How Do You Register a Deed of Usufruct?

Introduction

A deed of usufruct allows one person to use and enjoy real property while another person retains ownership, including the right to sell or encumber the property. The usufructuary generally receives the right of possession and enjoyment, while the owner keeps the naked title or bare ownership.

To make the arrangement effective against third persons and reflect it on the certificate of title, the parties should execute a proper deed, comply with registration requirements, and request its annotation with the appropriate Registry of Deeds. The process differs from a sale because a usufruct does not transfer ownership of the real property.

What Is a Usufruct?

Under Article 562 of the Civil Code of the Philippines, usufruct gives a person the right to enjoy property belonging to another, subject to the duty to preserve its form and substance unless the law or the instrument creating the usufruct provides otherwise.

A usufruct may be created by law, by an agreement or other inter vivos act, by a last will and testament, or by prescription under Article 563 of the Civil Code. It may cover the whole property, a portion of it, or its fruits. It may also be constituted for a fixed period, for life, or subject to a condition, depending on the terms of the instrument.

The instrument creating the usufruct controls the parties’ rights and duties. If the instrument is silent or incomplete, the applicable provisions of the Civil Code govern under Article 565.

What Rights Does the Usufructuary Receive?

The usufructuary ordinarily receives the rights to possess, use, and enjoy the property. The usufructuary is generally entitled to the natural, industrial, and civil fruits of the property, such as produce, rentals, or other income, unless the deed provides otherwise.

Article 572 of the Civil Code allows the usufructuary to personally enjoy the property, lease it to another, or transfer the usufructuary’s own right, even gratuitously. However, contracts entered into by the usufructuary generally end when the usufruct expires, subject to the statutory rule concerning leases of rural lands during the agricultural year.

In Hemedes, et al. v. Court of Appeals, et al., G.R. No. 107132, 8 June 1999, the Supreme Court explained that usufruct transfers the jus utendi and jus fruendi—the rights to use and enjoy the property—but not ownership. The owner retains the power to alienate, mortgage, or otherwise encumber the property, subject to the duty not to prejudice the usufructuary’s rights.

What Does the Property Owner Retain?

The property owner retains ownership or naked title. The owner may sell, mortgage, or otherwise encumber the property, provided that the transaction does not unlawfully impair the existing usufruct.

A buyer or mortgagee may therefore acquire an interest in the property subject to a properly constituted and annotated usufruct. The annotation gives notice of the usufructuary’s rights and helps prevent a third person from claiming that the property was acquired free from the recorded burden.

If the property is attached or sold judicially to satisfy the owner’s debt, the usufructuary is generally not required to pay the owner’s debt. Under the Civil Code, the owner may be liable to the usufructuary for the loss suffered because of the attachment or judicial sale.

How Should the Deed of Usufruct Be Prepared?

The deed should clearly identify the parties, the property, the nature and duration of the usufruct, and the rights and restrictions applicable to the usufructuary. The parties should avoid vague terms that may create disputes over possession, leasing, improvements, expenses, or termination.

A deed of usufruct should ordinarily state the following:

• Complete details of the parties: full names, civil status, citizenship, addresses, and tax identification information where required;
• Exact property description: title number, lot number, technical description, location, area, and the registered owner;
• Scope of enjoyment: whether the usufruct covers the entire property, a specific portion, or only specified fruits or income;
• Duration: a fixed period, the lifetime of the usufructuary, or another legally permissible term;
• Permitted use: residential, agricultural, commercial, or other use, together with any restrictions;
• Leasing and transfer: whether the usufructuary may lease the property or transfer the usufructuary’s right;
• Expenses and repairs: responsibility for taxes, insurance, ordinary repairs, extraordinary repairs, utilities, and improvements;
• Inventory and security: whether the usufructuary must submit an inventory and provide security before taking possession; and
• Termination and turnover: the events that end the usufruct and the procedure for returning possession to the owner.

Article 583 of the Civil Code generally requires the usufructuary, before enjoying the property, to prepare an inventory after notice to the owner and to provide security for the performance of the usufructuary’s obligations. The deed may address these requirements, but it should not be assumed that they are automatically waived without a legally sufficient basis.

Should the Deed Be Notarized?

Yes. The deed should be executed as a notarized public instrument, particularly because it concerns an interest in real property and will be submitted for registration or annotation.

The parties must personally appear before the notary, present competent proof of identity, sign the deed, and comply with the notarial requirements. Corporate parties should also secure the appropriate board or corporate authorization, while representatives must present a valid special power of attorney or other authority.

A notarized deed carries a presumption of regularity and due execution. In Hemedes, et al. v. Court of Appeals, et al., G.R. No. 107132, 8 June 1999, the Supreme Court held that a notarized deed cannot ordinarily be defeated by a simple denial of execution; clear, strong, and convincing evidence is required to overcome its evidentiary value.

How Is the Usufruct Annotated on the Title?

After execution and notarization, the parties should submit the deed to the Registry of Deeds that has jurisdiction over the property. The usual process includes the following steps:

1. Verify the title: Obtain a certified copy of the transfer certificate of title or original certificate of title and check the registered owner, existing annotations, liens, mortgages, adverse claims, and restrictions.
2. Prepare the deed: Ensure that the deed accurately describes the property and expressly states the duration, scope, and conditions of the usufruct.
3. Notarize the instrument: Have the parties execute and acknowledge the deed before a notary public with proper authority.
4. Secure supporting documents: Prepare the title, tax declaration, identification documents, proof of authority, and other documents requested by the Registry of Deeds.
5. File the registration request: Submit the deed and supporting papers to the Registry of Deeds and pay the assessed registration and annotation fees.
6. Address technical or documentary deficiencies: Comply with any written notice or requirement issued by the Registry of Deeds.
7. Obtain the annotated title or registration proof: Confirm that the usufruct and its principal terms have been properly entered in the title records.

The exact documentary requirements and fees may vary depending on the Registry of Deeds, the form of the transaction, the identity of the parties, and the property’s existing annotations. The parties should obtain the current checklist from the proper Registry of Deeds before filing.

Is a Certificate Authorizing Registration Required?

A deed of usufruct is not, by itself, a sale or transfer of ownership. In BIR Ruling No. 810-2018, the Bureau of Internal Revenue stated that a contract of usufruct that does not transfer ownership of real property does not constitute a sale, transfer, or disposition of the property. The ruling addressed a request for annotation and the treatment of the contract for tax purposes.

Nevertheless, the parties should not assume that no BIR document will ever be requested. The Registry of Deeds may require a BIR certification, tax clearance, or other proof depending on the transaction and prevailing administrative practice. The parties should therefore obtain written confirmation of the current requirements from the appropriate BIR office and Registry of Deeds.

The tax treatment may also differ if the document includes a sale, donation, waiver, transfer of ownership, consideration, or another taxable transaction. The deed should accurately reflect the parties’ true arrangement and should not combine distinct transactions without addressing their separate legal and tax consequences.

What Is the Effect of Annotation?

Annotation does not create ownership in the usufructuary. It records and gives notice of the usufructuary’s existing right of use and enjoyment.

Annotation is particularly important when the owner may later sell, mortgage, lease, or otherwise encumber the property. A properly recorded usufruct informs prospective transferees and creditors that the property is subject to the usufructuary’s rights.

In Hemedes, et al. v. Court of Appeals, et al., G.R. No. 107132, 8 June 1999, the Supreme Court recognized that the owner may mortgage property subject to usufruct. The owner’s power to encumber the property does not automatically eliminate the usufructuary’s right to use and enjoy it.

Can a Usufructuary Have Exclusive Possession?

Yes, if the deed grants exclusive possession or language that necessarily implies exclusivity. The parties should expressly state whether the owner and other occupants may continue using the property.

In Fernandez, et al. v. Fernandez, G.R. No. 266145, 30 January 2024, the Supreme Court held that a grant of “full control and possession” during the usufructuary’s lifetime could mean exclusive possession even though the word “exclusive” did not appear in the agreement. The Court reasoned that possession and control could not be “full” if the parties intended it to be shared with a co-owner.

If the deed is intended to permit the owner or other family members to occupy the property, that reservation should be written clearly. Otherwise, continued possession by another person may later be treated as possession by tolerance, which can be withdrawn by a valid demand to vacate.

When Does the Usufruct End?

The usufruct ends according to the terms of the deed and the Civil Code. Common grounds include the death of the usufructuary, expiration of the agreed period, fulfillment or failure of a condition, merger of the usufruct and ownership in one person, total loss of the property, renunciation, or prescription.

A lifetime usufruct generally ends upon the death of the usufructuary unless the instrument provides a legally valid different arrangement. If the usufruct is granted to several persons successively or jointly, the deed should state what happens upon the death of one usufructuary.

Article 606 of the Civil Code provides that a usufruct granted for the period before a third person reaches a specified age continues for the number of years stated, even if that third person dies before the period expires, unless the usufruct was expressly granted solely in consideration of that person’s existence.

After termination, the parties should secure the cancellation of the annotation with the Registry of Deeds. Supporting documents may include a death certificate, proof of expiration, a deed of cancellation, a court order, or another document establishing that the usufruct has ended.

Common Examples

Lifetime residential usufruct. A parent transfers naked ownership of a house to a child but reserves a lifetime usufruct. The parent may occupy and enjoy the house during life, while the child becomes the owner subject to the parent’s recorded right.

Usufruct over rental income. The owner may grant another person the right to receive rentals from an apartment building while retaining ownership. The deed should identify who may lease the units, collect rent, pay expenses, and enforce the leases.

Usufruct with retained power to mortgage. The owner may reserve the right to mortgage the property. The mortgage documents should disclose the usufruct and require recognition of the usufructuary’s rights where appropriate.

Limited-use usufruct. The parties may restrict the usufruct to residential use and prohibit business operations, subleasing, construction, or alteration of the property. These limitations should be stated in precise terms.

Practical Precautions Before Filing

• Obtain a recent certified title and inspect every existing annotation.
• Confirm that the person creating the usufruct is the registered owner or has sufficient authority.
• Check whether the property is mortgaged, co-owned, leased, subject to estate proceedings, or covered by restrictions.
• Define possession, access, leasing, income, repairs, taxes, improvements, and insurance in the deed.
• State whether the usufructuary must submit an inventory or provide security.
• Coordinate with the Registry of Deeds and the BIR before signing if the transaction includes any sale, donation, or transfer of ownership.
• Retain the official receipts, filing documents, notices, and proof of annotation.

Conclusion

Registering a deed of usufruct over Philippine real estate involves more than signing an agreement. The parties should create a precise notarized instrument, verify the title, comply with the current requirements of the Registry of Deeds and relevant tax authorities, and secure annotation of the usufruct.

A properly documented usufruct preserves the owner’s naked title while protecting the usufructuary’s right to possess, use, and enjoy the property. Clear terms on duration, exclusivity, leasing, expenses, restrictions, and termination can prevent disputes and make later transfers or cancellation of the annotation easier.

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