Good faith

Dear Atty. Joji,

I acquired a parcel of land and built my family’s house on it. At the time I constructed the house, I honestly believed that I owned the property and had no knowledge that another person had a better claim over the land. A dispute subsequently arose, and the court eventually determined that the land actually belongs to another person. I spent a substantial amount of my own money constructing the house. Since I built it in the honest belief that the land belonged to me, can the landowner simply take possession of both the land and my house without paying me anything?

Ramon

Dear Ramon,

The law recognizes the rights of a builder in good faith or a person who builds on land believing that he or she owns the property or has a valid claim of title over it, without knowledge of any defect in his or her title. Article 448 of the Civil Code governs situations where a person builds, plants, or sows on the land of another in good faith which provides:

Art. 448. 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.

The owner of the land is generally given two options.

First, the landowner may choose to appropriate the house or other improvement as his or her own, but only after paying the builder the proper indemnity contemplated under Articles 546 and 548 of the Civil Code.

Second, instead of appropriating the improvement, the landowner may require the builder to purchase the land. However, the builder cannot be compelled to purchase the land when the value of the land is considerably greater than the value of the building. In such a case, the builder may instead be required to pay reasonable rent if the landowner does not choose to appropriate the building after paying the proper indemnity.

It is important to emphasize that the choice generally belongs to the landowner, not to the builder. This follows the principle of accession, under which the land is considered the principal and the building or improvement the accessory. Nevertheless, the landowner cannot simply refuse to make either choice and compel a builder in good faith to remove the structure.

The law seeks to avoid unjustly enriching either party. While the rights of the true landowner are respected, Article 448 likewise protects a builder who invested in the property under an honest belief of ownership.

Ultimately, the rights of the parties will depend on whether good faith is sufficiently established, the landowner’s exercise of the options provided by law, and the proper valuation of the land and improvements.

Hope this helps.

Atty. Joji Alonso