Atty Nueve - Co Lecture: Condominium Act - Oct 14 2020

Property 2E

1. Compare Article 490 and the Condominium Act

● Article 490 and the Condominium Act refer to different things
● Article 490
○ The property or the building described in Article 490 is not a condominium as
described in the Article 490 neither does the ownership the same or the interest
is the same in Article 490 and the co-ownership act.
○ More properly referred to as a perpendicular co-ownership because it only refers
to a building where the different owners are separately owned by different
persons. There is still co-ownership of the main walls, the roof, stairs, and some
other things. There is separate ownership of one entire floor.
○ Description of the floors in Article 490 is not as we usually understand it.
■ The first floor is NOT the ground floor.

2. Condominium meaning
● SECTION 2. A condominium is an interest in real property consisting of ​separate
interest in a unit ​in a residential, industrial or commercial building and an undivided
interest in ​common, directly or indirectly, in the land on which it is located and in other
common areas of the building. A condominium may include, in addition, a separate
interest in other portions of such real property. Title 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.

3. Interest
● What does interest mean? Does it mean ownership? There is separate ownership
of a unit and a co-ownership of the common areas?
○ Answer: Not necessarily. Because an interest there may be referred to other real
rights.
■ What real rights do we have?
Answer:
- A lease that will last for more than a year.
- A lease that is less than a year but is registered

Note: In the PH we have a leasehold for a condo unit.

 Freehold v Leasehold
a. Leasehold: unit owner or unit lessee will just pay for
several years and will stay for several years. He will hold
the condo unit for several years and then after several
years, he will have to give back the unit to the developer.
Because what he has is only a leasehold.
b. Freehold:​ ownership. The real right over separate interest
is ownership.

Note: The separate or undivided interest need not

necessarily refer to ownership. It may refer to other interest
other real rights.

Example: Leasehold/Leaseright over the unit and common

areas.

4. Common Areas meaning

● Everything besides the unit and some separate areas including….more importantly, the
land.
● Parking area not considered common area

5. Condominium
Does the condominium refer to a building? Similar to perpendicular ownership in
Article 490?
● Answer: Not necessarily. We may have a horizontal condominium.
○ Horizontal Condominium
- The separate houses are considered the units
- The common areas may refer to the land, clubhouse, golf area
etc.
○

6. What makes a project under a condominium act?

Answer: The registration of 2 Documents
a. Master Deed -​ refers to the description of the project. What makes the
unit, what the land looks like, what are the common areas
b. Declaration of Restriction -​ more important because it has to do with the
restrictions, declarations, expenditures that may be assessed. May also
provide for the management of common areas.

7. Who/What may hold to the title to common areas?

Answer: Section 2 and 5
a. Direct Owners: The co-owners may hold the title to the common area ​directly ​->
co-owners of common area → undivided interest in the common areas may refer to the
co-ownership of the common areas. → hold share on land and other common areas
directly

b. Indirect Owners: Common areas may be in the name of condominium corporation ->
unit holders are not the direct co-owners of the common areas or the land. They are the
indirect owners/indirect co-owners.

Why indirect? There is an intervening juridical entity between the co-owners and the
land. Corporation - direct owner of the land.

Why is it important to know the difference?

- It has to do with the rules on alien holding or alien ownership over the land

a. Direct Owners:

Ownership governs by unit holders or in the hands of an association

formed by the unit holders as co-owners → No unit can be sold to a
foreigner. Because otherwise there could be a circumvention of the
constitution prohibiting aliens from holding land in the Philippines.

Remember the definition of Condominium. Separate Interest to unit and

Undivided interest to common areas and the land. So if we sell one unit to
a foreigner, the common areas are directly in the hands of the co-owners,
you are thereby be allowing that alien to hold a part/portion/undivided
interest in the land in the Philippines, contrary to constitution.

b. Indirect Owners:

Condo where title to common areas is registered in the hands of

condominium corporation
However, if the common areas of the condo are registered in a condo
corp, then the units up to 40% of the project can be sold to aliens.

For example, 100 units in a condo project. 40 can be sold to foreigner.

Why? No violation to constitution because it is still considered as filipino corp.

Note:
- very rare that the condo corp is in the hands of the unit holders.
Declarations of restrictions usually provide that there will be an
establishment of corpo corp and that condo corp will hold the title to the
common areas because it allows the developer to sell 40% to foreigners.
 - Di ibig sabihin lahat magmanage. Pwede gumawa ng governing board or
maghire to manage day to day activities. What’s important is who holds
the title.

8. Dissolution: (dissolves juridical entity only)

Condominium Grant
- Vertical Condo: (Separate Interest) Interior walls of unit - Condo code
Outer wall to outer wall (WRONG)
- Non-exclusive right for ingress, egress with respect to common areas
- Airspace within the unit

9. Units

What happens for example, A buys a 1 room condominium apartment, B buys a 3 bedroom
condominium apartment. Can we say that they each have a single vote or shareholding or
stock. Don’t you think it’s unfair?

Answer: Yes. B paid more. What developers do is they consider each room to be a single
unit so A will only have 1 unit so 1 vote in the condo corp. B who bought 3 BR will be
considered to have bought 3 units in the condo corp. He usually given is 3 votes. This was
stated not only in ​Declaration of restriction but also in the ​Articles of Incorporation ​and ​By
Laws​ usually of the Condominium Corporation.

Note
1. When you become unit holder, you can either be :
a. Stock Corporation - unit owners are stockholders
b. Non-Stock Corporation - unitholders are considered members

Note: Suppletorily apply Revised Corporation Code.

2. We usually have Condo corporation to hold titles to common areas. We no longer have
condo assoc.

10. Expenses, expenditures, how the assessments regarding the common areas will all
be in the declaration of restrictions but it will be subject to determination eventually
to revision by the condo corp itself.
a. Assessments
- Can be considered a lien
Ex. Association Dues
If a condo unit holder fails to pay the assoc dues and the assoc dues are
usually computed based on sqm.
 1000 per sqm then 1 month 50k assoc dues.

If you fail to pay this assoc dues, then the condo corp can have your unit
foreclosed. After foreclosure, the condo corp can easily sell (foreclosure
sale).

Note:
- Each unit subject to real property tax- it will be paid by separate
owners of each unit
- Tax on common areas - must be paid by condo corp

11. Assuming we have condo corp that holds the title to common areas. What happens if
1 unit holder disagrees with other unit holder with respect to a decision made by
condo corp (ex. To annex a new project- Tower 1, tower 2 etc..) Owners of tower 1
will have to vote usually if it is not included in the master deed. To make tower 2 part
of Tower 1,

One does not want to expand because the additional weight of tower 2 cannot be
sustained by the land. As a dissenting stockholder, can she insist on appraisal right?
Can she insist that her interest in the condo corp be paid?

Answer: Yes. On the condition that she is likewise willing to sell her separate interest in her
lien. If she is willing to sell her condo unit, she can insist that she be paid by condo corp.

Appraisal right still exist in the condo act, provided that the unit holder is willing to sell her
condo unit.

12. What if she is willing to sell? How much?

Answer:
a. Usually provided in Declaration of Restrictions
b. Disagreeement - go to court.

13. The interest in the condo either the shareholding or the stockholding in the condo
corp cannot be separated at all with the separate interest. So kung si unit holder no
longer wants to be shareholder, she also has to let go of his interest to own condo unit.

Note: Dapat lagi magkasama Separate Interest and Undivided Interest (either directly or
indirectly through a condo corp)

13. Dissolution
- Can either be done
a. Voluntarily - Section 14 and 15; When every condo unit owner or everyone of
them agree to dissolve the condo corp. (Sec 15) If you can’t get unanimous vote
 just resort to Section 14. Under rule 104 decide the grounds for the dissolution.
[What are the grounds? Sira ½ no one wants to repair, 50 yr old obsolete,
expropriated etc.)
Why is it called voluntary? The decision comes from everyone or the unit holders
or some provided that grounds under Sec 14 is there.

b. Involuntarily ​- initiated by Securities and exchange commission; ground would

be ultra vires act of condo corp.

Example of ultra vires act: contrary to Articles of Incorporation, contrary to law,

nagpautang sa unit holders, the condo corp invested the assoc dues remitted by
unit holders into business)

14. What happens after dissolution? Wala na ba condo?

Answer: Of course not. Dissolution is not the same as partition of the condo. So it doesnt mean
na nagdissolve ang condo corp e wala na condominium.

15. What is the effect of dissolution of condo project?

Answer: It just destroys condo corp. Magkakaroon ng direct ownership ang unit holders to land.
No more intervening juridical entity. Unitholders will have direct interest or co-owners of the land
and other common areas.. --- Wala nanamang foreigners na pwede bumili.

16. Partition. Paano ang partition? Pwede ba physically idivide?

Answer: No. There can be no partition of condo project.
What happens after… there is judicial dissolution. There is special authority to sell the entire
condo project.
Partition can only be had by selling (Art 498) the entire project to someone else and then
divide/partitioning the proceeds of the sale. (Only means of partitioning a condo)

17. Can a unit holder sell freely his own unitholder?

Answer: Yes. Unless sa Declaration of Restrictions merong restrictions. And what restrictions
could that be? -- Right of refusal.