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Rights and Obligations of Condo Unit Owners

Like veritable mushrooms, condominium buildings have sprouted all over Metro Manila in just a few decades. From merely being a complement to office spaces in the Makati central business district in 1970 with a measly 12 units completed that year, condominium development easily took off so that as the ‘80s rolled by, that number rose to 3,300.  

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The Rise of Condominiums

The number of condominium units to be finished is projected to reach 158,000 in 2022. Fort Bonifacio, the Bay Area in Manila, and the Makati CBD account for the top three spots for condo development. But other places in Metro Manila have seen a rise in the number of condominium towers too, with the Ortigas Center in Quezon City almost keeping pace with Makati. Downtown Manila, Parañaque, and Las Piñas have their share of condo towers.  

It’s indeed a far cry from the ‘70s when you can see such structures only in Makati. Today, they’re almost everywhere in the metropolis. And you can credit that to the changing preference of Filipinos for their ideal abode. 

Whereas before, it was just young urban professionals who would live in condo units that were usually cramped (studio-type) because they were very near their places of work, today, couples and even families with children and pets are preferring the condo living. 

rights and obligations of condo unit owners

It’s because condo units are generally less expensive than a house and lot, townhouse, or even a single-attached unit and come in various sizes. They also offer various amenities such as gyms, swimming pools, and 24-hour security and are generally a stone’s throw away from commercial establishments. Some condo towers even have convenience stores on the ground floor. 

Because of the popularity of condominiums, unscrupulous developers and owners have taken advantage of their eager clients, who usually find themselves at the losing end of the bargain instead of a win-win situation for both. 

The issues have become rampant and concerning that the government had to step in and create laws for the protection of condo unit buyers. These rules and regulations have also removed most, if not all, of the confusion with regard to owning a condo unit. 

In this article, we would be discussing such laws, beginning with the one that is most specific to the subject in simple, layman’s terms, for those who are not aware of their rights and obligations as a condo unit owner. 

rights and obligations of condo unit owners

The Condominium Act 

Also known as Republic Act No. 4726, the Condominium Act defines what a condominium is, establishes the requirements for its creation, and governs its operation. 

By the Act’s specification, a condominium is any building whose sections can be bought by an individual or a corporation for residential, commercial, or industrial purposes. It can be owned by Filipino citizens or corporations. 

Incidentally, Philippine laws allow foreign ownership of the capital stock of corporations by up to 40% only, which means the enterprise is still Filipino-owned and controlled. Foreigners are also prohibited from owning lands in the country. 

Here are the more pertinent provisions of the Act: 

Owning a unit 

The law allows both Filipinos and foreigners to purchase a condo unit. Everything inside the walls of the unit is owned by the buyer and can alter or change it. This includes the interior walls, floors, ceiling, doors, and windows. Altering anything outside the unit is subject to the administration’s approval. 

Reselling the unit 

Owners can sell their unit without needing to ask the permission of the admin. However, this means you are also transferring your privileges, membership, and shareholdings in the condominium corporation. 

Selling the condominium building 

If you are the owner of the building, you can do so but under certain restrictions. For example, if the common areas are co-owned by unit owners, you can only sell the building to Filipinos, may it be an individual or a corporation.  

If it’s a corporation that is selling the building, it should not result in the foreign interest in the corporation exceeding 40%. Otherwise, the sale will be invalidated. 

Generally, the corporation can sell the building without the unit owners’ consent unless the master deed (also known as the declaration of restrictions) prescribed by the condominium corporation or the administration stipulates that it should be offered first to other condominium owners. 

There is also an amendment to the Corporation Code through RA 7899 that says a condominium building may not be sold by the corporation if it does not have the approval of a simple majority of the unit owners as well as the Housing and Land Use Regulatory Board (HLURB).  

The Condominium Act states that a condominium can be sold after 50 years. As a unit owner, do you have a say on this? It is important to mention here that when you purchase the unit, it essentially makes you a co-owner of the condominium and, if it’s owned by a corporation, you become a part of that organization, with certain privileges but subject to restrictions. 

So definitely, you can concur or express dissent on the matter. However, the final decision will depend on the majority vote. 

Mortgaging the unit 

Yes, the law is clear that this is an exclusive right of the unit owner. 

Amending the master deed 

If you are the condo building owner and you want to alter the provisions of the master deed, you would have to submit a formal legal document to the HLURB for approval. This document must be executed by a simple majority of the property’s registered owners. 

right to liberty of abode

23 Laws Condo Unit Owners Should Know 

Aside from the Condominium Act, here are other legal rules that underline your rights and obligations as a condo unit owner: 

1. Article III, Section 6, Philippine Constitution – Right to Liberty of Abode 

Article III is the Bill of Rights as prescribed by the 1987 Philippine Constitution. Section 6 specifies every Filipino citizen’s inherent right to choose where to live and to leave it at any time for whatever reason. 

2. Articles 476-481, New Civil Code (NCC) – Quieting of Title 

This is a special civil action where opposing parties ask the court to determine their respective rights over the disputed property. The ultimate objective is for the rightful owner to have every cloud of doubt on the property legally removed so that they can do whatever they wish with it without worrying that another suit is filed against them.  

3. Articles 484-501, NCC – Co-ownership 

The law recognizes that some properties cannot be physically divided to be distributed to two or more owners, so it allows multiple persons to own a single property, with the specific provision that each must respect the other when it comes to common use, preservation, and enjoyment. Shares are proportional to the owners’ respective interests.  

4. Articles 531-538, NCC – How Possession is Acquired 

A property can be acquired through the following means: purchase, the exercise of an inherent right, through legal means, and through inheritance. Minors and persons with disabilities can also acquire properties with the help of their legal representatives.  

The law is also very clear that possession cannot happen through the use of force or intimidation if the original owner refuses to sell or turn over the property. A proper legal remedy must be sought. 

A property cannot be possessed by two different persons at the same time unless it falls under the co-ownership condition. If there is a dispute, the present owner is usually recognized as the rightful owner or the one who has possession for a longer period. 

Should both claim possession at the same period, the one who can present a title is recognized. Should there still be an impasse, then the property is placed in judicial deposit until the court hands out its final decision.  

5. Articles 539-561, NCC – Effects of Possession 

A rightful property owner should be recognized as such, and should there be a dispute, they will be protected or helped to regain their possession by the laws and the Rules of Court. 

rights and obligations

6. Articles 562-612, NCC – Usufruct 

This gives a person the right to enjoy the property of another but with the explicit understanding that they will return the property at an agreed-upon time and without altering it unless it is provided in the agreement. 

7. Articles 667-673, NCC – Easement of Light and View 

In the case of two adjoining properties, the law provides for one to make an opening on his property, such as a window, to receive light and air and to have a view of the other property. It is prohibited for the other party to build any structure that would obstruct the window of the first party.  

8. Articles 1654-1679, NCC – Lessor’s and Lessee’s Rights and Obligations 

The lessor or the owner of the property being leased should make sure that the property is fit for use when delivered to the lessee, make all the repairs to the property, and keep to keep a peaceful environment for the lessee. They have the right to engage in the same business as the lessee unless an agreement was established preventing the lessor from doing so. 

On the other hand, the lessee is expected to settle the lease amount based on the terms of the agreement, to use the property with due diligence and as it is meant to be used, and to pay the cost of the deed of lease. It is the right of the lessee to withhold the lease payment if the lessor does not do the necessary repairs or if they fail to maintain peaceful surroundings. 

9. Sections 201-225, Local Government Code (LGC) – Appraisal and Assessment of Real Property for Real Property Taxes (RPT) 

According to the Local Government Code or LGC, taxable and exempted real properties will be appraised at the prevailing and fair market value based on their location. 

10. Sections 232-233, LGC – LGU’s Power to Levy Real Property Tax 

Cities, provinces, and municipalities in Metro Manila may impose an annual ad valorem tax (or a tax based on the item’s assessed value) on real property. This includes lands, buildings, machinery, and others. 

A uniform rate of a maximum of 1% is applicable for properties in the provinces within the Metropolitan Manila area, while it’s a maximum of 2% for cities and municipalities. 

11. Section 234, LGC – Properties Exempt from RPT 

Real property taxes shall not be imposed on the following: 

  • Real properties owned by the Philippine government or its agencies except when such property has been granted to a taxable person for beneficial use 
  • Charitable and religious institutions 
  • Machinery and equipment operated and maintained by local water districts and government-owned-and-controlled corporations that supply water and electricity to communities 
  • Machinery and other equipment used for environmental protection and pollution control 
  • Real property owned by duly registered cooperatives 

12. Section 235, LGC – Additional Levy on Real Property for the Special Education Fund 

LGUs in the Metropolitan Manila area may impose an additional 1% on a real property’s assessed value on top of the basic real property tax. The amount to be collected will go to the Special Education Fund, which helps in the maintenance and operation of public schools. 

13. Sections 246-251, LGC – Collection of RPT 

Real property tax should be paid on or before January 1, after which a penalty shall be imposed for failure to settle the assessed amount on time. It is the responsibility of the city or municipal treasurer to do the collection. They can employ the assistance of the barangay treasurer to collect RPTs on the barangay level. 

14. Sections 252-255, LGC – Payment of RPT Under Protest 

Should there be a complaint on the tax imposed, it will not be entertained unless the amount is paid first, after which the tax receipt will bear the note “Paid under protest.” 

A written complaint must then be filed within 30 days of the tax payment to the municipal treasure, provincial treasurer, or city treasurer. They will then decide on the protest within 60 days of receiving the letter. 

15. Sections 256-270, LGC – LGU’s Remedies for the Collection of RPT 

Local government units have at their disposal several ways to collect real property taxes: 

  • Local government lien – this means that the property under tax can be claimed by the LGU unless the tax due is paid, no matter if the property is still under mortgage 
  • Levy on real property – while a lien is just a legal claim against the property of the delinquent taxpayer, a levy is an actual takeover of the property after a warrant has been served. 
  • Advertisement and sale – once the warrant of levy has been served, the local treasurer, within 30 days, will advertise to the public the sale or auction of the property or a part of it to pay for the tax delinquency and the cost of having the property sold. 
  • Purchase of Property by the LGU if there is No Buyer or Bidder – in case no one buys or bids on the property, the local treasurer can purchase it on behalf of the LGU. The Registrar of Deeds will then transfer the title to the LGU without the need for a court order. The original owner may redeem the property within one year from its forfeiture by settling the full amount of the RPT plus interest and the expenses incurred from the sale. 
  • Collection of RPT Through the Courts – the local treasurer can file a civil case against the delinquent taxpayer in court. 

16. Section 194, National Internal Revenue Code, as amended (NIRC) – Documentary Stamp Tax (DST) Due on Lease Agreements  

The DST is a tax imposed on any document that serves as proof of an agreement between two parties on loans or the sale or transfer of rights, properties, or obligations. This includes lease agreements. 

According to the NIRC, a DST of Php3 shall be collected for the first Php2,000 (or a fraction of it) and then an additional Php1 for every Php1,000 (or a fraction of it) that exceeds the first Php2,000 for each year of the lease term.  

17. Art. 1643, NCC – No Lease for More Than 99 Years 

The lessor can allow the lessee to use the property for as long as they want but their contract cannot be for more than 99 years. A new contract must be drawn. 

18. Art. 1654, NCC – Obligations of the Lessor 

[See Item #8] 

19. Art. 1657, NCC – Obligations of the Lessee 

[See Item #8] 

20. Art. 1658, NCC – Right of the Lessee to Suspend Payment 

The lessee is within their right to settle their payment if the lessor does not do the needed repairs on the property or if they fail to ensure the peace within the property’s immediate surroundings. 

21. Art. 1670, NCC – Implied Renewal of Lease 

Should the contract of lease expire but instead of leaving the premises, the lessee has stayed for 15 more days with the consent of the lessor, it is understood that a new lease, although implied only, is in effect. 

22. Art. 1673, NCC – Reasons for Eviction 

A lessee can be forced out of the property if the lease has expired and the lessor does not want the lessee to stay any longer; if the lessee has failed to settle their payment; if the lessee has violated any of the conditions included in the contract; and if the lessee uses the property for other things not agreed on in the contract and results in the damage or deterioration of the property.  

23. Art. 1678, NCC – Useful Improvements and Ornamental Expenses 

The lessee can make useful improvements to the property as long as it is in line with how the property is originally intended to be used and that it would not be altered in form or substance. Once the lease expires, the lessor can reimburse the lessee 50% of the amount of the improvement. 

If there will be no reimbursement, the lessee can take away the improvement, even if it means damaging the property. 

For ornamental expenses, no reimbursement is needed since the lessee can remove the ornament as long as it does no damage to the property. Should the lessor decide to keep the ornament, they will need to pay the lessee for it at its market value when the lease expires. 

Final Thoughts 

There are more legal provisions that may not be directly addressing the concerns of condominium unit owners but lessees in general. What this proves though is that, in the eyes of the law, renters (and people who need homes) should be protected at all costs.

It’s a comforting thought, something that all of us need to keep in mind when we pursue our dream of having a house to call our own. 

Do keep in mind that you have both rights and obligations as a condo unit owner, and abiding by these laws allows you to do your part in making your condo building a good home for all.

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