Bureau of Local Government Finance Opinion

December 29, 2011 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION 2nd Indorsement Respectfully returned to the OIC-Regional Director, Bureau of Local Government Finance, Department of Finance, Region VI, 2nd Floor, Philippine Veterans Bank Building, corner Valeria-Delgado Streets, Iloilo City, her 1st Indorsement dated May 19, 2010, forwarding the letter dated April 21, 2010, of Provincial Treasurer Nilda V. Generoso of Negros Occidental, raising the issue on whether an heir of a real property that is delinquent in real property taxes may be allowed to purchase the same on public auction. Subject letter cited Article 1491 of the Civil Code of the Philippines (R.A. No. 386) as amended, providing for the persons who are disqualified to purchase a property at public auction, which is hereunder quoted: "Art. 1491. The following persons cannot acquire by purchase, even at a public auction, either in person or through the mediation of another: (1) The guardian, the property of the person or persons who may be under his guardianship; (2) Agents, the property whose administration or sale may have been entrusted to them, unless the consent of the principal has been given; (3) Executors and administrators, the property of the estate under administration; (4) Public officers and employees, the property of the State or of any subdivision thereof, or of any government owned or controlled corporation, or institution, the administration of which has been entrusted to them; this provision shall apply to judges and government experts who, in any manner whatsoever, take part in the sale; (5) Justices, judges, prosecuting attorneys, clerks of superior and inferior courts, and other officers and employees connected with the administration of justice, the property and rights in litigation or levied upon an execution before the court within whose jurisdiction or territory they exercise their respective functions; this prohibition includes the act of acquiring by assignment and shall apply to lawyers, with respect to the property and rights which may be the object of any litigation in which they may take part by virtue of their profession; (6) Any others specially disqualified by law." ADEHTS The specific law that governs the public auction of real properties on account of real property tax delinquencies is R.A. No. 7160 or the Local Government Code of 1991, Section 260 thereof, provides: "SEC. 260. Advertisement and Sale. Within thirty (30) days after the service of the warrant of levy, the local treasurer shall proceed to publicly advertise for sale or auction the property or usable portion thereof as may be necessary to satisfy the tax delinquency and expenses of sale. The advertisement shall be effected by posting a notice at the main entrance of the provincial, city or municipal building, and in a publicly accessible and conspicuous place in the barangay where the real property is located, and by publication once a week for two (2) weeks in a newspaper of general circulation in the province, city or municipality where the property is located. The advertisement shall specify the amount of the delinquent tax, the interest due thereon and expenses of sale, the date and place of sale, the name of the owner of the real property or person having legal interest therein, and a description of the property to be sold. At any time before the date fixed for the sale, the owner of the real property or person having legal interest therein may stay the proceedings by paying the delinquent tax, the interest due thereon and the expenses of sale. . . . ." (emphasis ours) Section 260 grants the delinquent real property owner the right to settle the delinquent tax obligation prior to the actual conduct of the public auction or sale, by paying the total amount of the delinquent tax, the interest due thereon and the expenses of sale. In effect, the public auction or sale shall be cancelled. This is a statutory right which must not be denied of the delinquent owner. Public auction of real property is an enforcement of the lien created because of non-payment of real property tax. It is conducted by the local treasurer to collect the delinquent tax, the interest due thereon and the expenses incurred. The delinquent owner retains ownership of the real property subject of auction. Therefore, this Bureau is of the view that payment of the delinquent tax is allowed even at the auction stage, provided, the entire amount of the delinquent real property tax, the interest due thereon and the expenses of sale is paid. Necessarily, the public auction proceedings will be stopped. In case the delinquent owner failed to stay the auction proceedings pursuant to Section 260, the remedy is to exercise the statutory right of redemption pursuant to Section 261 of the same Local Government Code, as follows: "SEC. 261. Redemption of Property Sold. Within one (1) year from the date of sale, the owner of the delinquent real property or person having legal interest therein, or his representative, shall have the right to redeem the property upon payment to the local treasurer of the amount of the delinquent tax, including the interest due thereon, and the expenses of sale from the date of delinquency to the date of sale, plus interest of not more than two percent (2%) per month on the purchase price from the date of the sale to the date of redemption. Such payment shall invalidate the certificate of sale issued to the purchaser and the owner of the delinquent real property or person having legal interest therein shall be entitled to a certificate of redemption which shall be issued by the local treasurer or his deputy. From the date of sale until expiration of the period of redemption, the delinquent real property shall remain in the possession of the owner or person having legal interest therein who shall be entitled to the income and other fruits thereof. AHCcET The local treasurer or his deputy, upon receipt from the purchaser of the certificate of sale, shall forthwith return to the latter the entire amount paid by him plus interest of not more than two percent (2%) per month. Thereafter, the property shall be free from the lien of such delinquent tax, interest due thereon and expenses of sale." (emphasis ours) The one (1) year redemption period is reckoned from the date of sale or registration of the sale whichever is provided for in the real property tax ordinance of the province or city concerned. The redemption price consists of the delinquent tax, the interest due thereon and the expenses of sale, plus interest of 2% per month on the total purchase price from the date of sale or registration to the date of redemption. Be clarified accordingly. (SGD.) SALVADOR M. DEL CASTILLO OIC-Executive Director