HLURB Goverce Framework for HOA

Legal basis and enabling authorities

The framework is adopted pursuant to Executive Order No. 648 (s. 1981), as amended, in relation to Republic Act No. 8763, Executive Order No. 535 (s. 1979), and Presidential Decree No. 902-A.
The framework is adopted to operationalize the HLURB’s role in regulating and supervising homeowners associations and their governance.

Policy, purpose, and governance objectives

The HLURB establishes that homeowners association governance must highlight the basic roles, powers, and responsibilities of the homeowners association and its officers and members under existing laws and regulations.
The HLURB establishes the need to promote and operationalize best practices and norms of good governance in homeowners association management.
The framework is directed to enhance delivery of basic services to members and promote members’ general welfare through active and enlightened management.
The framework directs associations to serve members’ interests through decision-making equity, transparency, accountability, and promotion of security in the living environment.
The framework requires associations to remain non-partisan and to cooperate with local government units and national government agencies for the benefit of residents within and outside the subdivision.

Definitions and covered associations

“Association” refers to a homeowners association registered with the HLURB, or previously registered with the Home Insurance Guaranty Corporation (now Home Guaranty Corporation) or the Securities and Exchange Commission (SEC) in accordance with law.
The framework’s defined “Association” includes: (i) homeowner and lot owner/buyer in a subdivision project within the purview of P.D. No. 957 and related laws; (ii) an awardee, a lessee, and an occupant in a private or government housing or relocation project and other urban estates; (iii) an informal settler in the process of being accredited as beneficiary or awardee of ownership rights under the Community Mortgage Program, Land Tenure Assistance and other similar programs; and (iv) other covered categories expressly enumerated in the definition.
“Board” refers to the board of directors or trustees of an Association acting as a collegial body with all powers, duties, and responsibilities relating to administration, management, and operation.
“Director” refers to a member of a board.

Registration and membership principles

An Association must register with the HLURB to acquire juridical personality.
Officers or members of an unregistered association, or an unincorporated group of homeowners representing themselves as an association, or exercising the essential characteristics, rights, and privileges of an Association, are personally liable for obligations and liabilities incurred by a de facto association.
Membership is voluntary unless required by deed restrictions annotated on the title, stipulated in the lot purchase contract, or required for an award under a Community Mortgage Program project or similar tenurial arrangement.
Member qualification depends on the by-laws “unless otherwise provided,” and includes: (a) homeowner, lot owner and lot buyer, or mortgagee who becomes an owner by foreclosure and consolidation of title in his name; (b) lessee under a contract term of at least three (3) years in lieu of the owner (if allowed in writing), with an exception rule when dues are not on a per lot basis and both owner and lessee pay dues; (c) occupant by subsisting usufruct in writing granted by the owner; (d) beneficiary or awardee under Community Mortgage Program/Self-Help Land Acquisition Program/Group Land Acquisition Development Projects included in the registry of the concerned government financing institution or its equivalent organization in the private sector; and (e) the developer holding title to unsold lots or units.
Members have rights to: vote in person or by proxy; inspect association books and records during office hours and receive annual reports including financial statements; avail of association services and facilities; and enjoy other by-law-provided rights.
Members have duties to pay membership fees, dues, and special assessments; attend meetings; support and participate in association projects and activities; and comply with by-law-required duties, rules, and regulations.
Failure to comply with member duties is a ground for sanctions, imposed in accordance with the by-laws.
The board must establish guidelines and procedures for determining delinquent members (members not in good standing) and prescribe administrative sanctions against them.
Due process must be observed when administrative sanctions are imposed on delinquent members.

Board composition, powers, and governance

The board must have at least five (5) but not more than fifteen (15) elected members.
Lessees, occupants, or developers covered under the membership definition cannot constitute a majority of the board “in no case.”
The board must examine or re-examine board size to determine the appropriate size that facilitates effective decision-making.
The board must (i) prepare an annual program of activities and corresponding budget and identify funding sources; (ii) adopt a uniform accounting system conforming to generally accepted principles of accounting and auditing and the standard form prescribed by HLURB; (iii) adopt a system of internal checks and balances; (iv) maintain working knowledge of statutory and regulatory requirements affecting the association; (v) institute and sustain continuing education; and (vi) exercise other necessary and proper powers for enforcement of the by-laws.
The board may require members and non-members to pay toll, fee, or post a bond for use of roads and other association facilities, with the amount approved by the general membership as necessary for operation and maintenance, provided the roads/facilities are maintained by the association.
The board must not engage in any business other than those incidental to association operations and must exercise authority within its articles of incorporation, by-laws, and existing laws, rules, and regulations.
The board must have a formal schedule of matters reserved to it for decision.
The board must have a strong element capable of objective judgment independently of officers, and no individual or small group may dominate board decision-making activities.
The board must conduct a formal assessment of its effectiveness as a whole and each director’s contribution.
Directors should receive proper briefing on issues arising at board meetings.
The board must decide on removal issues for the association secretary as a whole.
Directors must attend board meetings in person and cannot attend or vote by proxy at board meetings.
Special board meetings may be called by the chairperson or by a majority of directors.
Quorum for board meetings is a majority of directors as fixed in the articles of incorporation, unless articles/by-laws provide otherwise; decisions by at least a majority of directors present at a quorum meeting are valid corporate acts, except election of officers which requires vote of a majority of all board members.
The number of board meetings held in a year and attendance of every board member, including special committee meetings established by the board, must be disclosed in the association’s annual report.
The board must meet regularly and whenever particular circumstances warrant as determined by its members.
The board must adopt rules to govern its meetings.
Regular board meetings must be held in accordance with the schedule in the by-laws.
Directors who are lessees, occupants, or developers covered under the membership definition cannot constitute a majority of the board.

General membership meetings, notice, and voting

Regular membership meetings must be held at least annually on the date fixed in the by-laws.
Written notice of regular meetings, including the agenda, must be sent to all members at least two (2) weeks prior to the meeting unless the by-laws require a different period.
Special membership meetings may be called by the board whenever deemed necessary or as provided in the by-laws.
Written notice for special meetings, including the agenda, must be sent to all members at least one (1) week before the scheduled meeting unless otherwise provided in the by-laws.
Quorum in general membership meetings is the majority of members unless otherwise provided in the by-laws.
In elections of directors and officers, by-laws may provide that only members of good standing are considered in determining quorum.
Members may vote in person or by proxy in all association meetings.
Proxies must be in writing and signed by the member, filed with the association secretary before the scheduled meeting, and validated in accordance with by-laws.
A proxy is valid only for the date of the meeting it is intended for unless the proxy or by-laws provide otherwise.
No proxy may be valid and effective for more than five (5) years.
The framework encourages direct member participation and prohibits proxy voting from being used to subvert the true will of members or dominate association activities.
Voting by mail or other similar means may be authorized under conditions prescribed in the by-laws.
Voting rights on the enumerated corporate acts belong to a member regardless of standing.
Approval of the corporate acts enumerated under voting rights requires a vote of at least two-thirds (2/3) of the general membership, and covers: amendment of articles of incorporation; delegation to the board of power to amend/repeal by-laws or adopt new by-laws; sale/lease/exchange/mortgage/pledge or other disposition of all or substantially all association properties; incurring/creating/increasing bonded indebtedness; increase or decrease of members’ equity; merger or consolidation with another association, federation membership/disaffiliation, and segregation from the association; use of association funds in projects not included in regular or approved program of activities and expenditures; ratification of adverse interest or business transactions by directors under the conflict-of-interest framework; extension or shortening of the association’s term; and dissolution of the association.

Officers, committees, and internal controls

Unless otherwise provided in the by-laws, an association should have executive officers: president, vice-president, secretary, treasurer, and auditor; the board may create other management positions necessary.
Responsibilities must be clearly divided to maintain balance of power so no one individual or group has unfettered powers of decision.
The secretary is responsible to the board for ensuring board procedures are followed and applicable rules and regulations are complied with, and all directors must have access to the advice and services of the secretary.
The board decides questions on removal of the association secretary as a whole.
The board should constitute a Grievance Committee to resolve disputes between and among members and/or the board, and between members and the board and board members and officers.
The board should establish an Audit Committee to review accounts and physically examine association books and assets.
A director and the internal auditor of the association may not sit as members of the Audit Committee.
The board should establish an independent Election Committee to prepare election guidelines and mechanics per the by-laws, supervise election activities, and resolve election contests at association level.
Members of the special committees must be drawn from association membership.
Heads of the Grievance, Audit, and Election Committees must be present and available to answer questions at board or membership meetings when required.
External auditors, if any, must be present in membership meetings to assist directors in addressing relevant queries by members.

Conflict of interest, transparency, and funds

The board must specify instances where conflict-of-interest questions may arise requiring board approval or approval by a percentage of the total membership of the association.
To avoid conflicts and ensure transparency, a member or officer must not enter contracts with the association for provision of services unless all conditions are met: (a) the director’s presence at the board meeting was not necessary to constitute quorum; (b) the director’s vote was not necessary for contract approval; (c) the contract is fair and reasonable under the circumstances; and (d) the board previously authorized the contract.
If condition (a) or (b) is absent for a director-involved contract, the contract may be ratified by a vote of members representing at least two-thirds (2/3) of the total membership in a meeting called for the purpose, and full disclosure of the adverse interest must be made in that meeting.
The association must maintain books and records required under HLURB rules for transparency and consistent full disclosure.
The board must account for all fees, tolls, and bonds it collects by regularly posting on the association bulletin board a report of income and expenditures or by regularly disseminating the same through other means.
Association funds must be kept and deposited in bank accounts in the name of the association and must not be joined or commingled with funds of any other director, officer, person, or association.
The association annual report should contain details of the remuneration of each director.
The framework requires a formal and transparent procedure for nomination of new board directors and officers.
Directors and officers should be ready, where practicable, to enter dialogue with members based on mutual interests and objectives.
Officers must disclose, disseminate, and make available to members material information regarding association activities, transactions, and operations.

Elections and qualifications rules

Regular elections must be held annually unless by-laws provide otherwise.
By-laws must contain the general procedures for elections, including date and frequency.
By-laws may provide the procedure, manner, and votes required for referendum, recall election, and other initiatives of the general membership.
Names of members submitted for election or re-election as directors or officers must be accompanied by sufficient biographical details enabling informed decisions on qualifications.
Directors and officers must act in the best interest of the association characterized by transparency, accountability, and fairness.
Directors and officers must act on behalf of the association and perform duties with the utmost diligence and loyalty required by their positions.
A director and officer must be: of legal age; a member in good standing; an actual resident of the subdivision/housing/relocation project for at least six (6) months certified by the association secretary or by a member with personal knowledge if secretary certification is unavailable; and not convicted by final judgment of an offense involving moral turpitude.
A member’s legitimate spouse may be a candidate in lieu of the member.
The Secretary of the Board must meet the same qualifications as an association officer and must be a Filipino citizen.
By-laws must provide reasonable disqualifications to protect the association and its members from interests inimical or inconsistent with its purpose or practices detrimental to welfare, including: (i) election of long-term lessees and developers to president, vice-president, or treasurer positions due to lack of permanent and compelling interests as opposed to homeowners; (ii) election of former officers and directors who have not turned over association books, monies, and records during their term; and (iii) election of a board member or officer who served for three consecutive terms immediately preceding the election to encourage participation and develop leadership of other qualified interested members.
The chairperson, directors, and officers must be made aware of their specific duties and receive appropriate training when first elected.
Directors and officers must not receive compensation except for reasonable per diems.
One person should not hold two posts in an association at the same time.
No member may be president and secretary simultaneously, or president and treasurer simultaneously.
The posts of chairman and president in one person should be avoided.
Directors and officers should stand for election every year.
Where failure to elect a new set occurs, incumbents may continue in a holdover capacity until successors are elected and qualified, subject to compliance with applicable HLURB rules on non-holding or postponement of regular or special elections.
Outgoing directors and officers must turn over all association books and records to the new set of directors or officers to ensure orderly management turnover.

Compliance, sanctions, and separability

An association intending to register under the HLURB “Rules on the Registration and Supervision of Homeowners Associations” must submit by-laws consistent with the framework’s provisions.
An association previously registered with the Home Insurance Guaranty Corporation (HIGC) and/or the SEC must, upon enrollment under the “Rules on the Registration and Supervision of Homeowners Associations,” commit to observe the basic rules, principles, and best practices contained in the framework.
Failure to comply with any provision of the framework subjects the association to administrative sanctions or penalties provided under existing HLURB rules and regulations.
Any invalid or unenforceable section or portion of the framework does not invalidate or affect the validity or enforceability of other sections or provisions.
The framework becomes effective fifteen (15) days after publication in a newspaper of general circulation.