DUE DILIGENCE BLIND SPOT

ALERT: Here’s a red flag your due diligence process probably won’t catch.

(We would’ve missed it too if this were our transaction.)

A Filipino couple was set to buy a condo from a foreigner and a Filipina partner. No brokers involved. On paper, everything looked clean.

Facts:

Sellers disclosed: “We got married in Canada.” They presented a Canadian marriage certificate.

Title: shows John Doe (foreigner) and Luz B. Reyes — both listed as single.

Luz’s passport: Luz Borromeo Reyes.

When buyers verified TINs with the BIR:

• Luz’s TIN was registered as married

• John’s TIN was single (???)

Buyer rechecked the Canadian marriage certificate — the bride’s name was Luz S. BORROMEO, not Reyes.

So… what likely happened?

Luz was married in the Philippines to a Filipino man (let's call him Buboy).

Luz updated her BIR TIN to reflect being married to Buboy.

Luz and Buboy separated informally (no divorce in PH, only annulment).

Luz meets John. Luz and John buy a condo together and Luz declares herself single on the title.

Luz and John later marry in Canada. Since Canada relies on declarations + IDs, they assumed Luz was single.

Now here’s the problem:

➡ Buboy is still Luz’s legal spouse under Philippine law.

➡ Therefore, Buboy is a co-owner of Luz’s 50% share.

➡ Effective ownership becomes:

John – 50%

Luz + Buboy – 50%

So yes—Buboy legally owns 25% of the entire property.

Can the sale still push through?

Yes.

BUT Buboy must also sign the Deed of Absolute Sale (DOAS). And given how estranged relationships usually go, there’s a high chance Buboy will ask for a share of the proceeds.

And because Luz’s BIR records show she is married, the BIR will actively look for Buboy’s signature. They wouldn't be able to hide it.

And of course… the buyers, John and Luz, had already signed the Deed of Absolute Sale and payment has been made. 🤦🏻‍♂️

The real questions now are:

1️⃣ Why wouldn't our standard due diligence catch this?

2️⃣ And more importantly: what changes do we have to make to our processes?

Continued in tomorrow's post.