The real estate industry in the Philippines is remarkably transforming. With urbanization and a growing spending population heightening the need for residential and commercial properties, real estate is one of the most dynamic sectors of the country’s economy.

However, this rapid expansion also increases the demand for well-defined regulations and agreements to protect buyers and sellers in the real estate market. Understanding the various types of real estate contracts in the Philippines is crucial for buyers and sellers. These contracts serve as the backbone of real estate transactions, outlining the rights and responsibilities of all parties involved.

Whether you’re selling, renting, or buying property in the Philippines, these agreements secure your investments and ensure you know the terms you agree to. From sales contracts to lease agreements, this blog tackles what you need to know before purchasing and signing the papers for a property.

4 Types of Real Estate Contracts in the Philippines

Again, real estate contracts afford buyers and sellers in the Philippines clarity and rights protection. They also help you avoid property-buying mistakes that you may regret in the long run. You’ll find more information about each contract below.

1. Power of attorney

A power of attorney (POA) is a legal document that legalizes one party (the principal) to grant another party (the attorney-in-fact or agent) the authority to act on their behalf. The POA allows the agent to perform different tasks related to a real estate transaction, such as signing documents, representing the principal in negotiations, and handling financial transactions.

The document specifies the scope of authority granted, including limitations and the duration of the POA. It may be specific to a single transaction or broader for ongoing management.

Suppose you’re the principal party in an agreement but you're out of town or the country and unable to personally affix your signature to a real estate contract. A POA can grant legal authority to your representative to sign on your behalf. Your representative can also receive payments and complete other transactions for you.

Additionally, a POA is applicable if you're incapacitated due to an illness, mental disability, or other conditions that may impede your ability to fulfill the required actions.

2. Purchase agreement

A purchase agreement, sometimes called a contract to sell or sales contract, is fundamental when buying property in the Philippines. It outlines the terms and conditions under which the seller transfers ownership to the buyer. It also protects the seller's right to receive payment.

This contract includes details like the identity of the parties, description of the property, purchase price, payment terms, contingencies, terms of possession, and timeline for the transaction. It often involves a down payment and principal loan. If applicable, the agreement details other items part of the sale, such as appliances and equipment.

Besides the contract price, the purchase agreement may consist of other fees like real estate taxes, business taxes, documentary stamp taxes, and transfer taxes.

In a purchase agreement, a buyer usually agrees to purchase a house following a successful home inspection and financing arrangement within a specified period.

3. Lease agreement

A lease agreement is when one party (the lessor or landlord) agrees to rent a property to another party (the lessee or tenant) under specific terms. The lessee gains the right to use and occupy the property for the agreed-upon terms, while the lessor retains ownership and receives rent payments.

The agreement includes the rent amount, lease duration, maintenance and repairs responsibilities, security deposit requirements, and terms for termination or renewal. This arrangement is common in the country, especially among young working individuals who prefer to rent rather than buy. In a typical lease agreement, the landlord rents an apartment to the tenant for at least six months or one year.

After completing the contract, the tenant may renew it. But sometimes, it can become an open contract following this period, which means there is no minimum time to rent the property.

4. Real estate assignment contract

This contract allows you to initially secure a property through a purchase contract and subsequently transfer it to another party, should you wish to do so. If you’re the investor, you don't obtain the actual property title through this arrangement.

For example, you purchase a condo unit for PHP 8 million. Then, you assign your contract rights to someone else for a specific fee. This individual now steps into your position to complete the condo purchase for the original agreed-upon price.

Closing Your Philippine Property Deals

When venturing into real estate in the Philippines, you need a firm grasp of the various types of real estate contracts in the country.

Power of attorney authorizes one person (the attorney or agent) to act on behalf of another (the principal) in real estate transactions. A purchase agreement outlines the terms and conditions for property transactions in the Philippines.

A lease agreement is a contract between a lessor (landlord) and lessee (tenant) that grants the lessee the right to occupy the property while the lessor retains ownership and receives rent payments.

Lastly, a real estate assignment contract enables an investor to secure a property through a purchase contract and then transfer the rights to another party, allowing them to complete the purchase at the initially agreed-upon price, without obtaining the actual property title themselves.

These contracts give you the necessary framework to protect your investment, ensuring clarity, security, and legal compliance in property transactions.

If you're ready to find your dream property, visit OnePropertee. Whether you’re looking for your ideal home, an investment opportunity, or a new business location, OnePropertee is here to help. Our marketplace offers numerous listings for your specific needs. You can also use our platform to apply for home loan assistance. Reach out to OnePropertee, and explore real estate in the Philippines today!