Case Study on Paraphernal Property and Extra Judicial Settlement

Case Study : In this business, the most important people re documentation are the Bureau of Internal Revenue, Assessor’s Office and Register of Deeds ( RD ). We all at sometime will come across a client, investor, bank, lawyer who claim to know it all or have been informed otherwise ( these are the hardest people to deal with so handling it with special care and reasoning out with them is important ) but at the end of the day, it’s the three above mentioned Government agencies that really have the say so as not to waste our time.
 
About 10 years ago, there was this case wherein a property being sold went thru an Extra Judicial Settlement and so a new title was issued thru the surviving heirs ( wife & son ). Now take note that for every extra judicial settlement, an annotation of Section 4, Rule 74 will be done on the new title and this is something that’s required for at least two years, that’s why some “buyers in the know” require an Heir’s Bond prior to closing the deal ( some banks don’t even care for this specially if the two year period has already lapsed ).
 
It’s important to note that the inscription date is very important as this is where the basis of who needs to sign the Deed of Absolute Sale ( DOAS ) will be based. A lawyer commented then that the son who wasn’t married at the time of death of his father and when the new title was issued but now married, has to have the wife sign on the current Deed of Sale. I already advised them that this is a “paraphernal property” so there is no need for the husband to sign but the lawyer insisted so we followed their instruction just to move on and close the deal.
 
Please be aware of the Family Code that was revised in 1988 as ownership of a property, particularly, paraphernal properties are clearly defined !
 
So capital gains tax were paid and the Certificate Authorizing Registration ( CAR ) was issued by the Bureau of Internal Revenue. The problem was with the Register of Deeds as they said that there was no need for the wife of the son, who was an heir, so the DOAS had to be corrected and the process of going back and having the revised DOAS to the Notary Public and BIR had to be done.  Net effect was time wasted as we already knew that the original DOAS we had prepared was correct.  
 
This practice of having a wife / husband who isn’t part of a paraphernal property is now however acceptable with today’s practice as per RD.
 
Lesson learned, from then on, we always consulted the proper agency so there woudn’t be a waste of time. Please be advised that it will never be the lawyer or buyer that will correct the problem, it will be Us, licensed brokers or our Liason.  Good thing that the Buyer /
 
Investor wasn’t in a rush on getting their new Transfer Certificate of Title then but what about when the deal goes thru  a bank loan, delays could be costly and really create pressure on those concerned. 
 
Unfortunately, procedures aren’t standardized in all municipalities and that is something that has to be corrected so it really pays to do that extra due diligence on the procedure acceptable to the right agency to avoid any surprises.
 
For everyone’s reference, I am a practicing licensed Real Estate broker / consultant and not a Lawyer so please consult the proper authority should you have any questions.  What i blog about are actual experience and just relay for everyone’s awareness.
 

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