Improvements - Tax Declaration

Once upon a time, a seller was in the final stages of selling their house. Everything went smoothly until they requested a certified copy of the tax declaration.

When agents of the seller tried to procure a certified tax declaration, the city assessor said they would send an appraiser to check on the improvements of the house.

And so, the appraiser dropped by and started measuring. He discovered that the improvement stated in the original tax declaration was understated by roughly 800 sqm. Thus, the City Assessor imposed real property tax (RPT) and penalties of over a million pesos for the undeclared extension. This amount included an arbitrary number of years for which the RPT wasn't paid.

See, when owners expand their homes (even if it were just to cement a portion of the garden), they would have to consequently update the tax declaration of the improvement to include the area of expansion. The city would then impose real property tax on the extension.

"How can that be??" the seller complained. "I never constructed anything from the time I acquired the property!"

As it turned out, the previous owner constructed the extension. That owner never updated the tax declaration, and the seller was the one left holding the bag.

End of story.

Lessons:

1. Update your property's tax declaration when doing a renovation. The assessment is different for constructing a building, a swimming pool, or merely cementing land.

2. When purchasing a property, have an Engineer measure the improvement to ensure it coincides with the area stated in the tax declaration.