EVERYTHING WENT SMOOTHLY UNTIL…

Once upon a time, a seller was in the final stages of selling their house. Everything went smoothly until they requested a certified copy of the tax declaration.

When agents of the seller tried to procure a certified tax declaration, the city assessor said they would send an appraiser to check on the improvements of the house.

And so, the appraiser dropped by and started measuring. He discovered that the improvement stated in the original tax declaration was understated by roughly 800 sqm. Thus, the City Assessor imposed real property tax and penalties of over three million pesos for the undeclared extension. This amount included an arbitrary number of years for which the RPT wasn't paid.

See, when owners expand their homes (even if it were just to cement a portion of the garden), they would have to consequently update the tax declaration of the improvement to include the area of expansion. The city would then impose real property tax on the extension.

"How can that be??" the seller complained. "I never constructed anything from the time I acquired the property!"

As it turned out, the previous owner constructed the extension. That owner never updated the tax declaration, and the seller was the one left holding the bag.

Could the seller go after the previous owner? Not likely, since the previous owner passed away years ago.

End of story.

Lessons:

To owners: Update your property's tax declaration whenever you renovate or expand. Most owners leave this to their contractors, but some contractors do it and some don't. So check.

To brokers: When handling a property, estimate the actual floor area and compare it with the floor area on the tax declaration. If they don't match, warn the owner or buyer before closing. Catching it early keeps the deal from stalling at the assessor's office.

To buyers: Make sure the Contract to Sell or Deed of Absolute Sale says that all back taxes, including those from previous owners, are for the account of the seller.