Mr. and Mrs. X migrated to the US with all their children. As they had no intention of coming back, they offered their house and lot for sale to their neighbors, Mr. and Mrs. A (the buyers) who agreed to buy the property for 128 Million. Because Mr. and Mrs. A needed to obtain a loan from a bank first, and since the sellers were in a hurry to migrate, the latter told the buyers that they could already occupy the house, renovate it as it was already in a state of disrepair, and pay only when their loan is approved and released. While waiting for the loan approval, the buyers spent .Pl Million in repairing the house. A month later, a person carrying an authenticated special power of attorney from the sellers demanded that the buyers either immediately pay for the property in full now or vacate it and pay damages for having made improvements on the property without a sale having been perfected.
a) What are the buyers’ options or legal rights with respect to the expenses they incurred in improving the property under the circumstances? (3%)
b) Can the buyers be made to immediately vacate on the ground that the sale was not perfected? Explain briefly. (3%)
Suggested answer only. Not an official answer and not legal advice.
(a) The buyers are entitled to reimbursement with a right of retention, and (b) they cannot be made to immediately vacate. Under Articles 448 and 546 of the Civil Code, possessors in good faith are entitled
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Quick check
What legal right is enjoyed by a possessor in good faith who incurs necessary and useful expenses on real property?
A possessor in good faith has the right to retain the property until reimbursed for necessary and useful expenses.
Under Article 1475 of the Civil Code, when is a contract of sale perfected between contracting parties?
A contract of sale is perfected by mere consent upon the meeting of minds as to the object and price.
Can buyers who occupied and renovated a house with the owners' express consent be immediately evicted as trespassers?
Buyers authorized to occupy and renovate cannot be evicted because they are possessors in good faith with retention rights.
Under Article 546 of the Civil Code, what expenses are possessors in good faith entitled to be reimbursed for?
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What is the status of the sale between Mr. and Mrs. X and Mr. and Mrs. A upon agreeing on the price and property?
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Learn more about these topics
1. Good Faith Possessor
Under Article 448 and Article 546 of the Civil Code, a possessor or builder in good faith is one who occupies land and builds or makes improvements thereon with the belief that he has a valid right to do so, or under express authorization from the owner. Possessors in good faith are entitled to reimbursement for all necessary and useful expenses incurred on the property. Furthermore, they enjoy the statutory right of retention, allowing them to retain possession of the premises until full reimbursement is paid.
2. Right of Retention
Under Article 546 of the Civil Code, the right of retention serves as a security device for possessors in good faith who have introduced necessary or useful improvements on another's real property. Until the landowner reimburses the full amount of necessary and useful expenses, or elects to appropriate the useful improvements by paying their indemnity, the possessor in good faith cannot be legally compelled to vacate the premises or pay rent for their temporary occupation.
3. Perfection of Sale
Under Article 1475 and Article 1319 of the Civil Code, a contract of sale is consensual and is perfected at the moment there is a meeting of minds upon the object of the contract and upon the price. The delivery of physical possession to the buyers, coupled with an agreement on a definite purchase price and deferred payment terms pending bank loan release, confirms that a valid and binding contract of sale was perfected, preventing unilateral demand for immediate eviction.