Can Land Under a Mother Title Pay Debt in the Philippines?

Is It Possible to Settle Your Debt With an Inherited Piece of Land

While it’s common in the Philippines to pay debts using land, this may not be suitable for all situations. Properties that are still under a mother title can’t be transferred to a new owner as it is not yet legally subdivided among heirs, and individual titles are yet to be given. Therefore, you should think twice before accepting a debt payment via land if the heir or owner can’t produce a title in their name. Read this article to know how to deal with someone who wants to pay off debt using land instead of cash.

​What Is Dacion en Pago?

The so-called Dacion en Pago, or land as payment, is the act of transferring a property to pay a debt. However, this can be complicated if the lot property being offered by the one who owes you money is still under a mother title. In that case, the said property is likely to be still under an original title, a subdivision plan may not be in place yet, and individual titles don’t exist. Therefore, this can be a headache if you accept it, even if the heirs have already agreed on which portion of the land belongs to whom.

​Why Avoid a Property Under a Mother Title?

Obviously, you wouldn’t want to get caught in the middle of a family dispute, as lands under a mother title are not yet legally subdivided and individually titled. Meaning, the lot property is still co-owned by legal heirs, including spouses, children, and even grandchildren. They cannot simply point out certain portions to any heir, as this is against the law.
If you accept land as a debt payment, here are other risks and problems you might encounter in the future:

• Title transfer can be a long process, if not impossible.
      
  
• An heir might disagree with the subdivision without a proper Extrajudicial Settlement document.
      
  
• The buyer may not get the exact portion as promised by the seller.
  

This may be one of the most common real estate problems in the Philippines, and yet many Filipinos still fall victim to this scam. But don’t worry, because there are other ways to pay a debt rather than Dacion en Pago.

​Alternatives to Land as Payment

First is to sell the land, in which the debtor should find a third-party buyer to pay the debt in cash. This may be the best solution, but the process can take longer than usual. Another option is to give partial cash and then a portion of the land to pay the entire debt. Whichever you choose to settle the debt, make sure that proper documents are in place to protect all parties involved.

Final Thoughts

Lands that are still under a mother title can still be managed and accepted as payment as long as all heirs agree with the subdivision plan, each portion is clearly described, with notarized documents, and a lawyer who oversees the agreement. If you have questions regarding properties with mother titles, our agents at REALS.PH can assist you. You may also explore our property listings, including land properties for sale in Baguio City and other major cities nationwide.