One of the most common misconceptions in real estate transactions is that a sale of land becomes valid only after the deed is registered with the Registry of Deeds. This often leads to the question: Does the failure to register the Extrajudicial Settlement and Sale with the Register of Deeds render the sale void?
The answer is no.
The failure to register an Extrajudicial Settlement and Sale does not invalidate the transaction. While registration is important to protect the buyer’s rights against third persons, it is not an essential requirement for the validity of the sale between the parties.
Registration Is Not Required for the Validity of the Sale
Under Philippine law, ownership of real property is transferred by law upon the execution of a valid deed of conveyance in a public instrument. Registration with the Registry of Deeds is not one of the modes of acquiring ownership.
This principle was clearly explained by the Supreme Court in Chua vs. Court of Appeals (G.R. No. 119255, April 9, 2003), where it held:
“There is a difference between transfer of the certificate of title in the name of the buyer, and transfer of ownership to the buyer. The buyer may become the owner of the real property even if the certificate of title is still registered in the name of the seller. As between the seller and buyer, ownership is transferred not by the issuance of a new certificate of title in the name of the buyer but by the execution of the instrument of sale in a public document.
The recording of the sale with the proper Registry of Deeds and the transfer of the certificate of title in the name of the buyer are necessary only to bind third parties to the transfer of ownership. As between the seller and the buyer, the transfer of ownership takes effect upon the execution of a public instrument conveying the real estate. Registration of the sale with the Registry of Deeds, or the issuance of a new certificate of title, does not confer ownership on the buyer. Such registration or issuance of a new certificate of title is not one of the modes of acquiring ownership.”
Simply put, the execution of a valid notarized deed, not its registration, is what transfers ownership between the seller and the buyer.
What Is the Purpose of Registration?
Although registration is not necessary to make the sale valid between the parties, it serves an equally important function.
Registration gives constructive notice to the whole world that ownership of the property has changed. It protects the buyer from subsequent purchasers, mortgagees, or other persons who may later acquire rights over the same property without knowledge of the earlier sale.
The Supreme Court reiterated this principle in Tamayo vs. Lacambra (G.R. No. 244232, November 03, 2020), where it ruled:
“As mentioned, registration is not essential for validity. It is not even a mode of acquiring ownership.
While registration is not essential for perfection or performance however, registration under the Property Registration Decree or P.D. 1529 would be prudent in order to give due notice to third persons regarding the change of ownership. Notably, while valid between the contracting parties, the non-registration of a sale will render the rights of a buyer/property owner vulnerable to an innocent purchaser for value. Nevertheless, since no innocent purchaser for value is involved in this case, the better right of the heirs of Lacambra must be sustained.”
Thus, while an unregistered sale remains valid between the parties, the buyer’s ownership may be defeated by the rights of an innocent purchaser for value who subsequently purchases and registers the property in good faith.
Does This Principle Also Apply to an Extrajudicial Settlement and Sale?
Yes.
When the heirs execute an Extrajudicial Settlement of Estate with Sale, the document may validly transfer ownership of the inherited property, provided all legal requirements have been satisfied. The failure to register the instrument does not, by itself, nullify either the settlement or the sale.
However, unless the document is registered, third persons dealing with the property may have no notice of the prior conveyance. Consequently, the buyer may encounter difficulties in transferring the title, asserting ownership against subsequent claimants, or protecting the property from conflicting transactions.
Why Prompt Registration Matters
Although registration is not a requirement for the validity of an Extrajudicial Settlement and Sale, it remains an indispensable step in protecting the buyer’s interests.
Prompt registration helps:
- establish priority over subsequent transactions involving the property;
- provide constructive notice to third persons;
- facilitate the issuance of a new certificate of title in the buyer’s name;
- minimize the risk of double sales or fraudulent transfers; and
- avoid future disputes concerning ownership.
Hence, while registration does not make the sale valid, it helps ensure that the buyer’s ownership is protected and enforceable against the rest of the world.