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

La Salle Institute of Governance LAND MARKETS DEVELOPMENT PROJECT 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

La Salle Institute of Governance LAND MARKETS DEVELOPMENT PROJECT 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

La Salle Institute of Governance LAND MARKETS DEVELOPMENT PROJECT Current Policy Environment Two options for titling the 7.8 million residential parcels 1. Judicial Titling Process ▫ Confirmation of an Imperfect Title 2. Administrative Process ▫ Sales Patent or Miscellaneous Sales Patent Applications

La Salle Institute of Governance LAND MARKETS DEVELOPMENT PROJECT Findings 1. 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

La Salle Institute of Governance LAND MARKETS DEVELOPMENT PROJECT Findings 2. 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

La Salle Institute of Governance LAND MARKETS DEVELOPMENT PROJECT YearCourt Issued Titles DENR Issued Residential Sales Patents DENR Issued Agricultural Free Patent 20031,3254,05798, ,7612,918110, ,607101, ,125113,620 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

La Salle Institute of Governance LAND MARKETS DEVELOPMENT PROJECT Findings 1. 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

La Salle Institute of Governance LAND MARKETS DEVELOPMENT PROJECT Findings 2. 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

La Salle Institute of Governance LAND MARKETS DEVELOPMENT PROJECT Findings 3. 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 5 th and 6 th 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

La Salle Institute of Governance LAND MARKETS DEVELOPMENT PROJECT Policy Recommendation Establish a government program to enable the administrative process of titling of residential lands through free patents Re-enact and improve the Residential Free Patent Law (Batas Pambansa Blg. 223) authorizing the grant of free patent to residential lands

La Salle Institute of Governance LAND MARKETS DEVELOPMENT PROJECT Proposed Key Provisions 1. 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

La Salle Institute of Governance LAND MARKETS DEVELOPMENT PROJECT Proposed Key Provisions 2. Extend the program to all municipalities and cities ▫ Administrative titling should benefit landowners in all cities and municipalities ▫ BP 223 was limited to 5 th and 6 th class municipalities to have an impact to the economy

La Salle Institute of Governance LAND MARKETS DEVELOPMENT PROJECT Proposed Key Provisions 3. 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

La Salle Institute of Governance LAND MARKETS DEVELOPMENT PROJECT 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

La Salle Institute of Governance LAND MARKETS DEVELOPMENT PROJECT 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

La Salle Institute of Governance LAND MARKETS DEVELOPMENT PROJECT 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

La Salle Institute of Governance LAND MARKETS DEVELOPMENT PROJECT 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

La Salle Institute of Governance LAND MARKETS DEVELOPMENT PROJECT Legislative Status House 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

La Salle Institute of Governance LAND MARKETS DEVELOPMENT PROJECT 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