What is Property Assessment & How can it Affect You
Recently I had an associate who had this experience with her personal client who was buying a property through her in Metro Manila. The above photo isn’t the property but just a photo for you to comprehend what transpired during the transaction. This experience primarily will make one aware of why an updated assessment of a property is important and this could be noted on the owner’s Declaration of Real Property also known as Tax Declaration.
As most of of us know, the government, particularly the assessor’s office doesn’t update our property on a regular basis ( as per a recent conversation with the assessor’s office, this should be updated every three years ). This means that if you add an improvement in your house, one may need a permit to renovate or a building permit if the structure being added is substantial. Now this is at the engineer’s office where the permits are approved.
This then is the issue, in most municipalities, there is no coordination amongst the different departments, the point is that if there is any improvement done in a property which should be declared by the property owner ( attic, lanai, balcony, etc etc ), this then affects the market value and assessment of the corresponding property. However, there are instances wherein this additional structure and increase in market value isn’t reflected in the Declaration of Real Property and this is where the problem lies. If the property owner doesn’t inform the assessor’s office on the new improvements done on the property, then the assessment value will remain the same based on the last assessment done.
In this particular case, the necessary “due diligence” was done by the Seller ( certified true copy of title, tax declaration, certificate authorizing registration and homeowner’s association dues ). So the sale was done and the property owner migrated to another country after the sale was done.
The documents, Deed of Absolute Sale and other pertinent documents were then submitted to the Bureau of Internal Revenue together with the all payments, Capital Gains Tax and Documentary Stamps Tax and forms accompanying the same.
The problem arose when an inspection was done on the house ( this is random but now getting more frequent depending on the municipality ) and was directly related to the additional structure at the backyard. When there is a house and lot or building, there is a separate Declaration of Real Property for both the land and the improvement. The Tax Declaration on the improvement declared a floor area on the old structure only and the additional structure or improvement wasn’t reflected.
What is the consequence of this ?
The additional structure would then need to be assessed and added on the the market value. The market value of the property would then be recomputed to show the value added into the original structure. The Assessor’s office would then go back and recompute the Real Estate Taxes as the correct amount and would add penalty for the years the additional property wasn’t included.
Who should shoulder this ?
Since the former owner of the property is already abroad and no way to reach them, the buyer would then have to settle this with the Assessor’s Office as it is a requirement for the Certificate Authorizing Registration ( CAR ) to be released by the Bureau of Internal Revenue.
How can one avoid this ?
Check the Tax Declaration of the property and compare with the actual improvement presently in the property. Of course, measurements have to be done but that may not coincide with what the assessor’s office examiner will do. So the best procedure is prior to proceeding with the sale, it’s best to have to assessor’s office do an inspection of the property and have an updated tax declaration ! This is a procedure that the assessor’s office should do every three years as per their rules and guidelines but isn’t followed.
As mentioned in my previous blogs, all different sectors of the government are now implementing , cleaning up, updating, correcting, and improving their systems in order be in compliance with government regulations !
Finally, as everyone involved in Real Estate should know, we have this term, CAVEAT EMPTOR, also known as BUYER BEWARE when buying a property !
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Robert G. Sarmiento Properties
Professional Affiliation :
Philippine Association of Real Estate Boards
Member, City of Taguig Real Estate Board 2016 – 2018
Real Estate Broker’s Association of the Philippines 2000 – 2015
President, Greenhills Chapter 2008, 2009
Philippine Association of Real Estate Boards
San Juan Mandaluyong Chapter 1998 -1999
PRC # 6569
PRC Lecturer’s License # 0294
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