurts . Are there any other taxes that apply to leases? It looks like CGT does not apply.

“Section 194. Stamp tax on Leases and Other Hiring Agreements. – On each lease, agreement, memorandum, or contract for hire, use or rent of any lands or tenements, or portions thereof, there shall be collected a documentary stamp tax of Three pesos (P3.00) for the first Two thousand pesos (P2,000), or fractional part thereof, and an additional One peso (P1.00) for every One Thousand pesos (P1,000) or fractional part thereof, in excess of the first Two thousand pesos (P2,000) for each year of the term of said contract or agreement.”

Damn looks like my dad would need to pay a 12% "Rental Income Tax" on this nonsense. Which would be huge about $6600 but not sure how they would find out. My dad just recently became a dual citizen after being gone from here 40-50 years.

Do you mean including the HOUSE?
I suggested you SPLIT the property in land (father's) and house (yours) to avoid your mother and brother inherit part of that. (Disadvantage though it can't be used as collateral.)

The tax is at the LEASE fee. That don't need to be high... (But make it high enough to cover the yearly costs.) Remember the yearly property taxes are paid by the OWNER.

Lunkan wrote:Do you mean including the HOUSE?  
I suggested you SPLIT the property in land (father's) and house (yours) to avoid your mother and brother inherit part of that.   (Disadvantage though it can't be used as collateral.)

The tax is at the LEASE fee. That don't need to be high...      (But make it high enough to cover the yearly costs.) Remember the yearly property taxes are paid by the OWNER.

I don't think I was totally clear. To get this visa..I need to deposit 50K USD in to a PH bank..and then I can convert it to an active investment buy using the funds to do a long term lease of house and lot. However after the DST and "Rental Tax" my father would be due on that amount looks to be prohibitive. (I'd get the money back from him because I've already paid for the house through him).

The other option is to get this visa by despoiting $20,000 USD in a time deposit account in the PH and leave it there, I can't use it until I cancel the visa and really the only reason I want this visa is to start working on the 10 years residency requirement to apply for naturalization. Ironic how hard I'm trying to become a Filipino citizen when it usually the other way around.

I thought I could kill two birds with one stone, and use the investment I already made in PH towards this Visa by leasing it to me and then use that Visa towards my citizenship.

Now I think I should just have my Father lease the house and lot to me for a very cheap amount just to get it registered and not cause us too many taxes on it. This will secure me the rights to use the place at least for 50 years. and just deposit the $20K until I get the citizenship or give up trying haha.

Regarding splitting it, provided my mother and brother are not hostile and don't care at all about the disposition of this property, do I really need to care if they own part of the house, im still in the same boat regardless as they will still own part of the land. Right?

"To get this visa..I need to deposit 50K USD in to a PH bank..and then I can convert it to an active investment buy using the funds to do a long term lease"
Do they count a LEASE as an investment???
I don't. But I count BUYING a HOUSE as an investment
If you just lease the land, the fee for that can be low, which make low tax...

" the only reason I want this visa is to start working on the 10 years residency requirement to apply for naturalization"
Aren't there other simpler/cheaper VISA options solving that?

"Regarding splitting it, provided my mother and brother are not hostile and don't care at all about the disposition of this property, do I really need to care if they own part of the house, im still in the same boat regardless as they will still own part of the land. Right?"
Well. Why not owning as much as you can of what you have PAID allready?
It can become problem in the future concerning selling/inheritance. Then you risk to pay extra, to get the house in YOUR name then...
When making contructions we better think of ALL steps and what can happen.

Lunkan wrote:"To get this visa..I need to deposit 50K USD in to a PH bank..and then I can convert it to an active investment buy using the funds to do a long term lease"
Do they count a LEASE as an investment???
I don't. But I count BUYING a HOUSE as an investment    
If you just lease the land, the fee for that can be low, which make low tax...

The lease must be for at least 50,000 USD..they do it to get the capital in from abroad.

" the only reason I want this visa is to start working on the 10 years residency requirement to apply for naturalization"
Aren't there other simpler/cheaper VISA options solving that?  

Not really, you'd be surprised how hard expensive/hard it is to become a perm resident here. I don't think I will get my house mixed up in this visa thing. I will just do that seperately.

"Regarding splitting it, provided my mother and brother are not hostile and don't care at all about the disposition of this property, do I really need to care if they own part of the house, im still in the same boat regardless as they will still own part of the land. Right?"
Well. Why not owning as much as you can of what you have PAID allready?  
It can become problem in the future concerning selling/inheritance. Then you risk to pay extra, to get the house in YOUR name then...
When making contructions we better think of ALL steps     and what can happen.

Well I just looked at the recent tax paperwork. The market value of the house is only 440,000 PHP according to city, so I suppose even with the taxes and stuff. It wouldn't be TOO much to sell it to me in my name. The CGT is based on the FMV or the Selling Price whichever is higher. 6% of of 440 is only like 26K in taxes, plus a few other taxes.

I'll have my dad sell it to me for like P25,000 and lease the land to me for another P25,000 one time cost. The income taxes on that wont be too bad.

But still what a nightmare this all is. How do they split the title up? There would be a new TCT for the house only in my name?

"The lease must be for at least 50,000 USD..they do it to get the capital in from abroad."
If you buy a house that add much money to the Philippines too

" The market value of the house is only 440,000 PHP according to city"
Oh not more.
"I'll have my dad sell it to me for like P25,000 and lease the land to me for another P25,000 one time cost. The income taxes on that wont be too bad. "
Well. It's odd to sell a 440 000 worth house for 25000, and one time cost least at only 25000 is odd too. I don't believe Phil officials will believe you
And what would that solve??

"How do they split the title up?"
I don't know. I suppouse the owner sell the house to you, shown in a contract and reciept.
"There would be a new TCT for the house only in my name?"
House at leased land don't get TCT as for land. That's why it can't be used as collateral.

I have a contract of 25 year lease on the 2 adjoining properties I reside on, extendable another 25 years. The Contract of Lease is notarized with Doc #, page #, book # and series of 2010. It has no documentary stamp. The 2 TCTs, in my possession, are annotated. I pay month by month. I don't recall any huge expense in acquiring the lease. I stay here on my PRA visa. I hear it's difficult to get your PRA deposit back. If you will it to someone, that person has to pay the 30% tax before he/she can get your deposit. PRA wants badly to keep your deposit even after you die.