What Is the Effect of an Unregistered Deed of Sale on Third Parties?
Introduction
A deed of sale may be valid between the seller and buyer even if it has not yet been registered. However, the same deed generally cannot bind innocent third parties who later acquire an interest in the property or register a lien over it.
This distinction is especially important in transactions involving registered land. A notarized deed proves the parties’ agreement and may transfer rights between them, but registration is the operative act that affects the property as against third persons. Until registration, the buyer’s rights remain vulnerable to a subsequent purchaser in good faith, a registered creditor, or another person who relies on the certificate of title.
What Law Governs the Effect of Registration?
Section 51 of the Property Registration Decree provides that an owner of registered land may convey, mortgage, lease, or otherwise deal with the property. However, a deed or other voluntary instrument affecting registered land operates only as a contract between the parties until it is registered.
The same provision declares that registration is the operative act to convey or affect registered land insofar as third persons are concerned. The registration must be made with the Register of Deeds having jurisdiction over the place where the property is located. See [Property Registration Decree, P.D. No. 1529](#L3.62).
Article 709 of the Civil Code expresses the related rule that titles of ownership and other rights over immovable property that are not duly recorded in the Registry of Property do not prejudice third persons. See [Civil Code of the Philippines, R.A. No. 386](#L2.743).
Is an Unregistered Deed of Sale Valid Between the Parties?
Generally, yes. Registration is ordinarily not required to make the sale valid between the seller and buyer, provided that the deed complies with the substantive and formal requirements of a valid contract of sale.
As between the parties, an unregistered deed may establish the buyer’s contractual and proprietary rights against the seller. The buyer may, for example, bring an action to compel the seller to honor the sale, deliver the necessary documents, or cause the transfer to be registered.
The Supreme Court has explained that registration primarily serves to notify persons who are not parties to the transaction. Thus, a notarized deed of sale may be valid between the contracting parties even before registration. See *Arao, et al. v. Eclipse, et al.*, G.R. No. 211425, 2018, [excerpt](#J3.14).
Why Does the Deed Not Bind Innocent Third Parties?
Under the Torrens system, third parties are generally entitled to rely on the certificate of title. From their perspective, the property remains owned by the person whose name appears on the title unless the deed of conveyance has been registered or the third party had actual knowledge of the prior transaction.
Consequently, an unregistered deed may be binding between the seller and buyer but ineffective against an innocent third party who subsequently acquires the property or registers an interest over it.
In *Bulaong v. Gonzales*, General Register No. 156318, 2011, the Supreme Court stated that an unregistered sale is binding only between the seller and buyer and does not affect innocent third persons. The Court also emphasized that a levy can attach only to the actual interest of the judgment debtor existing at the time of the levy. See [*Bulaong v. Gonzales*](#J1.25).
Effect on a Subsequent Buyer
A subsequent buyer may prevail over an earlier buyer whose deed was not registered if the subsequent buyer is an innocent purchaser for value. This usually requires proof that the later buyer:
- purchased the property for valuable consideration;
- acted in good faith;
- relied on a clean certificate of title; and
- had no actual or constructive notice of the earlier sale or another adverse claim.
Good faith is not determined solely at the time of signing the deed. The buyer must generally maintain good faith until the conveyance is registered. If the buyer learns of a prior sale, adverse claim, pending litigation, or other defect before registration, the buyer may lose the protection accorded to an innocent purchaser.
In *Duenas, et al. v. Metropolitan Bank and Trust Company, et al.*, General Register No. 209463, 2022, the Supreme Court held that a buyer must remain in good faith from purchase until registration. A deed executed before registration remains binding only between the parties, and the buyer cannot expect third persons to be bound by a transaction that was not yet recorded. See [*Duenas v. Metropolitan Bank and Trust Company*](#J2.58).
When Does a Subsequent Buyer Lose Good-Faith Protection?
A later buyer cannot rely blindly on the title when circumstances should prompt further inquiry. The buyer may lose good-faith status upon learning that another person:
- claims ownership of the property;
- is occupying or possessing the property;
- has already purchased the property;
- has filed a case involving the property; or
- has placed an adverse claim, notice, or other warning on the title.
Actual possession by someone other than the registered owner is ordinarily a circumstance that requires investigation. A buyer who ignores such circumstances may be treated as having constructive notice of the possessor’s claim.
In *Tamayao, et al. v. Lacambra, et al.*, General Register No. 244232, 2020, the Court held that a subsequent buyer who knew of the prior sale and the first buyer’s possession could not be considered an innocent purchaser for value. The later buyer therefore acquired no better right merely because the later transaction was registered. See [*Tamayao v. Lacambra*](#J5.24).
Effect on a Registered Levy or Creditor’s Lien
An unregistered sale may also be defeated by a properly registered levy, attachment, or lien in favor of a creditor who had no actual knowledge of the prior sale.
Section 52 of P.D. No. 1529 provides that a registered conveyance, mortgage, lien, attachment, order, judgment, or other instrument affecting registered land constitutes constructive notice to all persons from the time of registration. See [Property Registration Decree, P.D. No. 1529](#L3.62).
In *Pineda v. Arcalas*, General Register No. 170172, 2007, the Supreme Court held that an unrecorded deed operates merely as a contract between the seller and buyer insofar as third persons are concerned. The Court further recognized the rule that a duly registered levy on execution takes precedence over a prior unregistered sale. See [*Pineda v. Arcalas*](#J6.10).
The reason is that the creditor or judgment lienholder is entitled to rely on the public record. If the seller remains the registered owner and the earlier sale is not recorded, the property may appear available for attachment or execution.
Important Exceptions to the Registration Rule
The registration rule does not automatically protect every subsequent buyer or creditor. An unregistered conveyance may still bind a third person who had actual knowledge of the transaction.
Recognized categories of persons who may be bound by an unregistered conveyance include:
- the grantor or seller;
- the grantor’s heirs and devisees; and
- third persons who actually knew of the conveyance.
In *Arao, et al. v. Eclipse, et al.*, the Court explained that nonregistration does not necessarily defeat the conveyance against the grantor, the grantor’s heirs and devisees, or third persons who had actual notice of the transaction. See [*Arao v. Eclipse*](#J3.14).
Similarly, in *Cano, et al. v. Cano, et al.*, General Register No. 188666, 2017, the Court recognized that an unregistered donation may remain valid between the parties and may bind persons who had actual knowledge, although it generally cannot prejudice innocent third parties. See [*Cano v. Cano*](#J4.18).
Notarization Is Not a Substitute for Registration
Notarization gives the document a public character and may make it admissible without further proof of authenticity. It does not, by itself, provide the same protection against third parties as registration with the Register of Deeds.
A notarized deed may therefore establish the parties’ agreement while remaining ineffective against an innocent subsequent buyer or registered creditor. The buyer should not treat notarization as the final step in acquiring protection over registered land.
The distinction is also reflected in BIR administrative practice. BIR Ruling No. 028-2024 recognizes that a private conveyance may be valid between the parties, while registration and the required public documentation are relevant to its effect on third persons and to the tax and registration process. See [BIR Ruling No. 028-2024](#I1.3).
Registration, Constructive Notice, and the eCAR Requirement
Registration with the Register of Deeds creates constructive notice to the public from the time the instrument is registered, filed, or entered. This allows third parties to determine from the title and registry whether the property has been sold, mortgaged, attached, or otherwise encumbered.
For the Register of Deeds to register a transfer of ownership, the applicable tax requirements must also be satisfied. RR No. 3-2019 requires the corresponding electronic Certificate Authorizing Registration, or eCAR, before registration of a deed or instrument transferring ownership of real property. See [RR No. 3-2019](#I2.6).
The eCAR requirement is an administrative condition for registration and tax compliance. It does not change the basic civil-law distinction between the validity of the sale between the parties and its enforceability against third persons.
Common Scenarios
| Situation | Likely Legal Effect |
|---|---|
| Buyer has a notarized deed, but it remains unregistered | The sale may be valid against the seller but generally does not bind innocent third parties. |
| Seller later sells the land to an innocent buyer who registers first | The later registered buyer may prevail, subject to proof of good faith and value. |
| Creditor registers a levy before the earlier sale is registered | The registered levy may take precedence if the creditor had no actual knowledge of the sale. |
| Later buyer knows of the earlier sale or sees the first buyer in possession | The later buyer may be denied innocent-purchaser protection despite later registration. |
| Seller or the seller’s heirs challenge the unregistered sale | The buyer may enforce the sale directly against the seller or persons legally bound by the transaction. |
Recommended Steps for a Buyer
- Verify the title. Obtain a certified true copy from the Register of Deeds and check the registered owner, annotations, liens, adverse claims, notices of lis pendens, and pending transactions.
- Inspect the property. Determine who occupies or possesses the land and ask occupants about their claim or relationship with the registered owner.
- Investigate inconsistencies. Confirm the seller’s identity, authority, civil status, succession documents, tax declarations, and ownership history.
- Complete tax requirements. Secure the applicable tax clearances, certificates, and eCAR before presenting the deed for registration.
- Register without delay. Preserve proof of filing, payment, and entry in the Primary Entry Book or electronic registration system.
A buyer who delays registration assumes the risk that another person may register a conflicting transaction, levy, attachment, or other encumbrance first. The risk is greater when the seller remains the registered owner and the buyer has no annotation or adverse claim on the title.
Final Observations
An unregistered deed of sale is not necessarily void. It may be valid and enforceable between the seller and buyer, and it may bind persons who had actual knowledge of the transaction. Its weakness lies in its effect on third parties who acquire rights in good faith and rely on the public registry.
The safest rule for buyers is simple: execute the deed properly, comply with tax requirements, and register the conveyance as soon as possible. Until registration, ownership acquired under the deed may remain exposed to a subsequent innocent purchaser or a registered creditor’s lien.
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