RA 4726 and PD 957

RA No. 4726 AN ACT TO DEFINE CONDOMINIUM, ESTABLISH REQUIREMENTS FOR ITS CREATION AND GOVERN ITS INCIDENTS

PD No. 957 THE SUBDIVISION AND CONDOMINIUM PROTECTIVE BUYER’S DECREE Purpose P.D. No. 957 was enacted to protect helpless citizens who may fall prey to the manipulations and machinations of unscrupulous subdivision and condominium sellers. (Eugenio v. Drilon, 322 Phil. 112 (1996)). It was issued in the wake of numerous reports that many real estate subdivision owners, developers, operators and/or seller have reneged on their representations and obligations to provide and maintain properly subdivision roads, drainage, sewerage, water systems, lighting systems, and other basic requirements for the health and safety of home and lot buyers. (Casa Filipina Realty Corp. v. Office of the Pres., 311 Phil. 170 (1995).

Sec. 4 Provisions of this Act shall apply to property divided or to be divided into condominium only if a Master Deed has been recorded in the Register of Deeds of the province or city in which the property lies, and duly annotated in the corresponding certificate of title of the land, if the latter had been patented or registered under either the Land Registration or Cadastral Acts Evidence of ownership – In house and lot, evidenced by original or transfer certificate of title while in condominium, ownership is evidenced by condominium certificate of title (ownership of a condominium unit issued by the Register of Deeds of the city or municipality where the condominium project is located). Capacity to buy – In house and lot, or lot only or townhouse, alien acquisition is not allowed. In the condominium concept, alien ownership not to exceed 40% interest in the project is legally allowed Extent of ownership – the interest of the owner in house and lot consists of absolute ownership of the inner and outer structures of the building (the entire building). In the condominium concept, the unit owner is the absolute owner of the space within the interior surface of his unit, but is only a co-owner of the exterior or façade of the unit Definition of Terms (Sec 3) Sec 2 Condominium project - shall mean the entire parcel of Condominium – an interest in real property real property divided or to be divided primarily for consisting of absolute ownership in a unit in a residential purposes into condominium units, residential, industrial and commercial building and including all structures thereon. common ownership in the land on which its located Condominium unit- shall mean a part of the and in common areas of the condominium project. condominium project intended for any type of Condominium Unit – the space bounded by the independent use or ownership, including one or more interior surface of those intended for independent rooms or spaces located in one or more floors (or part use or absolute ownership. of parts of floors) in a building or buildings and such Common areas – the entire project, such as the land, accessories as may be appended thereto. building structures, hallways, elevators, stairways, Owner- shall refer to the registered owner of the land electrical, water and plumbing system, and all subject of a subdivision or a condominium project. amenities in a condominium project, the exception is Developer- shall mean the person who develops or the inside of the individual condominium unit. improves the subdivision Condominium corporation – a non-stock and nonBuy and purchase- shall include any contract to buy, profit corporation consisting of condominium unit purchase, or otherwise acquire for a valuable owners which is the management body of the consideration a subdivision lot, including the building condominium project and owner of its common and other improvements, if any, in a subdivision areas. This is synonymous in function and nature to project or a condominium unit in a condominium the homeowners association in subdivisions except project. that it is taking the form of a corporation. Take note therefore that it is the reason why a condominium Sec 4 Registration of Projects unit can be personally owned by possession and title In case registered owner of land wishes to convert by foreigners but only up to 40% of the total number such land to a condominium project, he/she must of units of the whole condominium project. register project to the National Housing Authority now Condominium project – the entire parcel of land HLRUB. including all the structures thereon. Master deed – the enabling act which creates the Authority to publish the notice of the filing of the condominium and contains the description of the registration statement at the expense of the land, building, common areas facilities use of the applicant-owner or dealer, in 2 newspapers of general building, declaration of restrictions and plans of the circulation, one published in English and another in

land and buildings and annotated on the certificate of title. Declaration of restrictions – refers to the set of rules, procedures, policies and limitations as to the management and usage of units and common areas in a condominium project which constitutes a lien upon the project and each unit and building upon all unit owners, occupants, and others holding any right or interest in the project, pursuant to the provisions of the Condominium Act and other related laws. STEPS IN FORMING CONDOMINIUM 1. 1. Preparation of a Master Deed with Declaration of Restrictions and registration with the Registry of Deeds for annotation in the title. 2. 2. Organization of a condominium corporation with the project owners as incorporators. 3. 3. Causing issuance of individual tax declarations and condominium titles for the units and common areas from the Assessor’s Office and the Registry of Deeds respectively. 4. 4. Execution of Deed of Conveyance on the land and common areas in favor of the condominium corporation. 5. 5. Application for registrations with the Housing and Land Use Regulatory Board (HLURB). 6. CONTENTS OF A CONDOMINIUM MASTER DEED 1. 1. Description of the land including survey plan 2. 2. Description of the building/s, enclosing technical and diagrammatic plans. 3. 3. Description of the common areas and facilities 4. 4. Deed of registration 5. 5. Certification of the registered owner of the property if it is other than the one executing the Master Deed, that he consents of the registration of the deed. 6. Note: The enabling or master deed may be amended or revoked upon registration of an instrument executed by a simple majority of the registered owners of the property. (RA 7899 Amending Secs 4 and 16 of RA 4726)

Sec. 19. Where the enabling or master deed provides that the land included within a condominium project are to be owned in common by the condominium owners therein the Register of Deeds may at the request of all the condominium owner and upon surrender of all their condominium owner’s copies, cancel the certificate of title of the property and issue a new one in the name of said condominium owners as pro-indiviso co-owners thereof.

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Pilipino, once a week for two consecutive weeks. The fact of such registration shall be evidenced by a registration certificate to be issued to the applicantowner or dealer. Sec 5 After two weeks of obtaining a registration certificate, the applicant-owner dealer can now apply for a license to sell the project, and after payment of performance bond (Sec 6). Effect of absence of certificate of registration or license to sell by the HLURB In Sps. Co Chien v. Sta. Lucia Realty & Dev., Inc., et al., G.R. No. 162090, January 31, 2007 There was a sale of a realty but there was a contention that the sale is void for lack of prior certificate of registration and license to sell by the HLURB. Is the contention correct? Why? Held: No. P.D. 957 is a law that seeks to regulate the sale of subdivision lots and condominiums in view of the increasing number of incidents wherein “real estate subdivision owners, developers, operators, and/or sellers have reneged on their representations and obligations to prove and maintain properly” the basic requirements and amenities, as well as “reports of alarming magnitude… of swindling and fraudulent manipulations perpetrated by unscrupulous subdivision and condominium sellers and operators.” As such, P.D. 957 requires the registration not just of the developers, seller, brokers and/or owners of the project but also of the project itself. Upon the registration of the project, a license to sell must be obtained prior to the sale of the subdivision lots or condominium units therein. The law also provides for the suspension and revocation of the registration and license in certain instances, as well as the procedure to be observed in the event thereof. Effect of failure develop subdivision within one year from the issuance of license. Under PD 957, the seller is obliged to develop the subdivision, otherwise, the buyer has the right to suspend payment and the only requirement under the law is to give due notice to the owner or developer of the buyer’s intention to suspend payment. Option to suspend payment or demand for reimbursement given to buyer In case the developer of a subdivision or condominium fails in its obligation under Section 20 of P.D. No, 957, Section 23 of the law gives the buyer the option to demand reimbursement of the total amount paid, or to wait for further development of the subdivision, and when the buyer opts for the latter alternative, he may suspend payment of installments until such time that the owner or developer had fulfilled its obligation to him. (Tamayo v. Huang).

CONTENTS OF A DECLARATION OF RESTRICTION 1. Formation of the condominium corporation, the project’s management body. 2. Procedures and guidelines on maintenance of units and common areas. It is thus clear that the law provides two remedies in 3. Rules and restrictions on the occupancy and usage case of incomplete development of the subdivision of units and common areas. project: (1) reimbursement of the total amount paid, 4. Provision for insurance coverage. including amortization interest but excluding

5. 5. Realty taxes and assessments on units and common areas. 6. 6. Right of assignees, mortgagees, tenants and occupants of the units. 7. 7. Provision for assessments and fees. 8. 8. Penalty provisions. 9. 9. Procedures in amending restrictions. RIGHTS OF A CONDOMINIUM OWNER (Sec 6) 1. 1. Absolute ownership of his unit. 2. 2. Limited ownership of walls, ceilings and floor 3. 3. Co-ownership of the land and common areas in proportion to the unit/s owned. 4. 4. Exclusive easement of the air space within his unit. 5. 5. Non-exclusive easement to common areas for ingress and egress. 6. 6. Repair, decorate the inner surfaces of his unit as he pleases. 7. 7. Sell, lease, mortgage his unit. 8. 8. Vote and be voted upon during meetings of the condominium corporation. CONVEYANCE (Sec 18) Requisites: 1. A copy of the description of land 2. Brief description of condominium conveyed 3. Name and personal circumstances of the condominium owner Upon registration and payment of fees of an instrument conveying a condominium, the Register of Deeds shall enter and annotate the conveyance on the certificate of title covering the land included within the project. Transferee is then issued a “condominium owners” copy of the pertinent portion of such certificate of title. In case of condominium project registered under the provisions of the Spanish Mortgage Law or Act 3344 as amended, the registration of the deed of conveyance of a condominium is sufficient if the Register of Deed has the original or signed copy, together with the certificate of the management body of the project. A copy of said deed of conveyance will be given to the condominium owner duly acknowledged and stamped by the Register of Deeds in the same manner as in the case of registration of conveyance in accordance with the provisions of the declaration of restrictions of such project. DISSOLUTION OF A CONDOMINIUM PROJECT 1. Term of corporation – the life of the condominium corporation shall be co-terminus with the existence of the condominium project and the registration and regulation of the condominium corporation shall be vested to the Housing and Land Use Regulatory Board (Sec 11). 2. As per Building Code, a building has a life of 50 years subject to an extension of another 25 years upon issuance of the soundness of its structure.

delinquency interests, with interest thereon at the legal rate; or (2) for the buyer to suspend amortization payments until the completion of the project. These remedies are available to the prospective buyer to give effect to the law’s intent to protect the buyers from abusive owners/developers of subdivisions. In cases of incomplete development, it is the developer who is the one at fault, as it would then have violated its promise to the prospective buyers to provide the necessary facilities in the subdivision. The aggrieved party, therefore, is the prospective buyer because of the non-fulfillment of the developer’s commitment. As such, it is but logical that the option is given to the prospective buyer, not to the developer.

Note: A condominium corporation shall not, during its existence, sell, exchange, lease or otherwise dispose of the common areas owned or held by it in the condominium project unless authorized by the affirmative vote of a simple majority of the registered owners (RA 7899 Amending Secs 4 and 16 of RA 4726) 3. Effects of Voluntary Dissolution: (Sec 12) a. The corporation shall be deemed to hold a powerof-attorney from all unit owners/ members to sell their separate interests in the project. (Sec 15) b. Liquidation of the corporation shall be effected by the sale of the entire project subject to the rights of the corporation and individual creditors. (Sec 15) c. The common areas held by the corporation shall be transferred to the unit owners in the proportion to their interests. (Sec 19) EXCEPT as provided by Sec 13 3. Effects of Involuntary Dissolution: The transfer shall be deemed full liquidation of the interest of the members in the corporation.

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SOME ADVANTAGES OF CONDOMINIUM OWNERSHIP - Enhances affordability - Accessibility to the amenities of the metropolis. - Better security - Maximizes land efficiency - Lesser cost of facilities, services and maintenance - Privacy

References: RA 4726 PD 957 RA 7899 Housing and land Use Regulatory Board- /hlrub.gov.ph/ Board of Investments- /boi.gov.ph/ Real Estate Brokers of the Philippines - /rebap.com.ph/ Chamber of Real Estate and Builders Assn. Inc – /creba.ph/