1. Negotiate and Agree on Payment Terms

  • Clearly outline the schedule of payments, including:
    • Total purchase price.
    • Amount of down payment.
    • Subsequent payment amounts and due dates.
    • Penalties or interest for late payments (if applicable).
  • Discuss whether possession of the property will be transferred after full payment or at some earlier stage.

2. Draft a Staggered Payment Agreement

  • Use a legally binding Contract to Sell to document the staggered payment terms. This document should include:
    • The payment schedule and amounts.
    • Consequences of failure to meet the payment terms (e.g., forfeiture of payments or cancellation of the contract).
    • Conditions for the transfer of ownership (usually upon full payment).
    • A clause stating that ownership/title remains with the seller until all payments are made.

3. Require the Buyer to Sign a Promissory Note

  • For additional assurance, ask the buyer to sign a Promissory Note acknowledging their commitment to the staggered payments. This note should reference the Contract to Sell and payment terms.

4. Provide Official Receipts for Each Payment

  • Issue an official receipt for each installment the buyer pays. This creates a clear record of payments and reduces the risk of disputes.

5. Include a Forfeiture Clause

  • To protect yourself, include a clause in the Contract to Sell that specifies:
    • If the buyer fails to meet the payment schedule, you have the right to cancel the contract.
    • Any payments already made may be forfeited as liquidated damages, depending on the terms agreed upon.

6. Retain Ownership Until Full Payment

  • Make it clear in the Contract to Sell that:
    • The title of the property will not be transferred until the buyer has completed all payments.
    • Possession of the property may also be withheld until full payment (unless you agree otherwise).

7. Consult a Lawyer

  • To avoid potential disputes or issues, have the Contract to Sell and all related documents reviewed by a legal professional. This ensures compliance with Philippine laws and safeguards your interests.

8. Monitor Payments Closely

  • Keep detailed records of all payments received, including dates and amounts. Use an Excel sheet or a basic accounting tool to track installment progress.
  • Send reminders to the buyer before each payment due date.

9. Transfer Title Upon Completion

  • Once the buyer completes all payments:
    • Execute a Deed of Absolute Sale to formally transfer ownership.
    • Assist the buyer in transferring the title to their name and paying associated taxes and fees (capital gains tax, documentary stamp tax, etc.).

Example Clause for Staggered Payment:

Payment Terms:

  1. The buyer agrees to pay a down payment of PHP 500,000 upon signing the Contract to Sell.
  2. The remaining balance of PHP 2,000,000 will be paid in monthly installments of PHP 100,000 starting January 15, 2025.
  3. Payments must be made on or before the 15th of each month.

Forfeiture Clause: If the buyer fails to pay two consecutive installments without prior notice and approval from the seller, this agreement will be considered void, and all payments made shall be forfeited as liquidated damages.