Builder in Bad Faith: Forfeiture of Improvements Under Philippine Law

Property disputes often arise when one party constructs improvements on land that does not belong to them. Philippine law draws a sharp distinction between a builder in good faith and a builder in bad faith. The consequences for the latter are severe: a builder in bad faith forfeits everything he has built, without any right to indemnity or reimbursement.

This article explains the legal basis for this rule, its practical implications, and why the law imposes such a strict sanction.

Legal Basis Under the Civil Code

The governing provisions are found in the Civil Code of the Philippines, particularly Articles 449 and 450.

Article 449 – Forfeiture Without Indemnity

Article 449 provides:

“He who builds, plants or sows in bad faith on the land of another, loses what is built, planted or sown without right to indemnity.”

This provision leaves no room for interpretation. When construction is undertaken with knowledge that the land belongs to another, or despite awareness of defects in one’s claim of ownership, the law imposes an automatic penalty: total loss of the improvements.

Article 450 – Rights of the Landowner

Article 450 further strengthens the position of the lawful landowner:

“The owner of the land on which anything has been built, planted or sown in bad faith may demand the demolition of the work… at the expense of the person who built… or he may compel the builder to pay the price of the land…”

Under this provision, the landowner has several options:

• Demand demolition or removal of the improvements at the builder’s expense;

• Compel the purchase of the land by the builder; or

• Require restoration of the property to its former condition.

The choice belongs exclusively to the landowner.

What Constitutes “Bad Faith”?

In legal contemplation, bad faith is not mere error or negligence.

A builder is deemed in bad faith when he:

• Knows that the land is owned by another;

• Is aware of defects in his title or right of possession; or

• Continues construction despite objections, warnings, or a pending ownership dispute.

Philippine jurisprudence consistently holds that knowledge or conscious disregard of another’s rights is sufficient to establish bad faith.

No Reimbursement, Even for Useful Improvements

Unlike a builder in good faith, who may be entitled to reimbursement under Articles 448 and 546, a builder in bad faith has no right to compensation whatsoever—even if the improvements increased the value of the land.

The law denies:

• Reimbursement for construction costs;

• Compensation for labor or materials; and

• Claims based on equity or unjust enrichment.

The principle is well-settled: equity cannot be invoked to reward wrongdoing.

Jurisprudential Consistency

The Supreme Court has consistently affirmed this doctrine, ruling that:

A builder in bad faith forfeits the improvements without any right to indemnity, and the landowner may appropriate them or demand their removal.

This reflects the judiciary’s firm stance on protecting property rights and discouraging unlawful occupation.

Policy Considerations

The strict treatment of builders in bad faith serves important legal and social objectives:

1. Protection of property ownership, particularly under the Torrens system;

2. Deterrence against land grabbing and opportunistic construction; and

3. Preservation of order and predictability in property relations.

Allowing reimbursement would undermine these objectives and encourage disregard for lawful ownership.

Practical Guidance

Before undertaking any construction, individuals and developers should ensure:

• Clear proof of ownership or lawful authority to build;

• Due diligence on land titles and boundaries; and

• Proper documentation and written consent when building on land owned by another.

Failure to do so may result in total financial loss of the improvements.

Conclusion

Philippine law is unequivocal: a builder in bad faith loses what he has built, without indemnity or reimbursement. This rule underscores the fundamental principle that no one may profit from an act done in bad faith or in violation of another’s property rights.

For landowners and builders alike, understanding this doctrine is essential to avoiding costly and irreversible consequences.

Source: Ziggurat Real Estate

Modernization key as tenants raise standards

Tenant demand for resilient, green-certified buildings is pushing Philippine developers to modernize projects and tighten compliance, analysts said.

Property developers must ensure that their projects are updated with current building codes and leverage the expertise of third-party evaluators as more tenants prioritize safety and sustainability in their choice of office and residential spaces.

“Global occupiers increasingly prioritize buildings that are disaster-resilient, energy-efficient, and structurally sound, as this supports business continuity, employee safety, and talent retention,” Erika Recomite-Manasan, senior manager for commercial leasing at Leechiu Property Consultants, said.

She said developers that consistently modernize and upgrade their buildings are more likely to attract and retain occupiers compared to outdated properties.

The need for compliance was underscored last month when the Department of Environment and Natural Resources (DENR) flagged the Monterrazas de Cebu residential project for multiple violations of environmental standards.

Developers must secure all required permits and clearances before construction, Ms. Manasan said. These include zoning and building permits from local governments, an environmental compliance certificate from the DENR, utility clearances, an occupancy permit and a fire safety certificate.

Developers must likewise comply with geotechnical and soil testing, structural analysis under the Department of Public Works and Highways and occupational safety and health requirements from the Department of Labor and Employment.

“We advise occupiers to seek the expertise of independent third-party organizations (architectural and engineering firms) to vet the structural integrity of the building, its resilience to fire, earthquake, and flood,” she said.

Ms. Manasan also noted that more tenants are favoring developments with green building certifications amid the looming climate crisis.

These include the US Green Building Council’s LEED (leadership in energy and environmental design) certification; the International WELL Building Institute’s WELL certification; and the International Finance Corp.’s EDGE (excellence in design for greater efficiencies) certification.

Nigel Paul C. Villarete, senior adviser at technical advisory group Libra Konsult, cited the need for local governments to regularly review their comprehensive land use plans  to ensure that real estate developments comply with environmental, social and economic goals.

“It has to be revisited as frequently as possible, because development is constant, especially in urban areas like Metro Manila, Metro Cebu and other metropolitan areas,” he said.

Source: Business World

New Megacities Lie in the Path of Devastating Floods

Cyclone Ditwah brought Sri Lanka’s most damaging flooding in 20 years.

 Humanity’s future lies in some of the most vulnerable spots on the planet.

We’ve seen that in stark relief of late. A United Nations report last month concluded that the world’s population is increasingly crowded into a group of often low-lying, middle-income megacities in Asia and Africa.

Jakarta and Dhaka dethroned Tokyo’s long-held status as the world’s biggest city, with 42 million, 37 million and 33 million people respectively.1Mexico City and Sao Paulo were overtaken by Shanghai and Cairo among the global top 10. Bangkok, Delhi, Karachi, Lagos, Luanda and Manila were some of the fastest growing among metropolises of more than 10 million.

Many of these very regions have been hit by a devastating run of floods in recent weeks. The monsoon belt from Southeast Asia to West Africa is at the same time the swath of the globe that is urbanizing fastest, and the one where catastrophic rainfall is set to increase most dramatically. Nearly 1,000 people have been killed in a wave of storms that have stretched from Sri Lanka to Vietnam, with more than 442 dead in the north of Indonesia’s Sumatra island and at least 160 fatalities in southern Thailand.

Cities of the Future

The world's fastest-growing urban areas are mostly in Asia

Such disastrous events are hardly unprecedented. Most of our earliest civilizations grew up along inundation-prone river valleys, as evidenced by the near-universality of deluge myths. In the same rural areas of Southeast Asia that have been among the worst-hit by the rains of recent weeks, homes were traditionally built on stilts under steeply-pitched roofs to allow water to run away without doing harm. Local traditions often warn against building near wild rivers prone to bursting their banks.

The sophistication of this vernacular technology is under-appreciated, but — as with the more technical modelling that’s done to mitigate flash flooding in the modern urban environment — it’s inadequate to the challenges we’ll face as our planet warms.

With each degree that the local temperature rises, the atmosphere’s ability to hold moisture goes up by about 7%. That’s an immense amount when you consider that a cyclone can easily hold half a billion tons of water. Indigenous knowledge, like modern flood maps, is grounded in a historical understanding of how rainwater behaves — but the heating of our planet is making all those old predictions irrelevant.

The risks of this are greatest in the expanding megacities. The current rural population of about 1.5 billion will barely grow before heading into permanent decline in the 2040s, according to the UN, but two-thirds of population growth between now and 2050 will be in cities. About half of the billion new urbanites will be in just seven countries, most of them in the Asian and African monsoon belts: India, Nigeria, Pakistan, the Democratic Republic of Congo, Egypt, Bangladesh and Ethiopia.

Unlike rural-dwellers who can often site their settlements in more stable locations, city migrants rarely have much choice about where to live. That’s why so many shantytowns are built on land previously neglected as too risky, from the landslide-prone hillsides of Brazil’s favelas and Venezuela’s barrios to the swamps that gave rise to slums in Mumbai’s Dharavi, Bangkok’s Khlong Toei and Lagos’s Makoko.

Unequal Burden

Source: Rentschler et al., Flood exposure and poverty in 188 countries. Nat Commun 13, 3527 (2022)

Precious few of these places have the sort of wealth to handle the engineering challenges of weather-proofing their built environment. Out of 1.8 billion flood-threatened people worldwide, just 11% are in high-income countries.

Unlike famine and infectious disease, tragic urban floods are rarely the result of absolute poverty. Instead, they’re most often the outcome of development that’s failing to keep pace with the problems it brings in its wake — cities whose allure is drawing people in so fast that infrastructure is incapable of moving at the same speed. The most damaging flooding over the past week in Thailand was in Hat Yai, a bustling tourist and shopping destination close to the Malaysian border that’s home to a special economic zone and one of the country’s busiest airports. In Sri Lanka, the fast-growing capital Colombo was worst-hit.

That puts a grave responsibility on municipal and national governments. All are counting on cities as the engines of growth over coming decades, but they’ll need to work hard in the face of natural disasters that will perpetually threaten to tear apart the urban fabric. The great centers of India, straining under water shortages and choking urban pollution, show what can happen to a country when urbanization starts to fail.

Bringing fresh water and global connections with them, rivers and coastlines have long been the lifeblood of the world’s great cities. As rising seas and devastating floods now make those same places increasingly unlivable, we must confront the possibility that these life-giving attributes could be their doom as well.

Source: Bloomberg