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November 30, 2010

Condominium Act of The Philippines – What’s in it For You as an Investor?

I just finished reading the Condominium Act of the Philippines and the most important lesson I learned from it is that reading laws like this can be a good cure for insomnia. It’s a six page document with 27 sections and with small prints. I almost fell asleep on my desk while on the third page and it’s only ten o'clock in the evening. Amazing! You won’t need sleeping pills anymore!

Seriously, I think I didn’t absorb much of its contents because I know that laws are generally structured by lawyers and therefore can only be clearly understood by them and those who have substantial experience in condominium development and management. BUT what I can share to you today are the things that I clearly understand and the things that would impact you as a unit owner.

Unlike in traditional ownership of real estate, Condominiums can be purchased by foreigners as long as they don’t exceed 40% ownership of the whole project. This is not a direct provision in the Condominium Act but I decided to include this fact here anyway.

Section 4 tells about the contents of the master deed. A master deed is facilitated after the condo project has been registered by the developer in the registry of deeds and the corresponding certificate of titles has been annotated. The latter should also be patented or registered under the Land Registration or Cadastral Acts.

The master deed contains important details about the project like:
  • Description of the land to where the project will rise
  • Description of the building or buildings, stating the number of storey, basement, the number of units and their accessories
  • It should include the floor plan of the building and each unit.
  • It should also contain any reasonable restriction not contrary to law, morals, or public policy regarding the right of any condominium owner to eliminate or dispose off his condominium

It would be advisable for you to secure a copy of the master deed specially if you are not sure about the reputation of the developer you are investing into. Because in it you can verify if the way they market each unit corresponds to what is indicated in the master deed. It is also important to know what the restrictions of your ownership are, if there’s any. Like if the units have freehold or leasehold type of ownership.

Upon purchase of the condo unit, you are automatically part of the condominium corporation. You have the right to vote and be voted upon in the corporation. The term of the condominium corporation is bound by the duration of the condominium project. Meaning, it would be as long as they, including you, eventually decide to dissolve either voluntarily or involuntarily.

Section 8 states that condominium projects that has been in existence for 50 years or more, that it is obsolete and uneconomical, and that condominium owners holding in aggregate more than 50 percent interest in the common areas are opposed to repair or restoration or remodeling or modernizing of the project may act upon to dissolve the condominium corporation and partition the assets proportionately among the owners.

Such right to partition or dissolution may be conditioned upon failure of the condominium owners to rebuild within three years or upon specified percentage of damage to the building.

The provision above is only applicable for freehold or perpetually owned projects because if it is leasehold, the ownership of the whole condominium project will automatically revert back to the developer after 25-50 years depending on what is stated in the master deed.

If you read this provision at face value, you would think that there is a possibility that the condominium corporation may be dissolved after 50 years or more due to the obsolescence of the building and other factors. How does this affect you? Remember that 50 years is the lifespan of a registered corporation and this concept was applied to the condominium corporation too. This does not mean that the corporation would likely be dissolved after 50 years because that would depend with a lot of factors. Obsolescence is surely to occur but with an effective property management, it can still retain its aesthetics and usability. The Manila Hotel for example was built in 1909 but remains to be a grand landmark in the heart of Manila today.

If in case the condominium corporation do decide to dissolve and liquidate the assets by selling the whole project for apportionment, it would still be good because with the duration of 50 years or more, the value of the land would have appreciated so much that its value exceeds the cost of constructing a new building.

What I have discussed represents a portion of the law and I intend to discuss other things that would affect the investor as my study about condominiums progresses. You might have some insight to share about the Condominium Act, feel free to comment below.

Live a beautiful life!

Ryan Rillorta 

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Read other posts:
House and Lot or Condo, Which is Better? 
Condo Hotel or Condotel - Is it a Worry-free Investment? 
Is Condo Living for You?
The Lumiventt Advantage – Distinctly DMCI
Why DMCI? - Their Edge Over other Developers.


  1. budz..

    Hi there Ryan. Good posts you have here.

    Question, does DMCI have leasing services, for people who want to rent out their units and if so how much are they charging, thanks.

  2. Thanks for you comment. About your question. DMCI contracts property managers for their projects. I know that as of now. not all projects have leasing services. Do you have a specific project in mind so I can confirm?

  3. Hi there...investing a condo interests me but i've got lot of questions in mind...first if for example i got a pre-selling unit and i've finished my down payment long before the turn over period, does the developer has the right to apply my remaining balance to automatic inhouse? even if the unit has not delivered to me yet? Is it correct to charge interest on the balance for the the months while the bank loan is on the process? and turn over period has yet to come? pls enlighten me...thank you...

    1. Hi, to answer your question. The bank loan should have been processed and approved before the end of the DP period A buyer is automatically put on in-house financing if they didn’t qualify for a bank or Pag-ibig loan. But in your case, since your loan is still in process, it depends on the policy of the developer. I believe that it can only happen if the bank is not a partner or accredited bank of the developer.

  4. Good day!

    We purchased a condominium from Megaworld Corp. The 50% of the contract price is payable for 5 yrs (60 months)and the other 50% is payable upon turn over of the unit which is schedule next year. We have paid for 43 months and due to financial problem we're not able to continue the monthly mortgage. We advice them that we will no longer continue to purchase the unit.

    i would like to know if we can refund what we have paid. Or is there any law that protect us buyer for this case.

    i really appreciate any help from you. thank you & God bless!

    1. Hi, as I see it, this is a transaction between you and Megaworld Corp. no bank loan involved. If this is true then yes you can demand a refund under Maceda Law. Here is a link to my post about Maceda Law but I suggest that you consult a lawyer for better assistance. Or one other option is to sell your rights to another person who is willing to take over your position as the buyer. I think this would be a better option because you can recover a larger portion of your equity compared to what Maceda law can offer. I hope you solve your financial problem soon as a better solution for this. Thanks and God bless!

  5. Thanks for sharing this. Relieved from actually reading the act


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