You Built on Someone Else's Land in Good Faith: What Now?
Quick answer
If you built a house on land that turns out to belong to someone else, and you honestly did not know of any flaw in your claim to the land, you are a "builder in good faith". Under Article 448 of the Civil Code, the landowner then has two choices: take the house after paying you the indemnity the law requires, or make you pay the price of the land. The landowner cannot simply order the house torn down. If you built in bad faith, the rules are much harsher.
Who is a builder in good faith?
The Civil Code does not define the term in one sentence, but the Supreme Court has. In Spouses Padilla v. Malicsi (2016), it said a builder in good faith is one "who was not aware of a defect or flaw in his or her title when he or she introduced improvements on a lot that turns out to be owned by another." In Spouses Espinoza v. Spouses Mayandoc (2017), the Court added that the builder must claim to own the land, that is, possess it "in the concept of owner", and be unaware of any flaw in the title or the way it was acquired.
Good faith is presumed, but the builder still has to back up the claim. In Padilla, the Court said: "It is not enough to invoke the ordinary presumption of good faith". The builders there relied on what another person told them and "did not examine the tax declarations or the title to the property before they built on it." The Court held they were not builders in good faith, so Article 448 did not protect them.
The term is also explained in builder in good faith.
What are the landowner's options?
Article 448 gives the rule:
The owner of the land on which anything has been built, sown or planted in good faith, shall have the right to appropriate as his own the works, sowing or planting, after payment of the indemnity provided for in articles 546 and 548, or to oblige the one who built or planted to pay the price of the land, and the one who sowed, the proper rent. However, the builder or planter cannot be obliged to buy the land if its value is considerably more than that of the building or trees. In such case, he shall pay reasonable rent, if the owner of the land does not choose to appropriate the building or trees after proper indemnity. The parties shall agree upon the terms of the lease and in case of disagreement, the court shall fix the terms thereof.
In plain words, the landowner chooses:
- Keep the house and pay the builder the indemnity, or
- Sell the land to the builder.
The choice belongs to the landowner, not the builder. In Padilla, the Court repeated an earlier ruling that the landowner "cannot refuse to exercise either option and compel instead the owner of the building to remove it from the land." When the courts have not yet fixed the land's value, they may first have to determine it. In Espinoza, the Court agreed that the trial court should let the landowners choose their option and assess the current fair market value of the land.
What if the land is worth much more than the house?
Then the builder cannot be forced to buy it. If the landowner does not take the house, the builder pays reasonable rent. The two sides agree on the lease terms, and if they cannot agree, the court fixes them (Article 448).
What does the builder get back if the owner keeps the house?
Article 448 points to Articles 546 and 548:
Necessary expenses shall be refunded to every possessor; but only the possessor in good faith may retain the thing until he has been reimbursed therefor.
Useful expenses shall be refunded only to the possessor in good faith with the same right of retention, the person who has defeated him in the possession having the option of refunding the amount of the expenses or of paying the increase in value which the thing may have acquired by reason thereof.
Expenses "for pure luxury or mere pleasure" are not refunded, but the builder may remove the ornaments if this does not damage the main property and the owner does not prefer to pay for them (Article 548).
What if the builder acted in bad faith?
A builder who is not in good faith, for example one who knew that the land belonged to someone else, is treated differently. Article 449 says:
He who builds, plants or sows in bad faith on the land of another, loses what is built, planted or sown without right to indemnity.
The landowner may instead demand demolition at the builder's expense, or make the builder pay the price of the land (Article 450), and may claim damages (Article 451). The builder in bad faith is refunded only the necessary expenses for preserving the land (Article 452).
If both acted in bad faith, Article 453 treats them as if both had acted in good faith. The landowner is in bad faith when the building was done "with his knowledge and without opposition on his part."
Does this apply to a wall built slightly over the boundary?
It can. In Tecnogas Philippines Manufacturing Corp. v. Court of Appeals (1997), part of a building and a wall stood on the neighbor's lot because of "a very slight deviation of the erected wall". The Court said this error was "consistent with good faith" on the facts, and that a buyer of the building stepped into the seller's shoes, including the right to make the landowner choose between the two options of Article 448. The case was sent back to the trial court to determine values, including the fair price of the land.
The Court has also treated relatives who built with the owner's consent as builders in good faith, as described in Padilla. Whether that applies to a particular family depends on the facts.
See also the topic page on land and property disputes.
How does this work in real life?
These are made-up examples to show how the rules work. They are not advice for any real case.
Nestor bought a lot under a notarized deed and built a house. Years later a court finds that the lot belongs to Rosa. If Nestor did not know of the flaw, Rosa must choose: pay for the house as Articles 448 and 546 require, or make Nestor buy the land. She cannot simply have the house torn down.
Same facts, but the lot is worth far more than the house. Nestor cannot be forced to buy it. If Rosa does not take the house, Nestor pays reasonable rent, on terms they agree or the court fixes.
Ben built on a lot after someone told him she owned it. He never checked the title or the tax declaration. As in Padilla, a court may find he was not in good faith, and under Article 449 he may lose the house without indemnity.
When do you need a lawyer?
Talk to a lawyer before you build on land whose title you have not checked, as soon as someone claims the land under your house, or if you are a landowner who has found a building on your lot. Good faith, the value of the land and the value of the house all have to be proved, and the outcome depends on the evidence.
If you cannot afford a lawyer, see Free legal help in the Philippines. The full text is on the Article 448 page.
Which provisions does this answer rest on?
Frequently asked questions
What happens if I built a house on land that is not mine?
It depends on good faith. If you did not know of any flaw in your title, Article 448 of the Civil Code lets the landowner either take the house after paying the indemnity the law requires, or make you buy the land. If you built in bad faith, Article 449 says you lose what you built without indemnity.
Who chooses between paying for the house and selling the land?
The landowner. In Spouses Padilla v. Malicsi (2016), the Supreme Court said the choice belongs to the owner of the land, but the owner must choose one of the two options.
Can the landowner just order the house demolished?
Not if the builder was in good faith. The Supreme Court has said the landowner cannot refuse both options and instead force the builder to remove the building. The Civil Code gives the landowner the option of demolition at the builder's expense against a builder in bad faith (Article 450).
Can I be forced to buy the land?
Not if the land is worth considerably more than the house. Article 448 says that in that case the builder pays reasonable rent if the owner does not take the house, and the court fixes the terms if the parties cannot agree.
Am I in good faith just because I was told the land was for sale?
Not necessarily. In Padilla, builders who relied on another person's word and did not check the title or tax declarations before building were held not to be in good faith.
What do I get back if the owner takes the house?
Under Article 546, necessary expenses are refunded, and useful expenses are refunded to a possessor in good faith, who may keep the property until paid. For useful expenses, the owner may pay either the amount spent or the increase in value. Luxury expenses are not refunded (Article 548).
General information, not legal advice. For your case, ask a lawyer, the Public Attorney's Office (PAO) or the agency.
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