REAL ESTATE MORTGAGE & FORECLOSURE

Atty. LEO V. CAINTO

REAL ESTATE MORTGAGE

Mortum Vadium - death pledge

Is a real right created to secure an

obligation upon real property of another
or alienable property rights affecting real
estate, which remains in the possession
of the owner, to pay with the proceeds
of the sale thereof such obligation when
the same is due. (Sanchez Roman)

KINDS OF MORTGAGE

Voluntary or conventional mortgage is

one created by agreement of the parties
Legal mortgage is one created by
operation of law
Judicial mortgage is one resulting from a
judgment
Equitable mortgage not a mortgage in
form but in substance a mere security for
a debt or obligation

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SPECIAL CHARACTERISTICS OF REAL

MORTGAGE

Realty as subject matter only real property may

be the subject matter of mortgage
Real right binding against the whole world and
may be enforced by real action against all persons
Accessory obligation a mortgage is only
accessory and presupposes the existence of a
principal obligation
Indivisibility the mortgage shall remain as one
Retention of possession mortgagor generally
retains possession

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REQUISITES OF A MORTGAGE

1. It must be constituted to secure a principal

obligation
2. Mortgagor must be the absolute owner of the
property
3. Mortgagor must have free disposal of the
property
4. Mortgage must be registered in the Registry of
Deeds to bind third parties
5. The foreclosed property must be sold in a
public auction and may not just be appropriated

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VOID STIPULATION IN MORTGAGE

PACTUM COMMISSORIUM a stipulation which

authorizes the mortgagee to APPROPRIATE the property
as his own automatically upon default of the mortgagor.
The creditor cannot appropriate the things given by
way of mortgage or dispose of them (Art. 2088 Civil
Code)
PACTUM DE NON ALIENDO a stipulation which
PROHIBITS the mortgagor from ALIENATING or SELLING
the property during the term of the mortgage.
A stipulation forbidding the owner from alienating the
immovable mortgaged shall be void (Art. 2130 Civil
Code)

A mortgagee may convey or assign his mortgage

credit to a third person totally or partially,
provided that is effected by a public instrument
and that a notice is given to the debtor and that
is recorded in the registry.

A mortgage of real estate includes improvements

and fixtures; to exclude the improvements it is
indispensable that the exclusion be stipulated
between the contracting parties.

REGISTRATION OF MORTGAGES: PLACE AND EFFECT

Registered in the RD where the real

property is situated
If the mortgage involves parcels of land
which lie in different provinces, the
instrument should be registered in each
of said provinces.
Registration of the mortgage deed
directly subjects the property to the
fulfillment of the obligation.
To bind third parties

Buyer in a contract of sale

vs buyer in foreclosure sale

Problem: The owner has already sold the

property but the same was not registered.
The owner eventually mortgaged the
same and failed to pay the loan secured
by the mortgage, hence, the mortgage
was foreclosed and the properties were
sold at public auction.

Dela Merced, et al vs GSIS GR 140398 Sept 1, 2002

May an alien be a mortgagee?

What is the effect of a Forged Power of Attorney?

Course of action left to Mortgagee

upon death of mortgagor

1. Abandon the security and file his claim with

the clerk of court in the testate or intestate
proceedings against the deceaseds estate and
share in the general distribution of the assets
thereof.
Foreclosure the mortgage by ordinary action in
court, making the executor or administrator of
the estate a party defendant and ask for
deficiency judgment.
Rely exclusively upon his mortgage and
foreclose the same.

Every person dealing with an agent is

put upon inquiry and must discover
upon his peril the authority of the
agent, and this specially true where
the act of the agent is of an unusual
nature (Veloso vs La Ubana)
Bank is not a mortgagee in good faith
(DBP vs CA 331 SCRA 267)

FORECLOSURE

Remedy available to the mortgagee by

which he subjects the mortgaged
property to the satisfaction of the
obligation.

Grounds for foreclosure:

1. the principal obligation is not paid
when due.
2. any condition is violated by the
mortgagor

JUDICIAL
FORECLOSURE
EXTRAJUDICIAL FORECLOSURE

&

Judicial Foreclosure occurs when a court makes

a judgment that a property will be foreclosed.
(Rule 68 Rules of Court)

Extrajudicial Foreclosure one where foreclosure

is effected thru a sheriff or notary public without
judicial proceedings, subject only to the required
publication and posting of foreclosure notice.
SPA to sell is inserted or attached to a real
mortgage
(Act 3135 as amended by Act 4118)

LEGAL AND GENERAL COUNSEL

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Example of power of Attorney inserted in

the mortgage contract..

the Pag-IBIG Fund or its assignee/transferee is

hereby appointed as BORROWER/BORROWER and COBORROWERs Attorney-in-Fact, with full power of
substitution and authority to perform such acts that
may be necessary to dispose of Mortgaged Property in
accordance of the provision of Act. 3135, as amended,
and pending such disposition to perform all other acts
of administration and management Extrajudicial
foreclosure may be undertaken by the Sheriff, Special
Sheriff or by Notary Public, at the option of Pag-IBIG
Fund. The latter hereby reserves its right to bid at
appropriate public auction.

PROCESS OF JUDICIAL FORECLOSURE

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FLOW OF JUDICIAL FORECLOSURE

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FLOW
OF
FORECLOSURE

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EXTRAJUDICIAL

EXTRAJUDICIAL FORECLOSURE

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Equity of redemption vs
Right of Redemption

EQUITY OF REDEMPTION

RIGHT OF REDEMPTION

Judicial foreclosure

Within 90 days after the judgment

becomes final or even after the
foreclosure sale but prior to its
confirmation.

1 year from the date of

registration of cert of sale with
ROD

Extra-judicial foreclosure

Exception Free patent &

Homestead

PERIOD OF REDEMPTION

Right of redemption
1 year
Equity of redemption 90-120 days
General Banking Act RA 8791
(mortgagee is an individual)
1 year
(mortgagee is a juridical person)
3 months
Rural Bank Act (RA 720)
property is covered by TCT
1year
homestead/free patent
2 years
Public Land Act (CA 141)
5 years

LEGAL AND GENERAL COUNSEL

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THANK YOU!
SOURCES:
LAND TITLES AND DEEDS-Pena & Pena
Land Titles Noblejas
The law on ejectment and lease-Manalastas
LEGAL FORUM/Atty. Biron
NEW CIVIL CODE
Wikipedia

Real Estate Brokers & Sales Persons are Trusted Advisors

Real Estate Brokers & Sales Persons are Trusted Advisors

Real Estate Brokers & Sales Persons are Trusted Advisors

Real Estate Brokers & Sales Persons are Trusted Advisors

THANK YOU!
SOURCES:
LAND TITLES AND DEEDS-Pena & Pena
Land Titles Noblejas
The law on ejectment and lease-Manalastas
LEGAL FORUM/Atty. Biron
NEW CIVIL CODE
Wikipedia
LEGAL AND GENERAL COUNSEL
GROUP

WHAT IS LEASE?

LEASE is a contract whereby a person, for consideration, gives to

another the possession, use and enjoyment of a property for a
period which may be fixed or not fixed.

Period of lease:
The lease period depends on the agreement of the lessor and the
lessee which in no case shall exceed:

99 years, if the lessee is a Filipino citizen (Civil Code)

25 years renewable to another 25 years, if the lessee is a
foreigner but not considered a foreign investor (P.D. 471)

50 years renewable to 25 years, if the lessee is a foreign investor

and the leased area shall be used solely for investment (RA 7652)

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LEASE

LEASE INTEREST TERMINOLOGIES

Leased fee estate interest of the owner-lessor
Leasehold estate interest of the lessee
Sandwich lease estate interest of the lessee
Market rent probable rent in an open market; passing
rent
Contract rent rental amount as appearing in the lease
contract
Turn-over rent rent based on earnings of the lease
Positive leasehold if market rent is higher than contract
rent
Negative leasehold if market rent is lower than contract
rent
Freehold interest fee simple estate

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RENT CONTROL ACT OF 2009

RA 9653
Extended until December 31, 2015
Limits the rent increase on any
residential property to no more than 7%
annually while occupied by the same
tenant
NCR up to P10,000; other areas up to
P 5,000
The HUDCC has the authority to continue
regulating the rent, to determine the
period of rent and to extend rent

PRE-TEST: WHAT DO YOU KNOW ABOUT RENT CONTROL

ACT OF 2009?

What is the limit on the increase in rent?

7% annually
From Aug. 2009 until Dec 2015 the rent of a
residential unit shall not be increased by more
than 7% annually, as long as the unit is occupied
by the same lessee.

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PRE-TEST: WHAT DO YOU KNOW ABOUT RENT CONTROL

ACT OF 2009?

Sir Chief leased a commercial unit starting from

June 2014 at P10,000 per month, can Sany the
lessor increase the rent by P 5,000 for a total of P
15,000 on June 2015?

YES.
The law covers only residential units.
Commercial units are not covered by RA
9653.
LEGAL AND GENERAL COUNSEL
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PRE-TEST: WHAT DO YOU KNOW ABOUT RENT CONTROL

ACT OF 2009?

Sir Chief leased a residential unit starting

01 June 2014 at the rate of P 10,000 per
month, can Sany the lessor increase the
rent by P 700 on June 1, 2015?
YES.
Because the increase does not exceed the
7% annual increase limit.

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PRE-TEST: WHAT DO YOU KNOW ABOUT RENT CONTROL

ACT OF 2009?

May Sany the lessor increase the rent by

April 2015?
NO.
Because he must wait for one year from
the time of the effectivity of the lease
contract before he could increase the
rent.

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PRE-TEST: WHAT DO YOU KNOW ABOUT RENT CONTROL

ACT OF 2009?

May the lessor demand 2-months

advance?
NO.
The lessor cannot demand more than
one (1) month advance rent.
May the lessor demand 3-months
deposit?
NO.
Neither can she/he demand more than
two (2) months deposit

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EJECTMENT

GROUNDS FOR JUDICIAL EJECTMENT OF LESSEE

(Art. 1673, NCC)

1. Expiration of stipulated period of lease;

2. Lack of payment of the rent stipulated;

3. Violation of any of the conditions agreed

upon in the contract; or

4. Misuse of leased property which has

resulted in its deterioration.

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GROUNDS FOR EVICTION

(Rent Control Act of 2009)

Subletting occurs without the owners

consent
Tenant fails to pay rent for a total of 3
months
The owner wishes to repossess the
property for personal use or use by
his/her immediate family
repairs of property subject of
condemnation
Expiration of lease

PURCHASER OF LEASED PROPERTY BOUND TO

RESPECT THE LEASE
(Art. 1676, NCC)

1. When the lease is indicated in the deed of sale;

2. When the lease is registered in the Registry of

Property; and/or

3. When the buyer has knowledge of the existence of

the lease even if the same is not duly registered in
the Registry of Property.

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UNLAWFUL DETAINER where one unlawfully withholds

possession there after the expiration or termination of his right
to hold possession under any contract, express or implied.
Where to file complaint: Municipal/Metropolitan Trial Court
TACITA RECONDUCCION A legal principle that if the lessee
continues his occupancy for at least 15 days from expiration of
the lease with the acquiescence of the lessor and without
notice to vacate, it is understood that there is an implied new
lease.
Rent agreed is annual: from month to month
monthly: week to week
weekly: day to day

LEGAL AND GENERAL COUNSEL

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THANK YOU!
SOURCES:
LAND TITLES AND DEEDS-Pena & Pena
Land Titles Noblejas
The law on ejectment and lease-Manalastas
LEGAL FORUM/Atty. Biron
NEW CIVIL CODE
Wikipedia
LEGAL AND GENERAL COUNSEL
GROUP