6 things to consider before buying a residential condominium unit

A condominium project consists of land on which the project stands, the individual dwelling units and the common areas.

In the Philippines, a condominium building is any vertical development, ranging from, say, 5 to 50-stories tall comprising of, say, a hundred to 500 individually-owned units per building wherein the units share walls.

In the United States, condominiums also usually share walls, although, that is not always the case. There, many condominiums resemble what may appear to us here in the Philippines like townhouses, row houses or apartment complexes that may be only 1 to 2 stories tall. The similarity is in the extent of ownership.

Extent of ownership in a  condominium project

What makes a condominium project unique is not the number of stories they have or whether the units share walls or not. What makes it unique is that each home buyer owns his unit space but shares ownership and use of the common areas and there is no individual ownership of a plot of land. The entire land on which the condominium project stands is owned in common by all the homeowners.

Condominiums are set up like a corporation

Though, it’s not required by law for a condominium project to be set up as a corporation, the fact that all local condominium developers also target foreign buyers makes this necessary. Foreigners cannot own or co-own land in the Philippines; they can only buy into a corporation that owns land.

This, to me, is the most important thing to consider when buying a condominium unit. As a unit owner, you become a shareholder of the condominium corporation. One unit is equal to one share (that is proportionate to the size and price of your unit) in the corporation which is then equal to a proportionate vote.

If there are 500 individually-owned units in the condominium you are buying into, it means there are 499 other incorporators, with varying motivations and idiosyncrasies, who have more or less the same stake and voting power as you do. Everyone, through the condominium corporation, owns all the common areas in the condominium and the land on which the building stands.

Like in any corporation, certain issues and problems will arise that can only be decided through votes by the shareholders or unit owners. As such, some unit owners will lose and some will win. Later, I shall discuss the most important issue that condominium owners will inevitably decide on.

Condominium unit owners can only obtain a CCT and not a TCT

Ownership of a condominium unit is evidenced by a CCT or Condominium Certificate of Title. Unlike a TCT or Transfer Certificate of Title which is evidence of ownership of a traditional house and gives the homeowner absolute ownership of the “inside” and “outside” of his house up to the boundaries of his lot, a CCT only endows the condo buyer ownership of the “inside” of his unit. By the way, a townhouse owner is also issued a TCT that entitles him ownership of his unit and the land on which his unit stands.

Condominiums have a life span of 50 years

Although, the law does not explicitly say that condominiums have a life span of 50 years, it definitely implies so. Section 8c of The Condominium Act says:

That project has been in existence in excess of 50 years; 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…

In such case, the owners can vote to have the building demolished which presents them two options:

  • Sell the land and the scrap from the demolished building, deduct the cost of demolition and divide the net proceeds among the owners, or
  • Strike a deal with the original developer or another developer to build a new condominium on their land. But until such time that the new project is completed, the owners will have to live in a temporary home which may take 2 to 4 years.

You might be laughing at this point telling yourself: “I’ll be dead by the time my condo reaches 50 years old.”

This leads us to another point:

A condominium is not an ideal inheritance for your children or grandchildren

By the time you pass on your condo to your heir, it may no longer be ideal for dwelling. If you ask me, 50 years is too long given the propensity of many developers to build very tall condominiums. The taller a building is, the more prone it is to the ravages of time and harsh environmental conditions, ergo, the shorter its life span. They are also the most technologically-dependent type of housing.

Short of 10 years, 40 years from now, will future buildings be using the same electrical, water or cooling systems that buildings are employing today? Will replacing these systems, even just their cables, pipes and conduits (which are mostly embedded in the walls) in a, say, 30-story condominium, be feasible? How will you replace a totally broken down elevator in such a building? Will the elevators that we have now still be the same mode for transporting residents up and down a building?

At the very least, modern condominiums today will become eyesores 50 years from now; they will be drowned out by future architectural designs.

Association dues is not the only expense that you will have to pay

Payment of association dues is not unique to condominiums since owners of single-detached houses in subdivisions and owners of townhouses also pay association dues for the maintenance of common areas, solid waste management, security and more. But association dues in condominiums are highest per square meter.

The following are the other expenses that you shall pay when living in a condominium:

  • Realty tax on your unit
  • Share of realty tax on the land on which the condominium stands
  • Share of realty tax on common areas

If you have a car and you opt to buy a car slot in the condominium, expect to pay an extra half a million pesos or more and pay additional monthly dues for it.

Given these 6 things to consider before buying a condominium unit, does it mean you shouldn’t buy a condo?

No, it does not; it depends on the lifestyle problems you want solved.

More on this on my next post.

Thank you so much

P.S. The Condominium Act aka Republic Act No. 4726

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Comments

  1. Hello Jay Frederic,

    Condominium has never been my forte and I am very far from being an expert. I am relatively a newbie in this industry and I am aware that I have given some lousy opinion on certain matters. In fact, I have gained a lot of knowledge from many visitors like you.

    I only base my opinion on what I read and interpret them to the best of my knowledge and I offer no warranty.

    As far as condominium ownership is concerned, I have always thought that it entitles the condo buyer Ownership of his unit until or unless, after several years, majority of the unit owners decide on whether to demolish the project or not as stated in the Condominium Act.

    However, just today, I learned from the website of Century Properties that there are two kinds of condo ownership in the Philippines: Leasehold and Perpetual Ownership. Honestly, it’s the only website I have come across that gave a definitive answer on the matter.

    I hope it helps you as much as it helped me.

    Thanks for dropping by.

  2. Jay Frederic Cruz says:

    Hi Sir,

    I came across your website and it has been very informative about Condominiums, its pros and cons, and whether to invest in such a deal. It was previously stated by one of the commenters here regarding Perpetual Ownership. I do have a basic understanding of it but I want an expert opinion on Perpetual Ownership as a concept in Condominiums. The developer is Phinma Properties and the project is Arezzo Place in Pasig.

    Any information you provide will be quite valuable.

    Thanks!
    Jay Frederic Cruz

  3. Hello Mr. Sajor,

    This is the first time I have heard of the phrase Irrevocable Proxy being included as a provision of a Contract to Sell.

    I don’t want to pretend that I know the answer to your question because, honestly, I don’t.

    Can you please email me at junsanchez@yahoo.com and tell me the name of the developer and the project where such CTS was used. I will try to get an answer but I cannot make any promises.

    I hope you understand.

    Thank you.

  4. Ruben Sajor says:

    The contract to sell that the buyer signed provides that you give the developer an irrevocable proxy for 5 years from registration. Is this legal under Philippine law? What if 4 years have passed and there’s still no registration for reasons known only to the developer despite complaint from the unit owner?

  5. Hello Gerlin,

    It’s easy for any company to be registered as a corporation at the SEC.

    I have not heard of the developer, Landgroup, Inc. Their project, Avenue Residences, should have a License-to-Sell issued by the HLURB. If there is none, that’s one very good reason not to buy from the developer; it’s a red flag.

    I hope this helps.

    Thank you for visiting my site.

  6. Gerlin Baranggan says:

    Hello Sir Jun,

    I have been searching for information about condo buying in the Philippines. I’m glad I found your site, it was very informative.
    I was checking out this condominium which is very near my place of work but found not enough info on the web regarding the developer. I have visited the condo and liked it a lot.
    This is The Avenue Residences at Tandang Sora Avenue in Quezon City. The developer is Landgroup, Inc.
    I checked and the developer is indeed registered with SEC but not with HLURB. What other things do I need to check with the developer before I make a purchase? The sales agents are young and not very helpful.

  7. Hello Armin

    This is the first time I have heard of the developer. So, probably just like you, I tried to google the developer and the project but can’t find anything useful, except for a facebook page that hardly has anything on it and one or two Youtube videos.

    Sorry I can’t provide more than you already know.

    Happy New Year

  8. Hi Sir Jun,

    Good day!

    This is very informative and helpful, I am glad I came across your site. This enlightens me a lot of things regarding buying a condominium and also the comments and other inputs. I just want to ask any insights regarding D’ University Land Development Holdings, specifically the D University Place Condominium Project at Taft Ave. Manila. We were quite impress on their units but i personally haven’t heard of the developer. Thank you very much in advance!

  9. Hello Alex

    I will be the first to admit that RA 4726 or the Condominium Act may be subject to different interpretations as it is replete with the word “may” and the phrase “unless otherwise stated” or other similar phrases.

    For example, in Section 2 alone, it says:”…A condominium may include, in addition, a separate interest in other portions of such real property. The 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 holders of separate interest shall automatically be members or share-holders…”

    I think the issue of who owns the land where a condominium project stands boils down to the statement of the nature of the interest and obligations acquired by the condominium buyers as specified in the Master Deed with Declaration of Restrictions.

    Assuming it is legal for a condominium developer to aver in the Master Deed that it will retain ownership of the land where the project stands, said Master Deed can be amended or revoked by virtue of RA 7899 that amended Section 4 of RA 4726.

    RA 7899 states: “The enabling master deed may be amended or revoked upon registration of an instrument executed by a simple majority of the registered owners of the property: Provided: That in a condominium project exclusively for either residential or commercial use, simple majority shall be on a per unit of ownership basis and that in case of mixed use, simple majority shall be on a floor area of ownership basis…”

    But actually, given my very limited knowledge and experience as a broker, I have not encountered any condo developer that retains ownership of the land or the common areas of the project. For why else are condo unit owners assessed property taxes not just on their individual units but also on the common areas (including land) in proportion to their ownership. If the developer retains ownership of the land, it should be the one paying for the taxes on such land and not the unit owners.

    Here, I believe, is the more common example of a Master Deed:

    See Part I, THE MASTER DEED, Section 4 The Condominium Corporation

    “The DECLARANT (property owners) and DEVELOPER will initiate the formation of a non-stock, non-profit organization known as FILIPINIANA TAGAYTAY CONDOMINIUM CORPORATION which shall have titular ownership as transferee of the title to the property as trustee for the members…. To the FILIPINIANA TAGAYTAY condominium corporation shall belong automatic ownership of the property in accordance with the provisions of RA 4726 as amended and such ownership will not be diminished by the fact that the title to the property remains in the name of the DECLARANT. The FILIPINIANA TAGAYTAY CONDOMINIUM CORPORATION shall have corporate personality which is the aggrupation of the unit owners and in turn the unit owners are collectively the condominium corporation.

    If the foregoing Master Deed is the norm, then the unit owners effectively and collectively own the common areas of the project including the land regardless of whether the title remains with the owner/developer or not.

    Note that the above is merely my personal opinion and should not be taken at face value as I have repeatedly said, do not have any legal background. My opinion is as good as anyone else’s.

    I will await for the result of your research on this issue, Alex and I thank you very much for sharing your experience on this important matter.

    Merry Christmas and my best regards

  10. as to 50 years consider impact of the water damage to the underlying metal bars.

    take into account rainy season.

    if metal is corroded the building will be condemned.

    the concrete is not good when it comes to tension, the metal reinforcement is critical as to the structural integrity.

  11. It appears the author made a huge mistake.

    The current practice in the Philippines indeed is to set the buyer association as a corporation.

    But it has nothing to do with the land, maybe it is the purpose of the developer to make it like the unit owner corporation owns the land.

    The corporation only manages common areas.

    The land title as a rule remains with developer company (developer corporation).

    But marketing agents / managers are trained to tell the buyer that every buyer has share of the land.

    To get clarity you can just go to city hall and for less than 1000 pesos you can get the true copy of the land title, it has also the master deed and all other encumbrances attached.

    I was told in Manila City Hall that they didn’t see a case when a unit owner association (arranged as corporation or not) owns the land on which the condominium is standing.

    I’m checking the matter further.

  12. Arvin R. Padual says:

    Living in a condo unit is less costly considering the exorbitant price of materials to maintain a good house.

  13. Hello Maria Shellyn,

    Nothing has changed in the Condominium Act.

    All condo projects in the Philippines offer perpetual ownership unless otherwise stated.

    There is nothing in the Condominium Act that says that a condo building should be torn down after 50 years. It only implies that in 50 years, a condo project may be obsolete, costlier to maintain than to build a new one or untenable.

    It’s really up to the majority of the unit owners if they want to maintain the building for 50 or even 100 years unless the Engineering Office of the city or municipality that has jurisdiction over the building deems the structure as condemned.

    If the developer’s advertising materials promised perpetual ownership of the condo, that’s a promise they cannot break. Copies of such advertising materials are one of the requirements that they submit to the HLURB for the issuance of the Certificate of Registration and License to Sell.

    I hope this helps at next time, sa akin ka na lang bumili, ha :)

  14. Maria Shellyn Chua says:

    Hi Jun,

    I bought a condominium and I’m about to sign the Deed of Absolute Sale. I noticed though that in the contract there is no indication regarding the Length of Ownership of the condo. In the marketing advertisements and the verbal sales, I have been told it’s perpetual ownership and they said the developer won’t ask me to return the unit in 50 years or 99 years. (As opposed to the HK condo law of 99 years lease and Camp John Hay’s units where you need to give the unit back after 25 years).

    In the Deed of Absolute Sale they gave me December 2013, it says: “Seller hereby sells, transfers and conveys unto buyer, absolutely and unconditionally, the subject property…”

    I was wondering how different this is from the other condo (from another developer) I bought which was turned over to me just this March 2013 where the Deed of Absolute Sale (DAS) says: “The vendor do by these presents sell, cede, transfer and convey absolutely and perpetually, unto the latter, its assigns, the above described real estate…”

    Why is it that in the March 2013 DAS it has the word PERPETUAL while in the December 2013 DAS the developer said they cannot use the word perpetual ownership? Is there a change in the Philippine condominium law between March 2013 and December 2013?

    Thanks and regards,
    Maria Shellyn Chua

  15. Hello Chux18

    Condominiums are still a good investment if they are built in a carefully chosen location with a large captive market. And only choose projects of highly experienced and reputable developers.

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  1. […] to show that you are serious about making the purchase. As proof of ownership, you must display the Condominium Certificate of Title, abbreviated as CCT. However, in order to say that you own the condominium fully, a transfer title […]

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