When co-owners cannot agree on the sale of their property

Co-owners of properties can run into disputes between or among themselves. These can arise due to differences in personal interests, financial goals, or management preferences.

When they cannot agree on selling the property or no longer wish to remain joint owners, are they essentially stuck at an impasse until all the co-owners can agree?

In such situations, the law provides various remedies to ensure that one or more parties can exit the arrangement fairly or that the property can be sold, even if the co-owners are at an impasse.

Alteration

If the disagreement between co-owners is about whether or not to make alterations to the property, the Civil Code provides that none of the co-owners shall, without the consent of the others, make alterations to the property. This holds true even if the alteration benefits all the co-owners. However, in the event that the refusal to give consent by a co-owner prejudices the common interest of the co-ownership, the other co-owners may go to court to seek an order to approve the act for the benefit of the co-ownership.

Notably, the word “alterations” in the law does not include the sale of the property by the co-owners.

Sale of Co-Owner’s Share

In the event that a co-owner desires to convert their share in the property to cash, they can sell their share in the property to others. However, any sale by a co-owner, without the others, shall be limited to the portion which may be allocated to the co-owner in the division upon the termination of the co-ownership. Any buyer shall only acquire a share in the whole of the property, but not a definite portion of the property.

When the remaining co-owner does not want to be a co-owner of the property with the buyer, the Civil Code gives the remaining co-owner the right of redemption in case the shares of all the other co-owners, or any of them, are sold to a third person. If the price of the alienation is grossly excessive, the redemptioner shall pay only a reasonable price.

Partition and Sale

If a co-owner does not wish to, or is unable to, sell their share in the co-owned property, the Civil Code also provides that no co-owner shall be obliged to remain in the co-ownership. Accordingly, in the event that co-owners cannot agree, a co-owner may demand the partition of the property, at least insofar as their share is concerned.

There are instances where a co-owned property may have to be sold as a whole. This happens when a property that is co-owned is essentially indivisible, and the co-owners cannot agree that it be allotted to one of them, who shall indemnify the others. In such cases, the property shall be sold, and its proceeds distributed among the co-owners.

(Articles 493, 494, 498, 491, 1620 Civil Code of the Philippines)

The Supreme Court has resolved several cases on disputes between co-owners, applying the cited provisions of the Civil Code.

The case of Aguilar v. Aguilar involved two brothers, Virgilio and Senen, who purchased a property for their father to live in. Initially, the ownership sharing was 2/3 to Virgilio and 1/3 to Senen. When Senen agreed to live with their father and shoulder the payment of the remaining mortgage over the property, the brothers agreed that they would equally own the property.

When their father died, Virgilio asked Senen to vacate the property as he wanted to sell it. However, the brothers could not agree on the sale, leading Virgilio to file a case in court, where he asked that the Court order the sale of the property and that the proceeds be distributed 2/3 to him and 1/3 to Senen. This sharing was disputed by Senen.

The Court upheld Virgilio’s right to demand the partition of the property, but it also ordered the sale of the property to third parties, with Virgilio and Senen to equally receive the sale proceeds since the brothers could not agree on the share of ownership. (GR 76351, October 29, 1993)

Another case involved co-owners of a 96-hectare property in Cavite, which was covered by several certificates of title. The first group of co-owners had agreed to sell their share in the property to a buyer for Php 12.50 per square meter.

The second group of co-owners filed a case in court because they objected to the sale, claiming that not only was the property incapable of partition, but also that the selling price was grossly excessive.

Accordingly, the second group of co-owners asked to be allowed to exercise their right to purchase the shares of the first group for Php 9.50 per square meter, as provided under Article 1620 of the Civil Code.

The Court declared that Article 1620 of the Civil Code was not applicable because the first group of co-owners had not actually sold their shares but only agreed to sell them to another party.

What was applicable was Article 494 of the Civil Code, which provided for the partition of the property, as it was clear that the co-owners no longer wanted to remain as co-owners of the property.

In this case, the Court finally decided that the property should be sold to third parties at a public sale, with the opening bid starting at Php 12.50 per square meter for the following reasons:

1. During the proceedings, the first group admitted that partitioning the property was not economically feasible or advantageous; and

2. It became reasonably evident that the parties could not agree on who among them would be allotted the property.

(Zaballero and Francisco v. Luna, et al. GR 56550, October 1, 1990)

Source: Inquirer

Unconscionable interest rates can be nullified or reduced

While the parties to a loan agreement may freely agree on the interest rate that applies to their transaction, any imposition of interest rate must always be reasonable and fair.

In fact, the Supreme Court ruled that even the willingness of the debtor to assume an exorbitant and unconscionable interest rate does not validate the agreed rate as legally binding and enforceable. This principle was clearly explained in the case of Spouses Castro v. Tan [GR 168940, Nov. 24, 2009], penned by Associate Justice Mariano del Castillo, which states:

“The imposition of an unconscionable rate of interest on a money debt, even if knowingly and voluntarily assumed, is immoral and unjust. It is tantamount to a repugnant spoliation and an iniquitous deprivation of property, repulsive to the common sense of man. It has no support in law, in principles of justice, or in the human conscience nor is there any reason whatsoever which may justify such imposition as righteous and as one that may be sustained within the sphere of public or private morals.”

Relative thereto, any loan agreement stipulating a grossly excessive interest rate is contrary to morals, and therefore void from the beginning, in consonance with Article 1409 of the New Civil Code of the Philippines.

Moreover, to prevent lenders from exploiting borrowers with oppressive rates of interest, the courts are granted the power to reduce unjust or unconscionable contractual interest rates, pursuant to Article 1229 of the said Code, which provides:

“Art. 1229. The judge shall equitably reduce the penalty when the principal obligation has been partly or irregularly complied with by the debtor. Even if there has been no performance, the penalty may also be reduced by the courts if it is iniquitous or unconscionable.”

With the foregoing, any debtor who enters into a loan agreement with an excessive interest rate may seek judicial relief to declare the interest void and unenforceable, or to reduce it to a fair and reasonable rate as warranted by the circumstances.

In this regard, one may, therefore, file a civil suit through the courts, either for the annulment of the interest rate in your loan agreement or the reformation of the instrument to fix the appropriate interest rate.

Source: Manila Times

Why the psychology of ‘utang’ matters for the economy

Debt or “utang” is not just a financial tool anymore. It is the lifeline that keeps many Filipino families afloat. With consumer spending making up about 70 percent of the economy, every peso that is spent keeps the economy moving.

When households keep buying, businesses do well but when they cut back, growth slows down. The tougher reality is that a lot of this spending is sustained by utang, drawn from savings, credit cards or loans simply to keep everyday life moving.

Behavioral finance explains that this behavior is rooted in a concept called present bias, which is the tendency to put more weight on immediate rewards than on future costs.

In the late 1990s, psychologists David Laibson of Harvard University and Ted O’Donoghue of Cornell University published an influential study that revealed how people often choose short-term satisfaction, such as spending or borrowing today, even when it leads to bigger problems later.

This bias explains why households continue to spend, even when incomes fall short, interest rates rise or debt levels grow. The pleasure of maintaining a lifestyle today feels more tangible than the burden of repaying loans tomorrow.

Extension of income

Combined with easy access to credit cards, installment plans and digital lending apps, present bias makes utang feel less like a burden and more like a convenient extension of income.

Recent data on the marginal propensity to consume (MPC) highlight this behavior. Before the pandemic, Filipino households typically spent 58.6 percent of their income in the first quarter, then pulled back midyear, before a sharp surge to nearly 70 percent during the Christmas season. Spending followed a familiar rhythm: spend, save, then splurge at year-end.

Since 2022, however, the pattern has changed dramatically. The first quarter spending rate has dropped to 54.4 percent, while the second and third quarters turned negative at -16 percent and -141.2 percent, respectively.

This means households are not only cutting back but also financing spending by dipping into savings or accumulating debt. Even the usual year-end rebound is weaker, with spending in the fourth quarter at just 61 percent, below prepandemic highs.

A negative MPC is a red flag. It signals that many households are keeping up their spending not with income, but with credit. This is present bias at work. Rather than cutting back, families choose to borrow so they can maintain the same lifestyle, even if it means pushing the real cost further into the future.

When incomes stagnate…

There is only so much households can borrow to keep spending at the same pace. Families stretch themselves to maintain their lifestyles, even when incomes stagnate and inflation eats into budgets. When borrowing fills the gap, the economy may still look steady but once the financial pressure builds, momentum may eventually weaken.

This slowdown is already showing in the data. In the first quarter of 2024, household spending grew by 8.3 percent compared to 2023, but in the first quarter of 2025 the pace slowed to 7.7 percent.

The second quarter tells the same story. Spending grew by 8.9 percent in 2024, but slipped to 6.8 percent in 2025. Taken together, total household spending in the first half of 2025 grew by 7.2 percent, down from 8.6 percent in the same period of 2024. The trend is clear. Growth is losing steam, and with much of consumption propped up by debt, the risks of a sharper slowdown ahead are rising.

Why does borrowing feel so normal? Because it has become part of everyday life. Taking on debt is seen as a practical choice. Credit cards, “buy now, pay later” apps and installment plans make it easy, while social pressures make it hard to say no.

Present bias then blinds households to the consequences. A family that borrows P20,000 at 3-percent monthly interest may end up repaying almost P30,000 in a year.

That money could have gone into savings or investments, but instead it locks them into repayment cycles.

Break the bad cycle

Breaking free from the psychology of utang takes both awareness and discipline.

Families need to recognize that spending habits are not just cultural but also behavioral.

One way to break the cycle is to reframe the question. Instead of asking, “Can I afford the monthly payment?” ask, “What will this really cost me a year from now?” That small shift can turn the focus from short-term comfort to long-term impact.

Debt can keep the economy afloat for a while, but over time it leaves households and businesses weaker. Real resilience comes when families move away from utang-driven spending and focus instead on saving and sustainable consumption.

In the end, stability doesn’t come from borrowing just to look secure, but from building financial strength that lasts.

Source: Inquirer