Defines condominium ownership rules

When condominium rules apply

The Act applies to property divided or to be divided into condominiums only if the owner records in the Register of Deeds of the province or city where the property lies and annotates in the certificate of title (where the land is patented or registered under the Land Registration or Cadastral Acts) an enabling or master deed.
The enabling or master deed must include:
- A description of the land where the building(s) and improvements are/will be located.
- A description of the building(s) stating number of stories and basements, and number of units and their accessories, if any.
- A description of the common areas and facilities.
- A statement of the exact nature of the interest acquired or to be acquired by purchasers in the separate units and in common areas.
- A statement that title to or appurtenant interests in common areas will be held by a condominium corporation, if applicable.
- The purposes for which buildings/units are intended or their restrictions as to use.
- A certificate of consent of the registered owner (if other than the deed’s executing persons) and all registered holders of any lien or encumbrance on the property.
- Appended plans as integral parts: (1) a survey plan of the land included (unless already filed for the same property in the same office), and (2) a diagrammatic floor plan sufficiently detailed to identify each unit, its relative location, and approximate dimensions.
- Any reasonable restriction not contrary to law, morals or public policy regarding an owner’s right to alienate or dispose of the condominium.
The enabling or master deed may be amended or revoked only upon registration of an instrument executed by the registered owner(s) and consented to by all registered holders of any lien or encumbrance; registered owner includes registered owners of condominiums in the project.
Until registration of a revocation, the Act continues to apply to the property.

Required inclusion in transfers

Every transfer or conveyance of a unit must include the transfer or conveyance of the undivided interests in the common areas, and in proper cases, the membership or shareholdings in the condominium corporation.
Where common areas are owned by unit owners as co-owners, no condominium unit may be conveyed or transferred to persons other than Filipino citizens, or corporations with at least sixty percent of capital stock owned by Filipino citizens, except for hereditary succession.
Where common areas are held by a corporation, no transfer of a unit is valid if the accompanying transfer of the appurtenant membership or stockholding would cause the corporation’s alien interest to exceed limits imposed by existing laws.

Default incidents and owner rights

Unless expressly provided otherwise in the enabling or master deed or declaration of restrictions, the Act sets default incidents:
- A unit’s boundaries are the interior surfaces of perimeter walls, floors, ceilings, windows, and doors.
- The following are not part of the unit (bearing walls, columns, floors, roofs, foundations, and other common structural elements): lobbies, stairways, hallways, other common-use areas, elevator equipment and shafts, central heating/refrigeration/air-conditioning equipment, reservoirs, tanks, pumps, central services/facilities, and pipes/ducts/flues/chutes/conduits/wires/utility installations—except their outlets when located within the unit.
- Each unit automatically has an exclusive easement over the air space encompassed by the unit’s boundaries at any time and as the unit is lawfully altered or reconstructed; the easement is automatically terminated upon destruction of the unit rendering it untenantable.
- Common areas are held in common in equal shares: one for each unit (unless otherwise provided).
- Each unit and common areas are subject to a non-exclusive easement for ingress, egress, and support through the common areas.
- Each condominium owner has the exclusive right to finish/decorate the inner surfaces of walls, ceilings, floors, windows, and doors bounding the owner’s unit.
- Each condominium owner has the exclusive right to mortgage, pledge, or encumber the condominium and to have it appraised independently of other condominiums; obligations incurred by an owner are personal to that owner.
- Each condominium owner has the absolute right to sell or dispose of the condominium unless the master deed requires first offering the property to condominium owners within a reasonable period before offering to outside parties.
Common areas remain undivided and are subject to no judicial partition, except as allowed under the Act’s next section.

Partition by sale: conditions and thresholds

Where several persons own condominiums in a condominium project, one or more owners may bring an action for partition by sale of the entire project, treated as if owners of all condominiums were co-owners of the entire project in proportion to their interests in the common areas.
A partition by sale is allowed only upon proof of at least one of the following:
- Three years after damage or destruction that renders a material part unfit for use prior to the damage, the project has not been rebuilt or repaired substantially to its pre-damage state.
- Damage or destruction renders one-half or more of the units untenantable and condominium owners holding in aggregate more than thirty percent interest in the common areas are opposed to repair or restoration.
- The project has existed for more than fifty years, is obsolete and uneconomic, and condominium owners holding in aggregate more than fifty percent interest in the common areas are opposed to repair/restoration or remodelling/modernizing.
- The project or a material part has been condemned or expropriated and is no longer viable, or condominium owners holding in aggregate more than seventy percent interest in the common areas are opposed to continuation of the condominium regime after expropriation/condemnation of a material portion.
- The conditions for partition by sale in the declaration of restrictions (duly registered) have been met.

Declaration of restrictions and management regime

Before conveying any condominium, the project owner must register a declaration of restrictions; the restrictions become a lien upon each condominium and bind all condominium owners.
The Register of Deeds must enter and annotate the declaration of restrictions on the land’s certificate of title covering the project area (when the land is patented or registered under the Land Registration or Cadastral Acts).
The declaration of restrictions must provide for project management by one of these management bodies: a condominium corporation, an association of condominium owners, a board of governors elected by condominium owners, or a management agent elected by the owners or by the board named in the declaration.
The declaration of restrictions must include rules on voting majorities, quorums, notices, meeting date, and other rules governing the management body.
The declaration of restrictions may include provisions on management powers, enforcement, insurance and bonding, maintenance and services, professional services, purchase of common-area supplies, taxes and special assessments, discharge of liens, reconstruction after damage/destruction, delegation of powers, entry into units for maintenance/construction, and a power of attorney for sale of the entire project when partition is authorized under the partition-by-sale section.
The declaration of restrictions must specify a method and procedure for amending the restrictions, requiring a vote of not less than a majority in interest of the owners.
The declaration of restrictions may provide for independent audit; separate assessments to each unit in proportion to fractional interest in the common areas (unless otherwise provided); subordination of assessment liens; and conditions (other than those in the Act’s partition and other specified dissolution/partition provisions) under which partition and dissolution may occur (including conditions based on failure to rebuild, inadequacy of insurance proceeds, percentage of damage, arbitrator decision, or other reasonable conditions).
Where the common areas are held by a condominium corporation, that corporation constitutes the management body.

Condominium corporation: formation, governance, dissolution limits

A condominium corporation’s corporate purposes are limited to holding the common areas (ownership or other legally recognized interest), managing the project, and other necessary, incidental, or convenient purposes to accomplish these objectives.
The corporation’s articles/by-laws cannot contain provisions contrary to the Act, the enabling/master deed, or the declaration of restrictions.
Membership in the condominium corporation (stock or non-stock) is not transferable separately from the condominium unit; when a member/stockholder ceases owning the unit appurtenant to membership, the person automatically ceases to be a member/stockholder.
The corporation’s term is co-terminous with the duration of the condominium project, overriding the Corporation Law to the contrary.

Liquidation and dissolution rules

Upon involuntary dissolution of a condominium corporation for causes provided by law, the common areas owned/held by the corporation must be transferred pro-indiviso in proportion to members/stockholders’ interests in the corporation, subject to creditors’ superior rights.
That transfer is deemed a full liquidation of the members’/stockholders’ interest in the corporation, after which the Act’s rules on undivided co-ownership of common areas apply fully.
Until the enabling/master deed is revoked, the condominium corporation cannot be voluntarily dissolved through an action for dissolution under Rule 104 of the Rules of Court, except upon proof of any of the following:
- Three years after damage or destruction rendering a material part unfit for use prior to the damage, the project has not been rebuilt or repaired substantially to its pre-damage state.
- Damage or destruction renders one-half or more of the units untenantable and more than thirty percent of members (if non-stock) or shareholders representing more than thirty percent of the capital stock entitled to vote (if stock corporation) oppose repair or reconstruction.
- The project has existed for more than fifty years, is obsolete and uneconomic, and more than fifty percent of members (if non-stock) or shareholders representing more than fifty percent of the capital stock entitled to vote (if stock corporation) oppose repair/restoration or remodelling/modernizing.
- The project or a material part has been condemned or expropriated and the project is no longer viable, or members holding in aggregate more than seventy percent interest in the corporation (if non-stock) or shareholders representing more than seventy percent of the capital stock entitled to vote (if stock corporation) oppose continuation after expropriation/condemnation of a material portion.
- The conditions for dissolution in the declaration of restrictions are met.
The condominium corporation may also be dissolved by affirmative vote of all stockholders/members at a general or special meeting called for that purpose, provided all requirements of Section sixty-two of the Corporation Law are complied with.
Unless otherwise provided by the declaration of restrictions, voluntary dissolution under the Act’s conditions is treated such that the corporation is deemed to hold a power of attorney from all members/stockholders to sell and dispose of their separate interests, and liquidation is effected by sale of the entire project as if the corporation owned the whole, subject to corporate and individual condominium creditors.

Restrictions on disposition of common areas

During the corporation’s existence, it cannot sell, exchange, lease, or otherwise dispose of common areas it owns/holds within the condominium project unless authorized by the affirmative vote of all stockholders/members.

Dissenters, buyout timing, and valuation framework

The by-laws of a condominium corporation must provide that a stockholder or member is not entitled to demand payment of shares/interest in cases where the right is granted under the Corporation Law unless the person consents to the sale of the separate interest in the project to the corporation or to a purchaser chosen by the corporation who must also buy the dissenting member/stockholder’s interest.
If price is disputed, the by-laws must use the valuation procedure provided in the appropriate provision of the Corporation Law for valuation of shares.
The corporation has two years within which to pay for the shares or furnish its chosen purchaser from the time of award.
All expenses incurred in liquidation of a dissenting member/stockholder’s interest are borne by the dissenting member/stockholder.

Land registration procedures and title copies

Upon registration of an instrument conveying condominium, the Register of Deeds must, upon payment of proper fees, enter and annotate the conveyance on the land’s certificate of title and entitle the transferee to issuance of a “condominium owner’s” copy of the pertinent portion of the certificate of title.
The “condominium owner’s” copy need not reproduce ownership status or series of transactions annotated for other condominiums in the project; it must be sufficient if it contains a copy of the land description, a brief description of the condominium conveyed, and the name and personal circumstances of the condominium owner.
No subsequent conveyance of condominiums or parts after the original conveyance is registrable unless accompanied by a certificate of the management body that the conveyance complies with the declaration of restrictions.
For condominium projects registered under the Spanish Mortgage Law or Act 3344, as amended, registration of the deed of conveyance is sufficient if the Register of Deeds keeps the original or signed copy with the management body’s certificate and returns a copy of the deed to the condominium owner duly acknowledged and stamped by the Register of Deeds in the same manner as real-property conveyance registration under those laws.
Where the enabling/master deed provides that the land included within the condominium project is to be owned in common by the condominium owners, the Register of Deeds may, upon request of all condominium owners and surrender of all “condominium owner’s” copies, cancel the existing certificates of title and issue a new one in the name of said owners as pro-indiviso co-owners.

Assessments, liens, enforcement, and releases

A duly registered declaration of restrictions creates an obligation for each condominium unit owner to pay assessments made in accordance with the restrictions.
An assessment and authorized charges (including interest, costs (including attorney’s fees) and penalties as provided in the declaration) become a lien upon the condominium when the management body registers a notice of assessment with the Register of Deeds of the city or province where the project is located.
The notice of assessment must state: the amount of assessment and other authorized charges, a description of the condominium unit assessed, and the name of the registered owner.
The notice must be signed by an authorized representative of the management body or as otherwise provided in the declaration of restrictions.
Upon payment and satisfaction of the assessment and charges, the management body must register a release of the lien.
The assessment lien is superior to all other liens registered after the notice of assessment, except real property tax liens, and except that the declaration of restrictions may provide subordination to other liens and encumbrances.
Such liens are enforceable by the same judicial or extra-judicial foreclosure methods applicable to real property mortgages.
Unless otherwise provided in the declaration of restrictions, the management body has power to bid at foreclosure sale, and the condominium owner has the same right of redemption as in judicial or extra-judicial mortgage foreclosure.
A condominium owner may remove the owner’s condominium from a lien affecting two or more condominiums or any part thereof by paying the lienholder the fraction of the total sum secured attributable to the owner’s condominium unit.

Work, consent, emergency repairs; common-area services

Labor performed, or services or materials furnished with the consent of or at the request of a condominium owner or the owner’s agent or contractor/subcontractor, may not be the basis of a lien against another condominium owner’s condominium unless the other owners have expressly consented to or requested the performance or furnishing.
Express consent is deemed given for the owner for emergency repairs of the owner’s condominium unit.
Labor, services, or materials furnished for common areas authorized by the management body under a declaration of restrictions are deemed furnished with the express consent of each condominium owner.

Personal property for the condominium owners

Unless otherwise provided by the declaration of restrictions, the management body may acquire and hold tangible and intangible personal property for the benefit of condominium owners and dispose of it by sale or otherwise.
The beneficial interest in that personal property belongs to condominium owners in the same proportion as their respective interests in the common areas.
Transfer of a condominium transfers to the transferee the transferor’s beneficial interest in such personal property.

Condemnation and court reorganization

If a court in an action for partition by sale or dissolution on the ground of condemnation/expropriation finds the Act’s or the declaration’s conditions are not met, the court may decree reorganization of the project.
The decree must specify the portion(s) continuing as a condominium project, identify the owners of remaining portions and their respective rights, and determine any just compensation due to a condominium owner due to deprivation of property.
Upon receipt of a copy of the decree, the Register of Deeds must enter and annotate it on the pertinent certificate of title.

Construction, severability, taxation, and amendment rule

Deeds, declarations, and plans for condominium projects must be liberally construed to facilitate operation of the project.
Their provisions are presumed to be independent and severable.
When real property is divided into condominiums, each condominium separately owned must be separately assessed for real property taxation and other tax purposes to its owners, and the tax on each condominium constitutes a lien solely on that condominium.
All Acts or parts of Acts in conflict or inconsistent with the Act are amended insofar as condominiums and their incidents are concerned.

Effectivity

Republic Act No. 4726 takes effect upon approval, approved on June 18, 1966.