Q&A: What Is a Condo Corporation?

When buying a condominium unit, it will be helpful to know the dynamics of the condo corporation, a legal entity that you will likely become a member of

The growing need for residential space and the resulting lack of developable land in urban areas in the Philippines have led to condominium developments further becoming common in local real estate. If you are among the numerous first-time home-seekers who are considering to buy a condo unit, you likely have a number of questions regarding condo ownership. One of the most likely queries is: How does it work given that there are shared spaces in a condominium development, including the land on which the property stands on?

The quick answer is by way of a condo corporation where the members are yourself and the other separate unit owners. However, there is more to a condo corporation than being a simple ownership group.

Q: What Is a Condo Corporation?

A: Republic Act 4726, otherwise known as the Condominium Act, states that:

“[T]itle to the common areas, including the land, or the appurtenant interests in such areas, may be held by a corporation specially formed for the purpose (hereinafter known as the “condominium corporation”) in which the holders of separate interest shall automatically be members or shareholders, to the exclusion of others, in proportion to the appurtenant interest of their respective units in the common areas.”

Along with the purpose of holding title to the land, a condo corporation also serves as the management body of the property, responsible for the control and administration of common areas and may have other obligations or responsibilities placed on it through the property’s master deed or the corporation’s own by-laws.

RA 4726 further stipulates that:

“[T]he corporate purposes of such a corporation shall be limited to the holding of the common areas, either in ownership or any other interest in real property recognized by law, to the management of the project, and to such other purposes as may be necessary, incidental or convenient to the accomplishment of said purposes.”

Members of the Corporation

The aforementioned “holders of separate interest” are the owners of the condominium units, whose ownership is synonymous with their membership in the condo corporation:

“Membership in a condominium corporation, regardless of whether it is a stock or non-stock corporation, shall not be transferable separately from the condominium unit of which it is an appurtenance. When a member or stockholder ceases to own a unit in the project in which the condominium corporation owns or holds the common areas, he shall automatically cease to be a member or stockholder of the condominium corporation.”

Buying your own condo unit makes you an immediate member of its condo corporation. When you sell it later on, you are not only transferring ownership, but also your membership in the corporation and the undivided interest in the common areas of the condominium that comes along with it.

Among your rights as a unit owner and a corporation member is co-ownership of land and common areas, the right of non-exclusive easement to the latter for ingress or egress, and the right to participate and vote in condominium corporation meetings. Your obligations, on the other hand, include complying with the common areas’ use restrictions, paying dues and assessments, and sharing in the insurance and real property tax of the land.

The Equivalent of a Subdivision’s Homeowners Association

Jake Loria, a licensed real estate broker and founder of The Real Estate Group Philippines, shares that a condo corporation is considered a legal entity by the Philippine government, allowing it to own the title for the common areas of the building.

“If there was no condo corporation, there would be no appropriate entity to own or operate the common areas. There will also be no one to officially represent the interest of the majority of the unit owners. If you’re a unit owner, you cannot rely on an outsider to represent your interest, since that outsider does not reside in the building and doesn’t know the day-to-day issues affecting the way people live in the building.”

Condo corporations are the equivalent of a subdivision’s homeowners association where members have the power to choose the building management companies, security companies, and housekeeping companies, among others. The unit owners today usually leave this work to the developer, but, if they so choose, they through the condo corporation can pick the service providers. If there was no condo corporation, the unit owners would feel like prisoners, unable to do anything when the service providers become problematic.

Role in Foreign Ownership

By law, foreigners or foreign corporations are prohibited to own land in the Philippines. However, by virtue of the Condominium Act, foreigners can own condominiums. One of the ways in which this applies is if the condominium is built on land that is leased from a Filipino owner, which allows for the condo corporation behind the project to be wholly foreign-owned.

In most cases, however, land is not leased, and is often owned by the condo corporation themselves. In this scenario, foreign condo ownership is possible because the ownership of the land is legally separated from the unit itself. The land is owned by a Filipino-controlled condominium corporation where as long as at least 60 percent of its members are Filipino, foreigners can comprise the remaining 40 percent of members or unit owners.

The Stake of a Unit Owner and a Corporation Member

As your unit ownership means immediate membership in the condo corporation, you are, in essence, a co-owner of the condominium. This entitles you to the privileges and limits you to the restrictions following the title.

As a co-owner, your preference is taken into consideration whenever decisions are made regarding the condominium’s common areas or the land that it occupies. These include taking part in the selection of companies tasked for the property’s upkeep, or when any part of it is to be sold or leased. This applies even as the condominium meets its projected lifespan.

“Condominiums only have a lifespan of about 50 years; after this period, the building is inspected if it is still good and livable. If the inspector finds that the building is already unsafe, the shareholders of the condo corporation will be the one to decide whether to sell the land on which the condo is built or to reconstruct the condo,” shares Loria.

“If there was no condo corporation, a lot of issues may arise among the unit owners [who have] different opinions. To sum it all up, a condo corporation is the best instrument for unit owners to properly organize themselves and decide on any and all matters affecting the condominium building.”

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