CONDOMINIUM CONCEPT AND OTHER

TYPES OF REAL ESTATE HOLDINGS

Comprehensive Real Estate Seminar and
Review (CRESAR for PRC Licensure
Exam)
Phela Grande Hotel, General Santos City
March 15, 2015

PRC Licensed Lecturer:

Realtor ARTURO M. LAWA, C.P.V.
PRC RE Appraiser No. 0000248
PRC RE Broker No.0002007

Investing in Real Estate

Even though changes in the economy have increased risk or

lowered returns, the investment market continues to devise
innovative and attractive investment strategies.

These developments make it important for real estate licensees to

have an elementary and up-to-date knowledge of real estate
investment.

Even the average homebuyer wants assurance that a residential

purchase is a good investment out of a hard-earned savings.

Therefore, a competent investment advisor should always be

sought to give experts advice to an investors specific needs.

Forms of Real Estate Investments

Direct Ownership both individuals (natural) and

corporations (juridical) may own real estate directly and
manage it for appreciation or to benefit for cash flow
(income).
Property held for appreciation is generally expected:
-to increase in value while it is owned and
-to show profit when it is sold.

Income property property held for recurring income as

well as a potential profit upon its sale ( ex. rental
properties).

Advantages

Serves as inflation hedges fluctuation of real estate

values resulting to investments failing to produce returns
greater than the rate of inflation, yet many RE
investments have shown above-average rates of returns,
generally greater than the prevailing interest rates
charge by mortgage lenders.

The investors can use the leverage of borrowed money

to finance a RE purchase and feel relatively sure that, if
held long enough, the asset will yield more money than
it cost to finance the purchase.

RE offers investors greater control over their

investments than do other options, such as stocks,
bonds or other securities.

RE investors also receive certain tax benefit like

investments within PEZA, tax incentives granted by
LGUs.

Disadvantages

RE is not highly liquid over a short period of time

Liquidity refers to how quickly an asset may be
converted into cash. Unlike listed stocks, only a call to
stockbroker when funds are needed.

RE investor may have to sell the property at a

substantially lower price than desired to ensure as quick
sale.

RE investment is expensive. Large amounts of capital

are usually required.

Investment decision is difficult and must be based on

careful studies of experts.

Investor can rarely sit idly by and watch his money grow,
it requires active management by himself or
professional property manager. Ex. How much rent to
be charged; how should repairs & tenant grievances be
handled.

CONDOMINIUM CONCEPT
AS REAL ESTATE INVESTMENT

- Reference materials exist and support that

Condominium ownership originated under
ancient Roman Law; and under that law,
Condominium means JOINT OWNERSHIP.
- In the modern concepts, joint-ownership
applies only to COMMON AREAS
- The horizontal or air-space are owned
individually in FEE-SIMPLE.

In the 12th Century ownership of floors and

separate room was common in German cities and
later on in France and Switzerland.
Housing shortages in Europe since 1930 spurred
total condominium ownership; and:
Most European nations enacted legislation support
England had condominium statute since 1925.
In the United States, the concept of condominium
has been recognized in the19th century.
The first condominium law in New York was
enacted in 1947.
Puerto Rico enacted their law in 1958.
The trend of condominium ownership has then
spread throughout the developed and
undeveloped countries including the Philippines.

CRITERIA Of CONDOMINIUM SITE

- Conforming to Comprehensive Land Use Plan, Zoning
Ordinance, National Building Code;
- Privacy, order, health and safety of residents are not
jeopardized;
- Open spaces are provided like courts, yards, setbacks,
parking spaces, light wells, uncovered driveways,
access roads, buffer strips, parks and playgrounds.
- Easement for utilities such as drainage, water supply,
power lines, etc.

WELL-PLANNED AREAS
- Must consider ventilation, sunlight and land
characteristics;
- No development allowed within 5m mandatory
easement on both sides of fault lines identified by
PHIVOLCS (NDRMC BR No. 515-1992)

SITE PRESERVATION/ALTERATION
- Slope: finish grade must have slope that channel
rainwater to street drains and prevent erosion of the
site or adjoining sites
- Preservation of Site Asset. Trees with caliper
diameter of 220mm. Preserve topsoil in open areas.
Ground cover comply with DENR standards.

RECREATIONAL AREAS
- Parks and playground must be provided (exclusive of
parking, easement, etc.);
- Minimum area for single park/playground is 50sq.m.;
- Not required if condo is not more than 800m from a
publicly accessible park/playground;
- Tennis courts and swimming pool are optional;

SPACE ALLOCATION
- Shall provide for living, dining, kitchen, sleeping, toilet
and bath, laundry/drying and storage according to
Building Code.

PARKING SPACE REQUIREMENTS

- Provide on-site and off-site parking in accordance to the
Building Code ;
- Additional parking if required by Ordinance of LGU.

ACCESS ROADS
- Min 8m for major and minor ROWs;
- Min 6m for carriageway ;
- Min 2m for sidewalks and planting strips;
- Min 1.2m for pedestrian path walk.

BASIC FACILITIES AND SERVICES

- Service Area (Laundry/Drying Area)
- Water supply, power, sewerage, drainage
- Reservoir/Water Tank
- Mechanical Equipment/Service Areas like elevators
- Refuse Collection/Disposal
- Fire Safety Facilities

FLOOR AREA REQUIREMENTS OF SINGLE OCCUPANCY

UNITS
- Minimum FA is 18 sq. m.
- However, 12sq.m. allowed if
- Intended for students/workers in highly urbanized areas
- Must have common basic facilities like laundry, visitors
lounge and dining area

FLOOR AREA REQUIREMENTS OF FAMILY DWELLING

UNITS
- Minimum FA is 36 sq.m. for open market condo projects;
- Minimum FA is 22 sq.m. for medium cost condo projects.

VARIANCES
- Variations from design standards is allowed if:
- Location is unique and different and owners cannot
obtain reasonable return on the condo projects;
- Hardship is not self-created;
- Proposed variance to existing permanent structure is
necessary to permit a reasonable use;
- Variance will not affect essential character of the location;
- Variance will not give rise to unauthorized reclassification
of approved subdivision or condo plan.

REPUBLIC ACT NO. 4726

AN ACT
TO DEFINE CONDOMINIUM, ESTABLISH REQUIREMENTS
FOR ITS CREATION AND GOVERN ITS INCIDENTS
Declaration:
Declaration
The real right in Condominium may by ownership or
any interest in real property recognized by law on
property in the Civil Code and other pertinent laws."

SALIENT POINTS OF THE LAW

Condominium (L. con together + dominium rule ) is

an interest in real property consisting of a separate
interests in a unit in a residential, industrial or commercial
building or in industrial estate. An undivided interests in
common, directly and indirectly, in the land, or the
appurtenant interest of their respective units in the
common areas.
Unit - means a part of the condominium project
intended for any type of independent use or ownership,
including one or more rooms or spaces located in one or
more floors (or parts of floors) in a building or buildings
and such accessories as may be appended thereto;
provided, that in the case of an industrial estate wherein
the condominium project consists of several buildings,
plants and factories may, by themselves, be considered
separately as individual units as herein defined.
Project - means the entire parcel of real property
divided or to be divided in condominiums, including all
structures thereon.

Industrial Estate - means a certain tract of land which

is subdivided and developed primarily for industrial
purposes and which usually includes provisions for basic
infrastructure facilities and common services such as roads,
water, electricity, drainage and waste disposal system.
Common areas - means the entire project except all
units separately granted or held or reserved.
To divide real property - means to divide the
ownership thereof or other interests therein by conveying
one or more condominium therein but less than the whole
thereof.

This Act shall apply to property divided or to be

divided into condominium only if there shall be
recorded in the Register of Deeds, and duly
annotated in the corresponding Certificate of Title
of the land, if the latter had been patented or
registered under either the Land Registration or
Cadastral Acts, and together with the enabling or
Master Deed.

1. Technical Description of the land on which the building

and improvements are to be located;
2. Description of the building, stating the number of stories
and basement, the number of units and their
accessories;
3. Description of the common areas and facilities;
4. A statement of the exact nature of the interest acquired
or to be acquired by the purchaser in the separate units
and the common areas of the condominium projects.
Where title to or to appurtenant interests in the common
areas are to be held by a condominium corporation, a
statement to this effect shall be included;

5. A certificate of the registered owner of the property that

they consent to the registration of the Deed;
6. Plans to be appended to the Master Deed as integral parts
thereof:
a. Survey Plan of the land included in the project;
b. Diagrammatic Floor Plans of each building unit, its
relative location and approximate dimensions.
7. Any reasonable restriction not contrary to law, morals, or
public policy regarding the right of any condominium
owner to alienate or dispose of his condominium.

Sec. 4. The enabling or Master Deed may be amended or

revoked upon registration of an instrument executed by a
simple majority of the registered owners of the property:

- In a condominium project exclusively for either residential

or commercial use, simple majority shall be on per unit of
ownership basis.

- In the case of mixed use, simple majority shall be on a

floor area of ownership basis.

Prior notifications to all registered owners shall be submitted

to the HLURB and the city/municipal engineer for approval
before it can be registered by the ROD;
-

Until registration of a revocation, the provisions of this Act

shall continue to apply to such property.

- Any transfer of a unit or an apartment, office or store or

other space therein, shall include the conveyance of the
common areas or in a proper case, the membership or share
holdings in the condominium corporation.

- Where the common areas in the condominium project are

held by the owners of separate units as co-owners hereof,
no condominium unit shall be transferred to persons other
than Filipino citizens or corporation at least 60% of the
capital stock belong to Filipino citizens, except in cases of
hereditary succession.

- Where the common areas in a condominium project are

held by a corporation, no transfer of a unit shall be valid if
the concomitant transfer of the appurtenant membership or
stockholding in the corporation will cause the alien interest
to exceed the limits imposed by existing laws.

1. Unless otherwise expressly provided in the enabling or

Master Deed or the Declaration of Restrictions, the
incidents of a condominium grant are as follows:
The boundary of the unit granted are the interior
surfaces of the perimeter walls, floors, ceiling,
windows and doors;
2. In the case of an industrial estate condominium
projects, wherein whole buildings, plants or factories may
be considered as unit, the boundary of a unit shall include
the outer surfaces of the perimeter walls of said
buildings, plants or factories;

3. The following are not part of the unit: load bearing

walls, columns, floors, roofs, foundations, and other
common structural elements of the buildings; lobbies,
stairways, hall ways and other areas of common use,
elevator equipment and shafts, central heating, central
refrigeration and central air conditioning equipment,
reservoir, tanks, pumps and other central services and
facilities, pipes, ducts, flues, chutes, conduits wires
and other utility installations, wherever located, except
the outlets thereof when located within the unit;
4. There shall pass with the unit, as an appurtenant thereof,
an exclusive easement for the use of the air space
encompasses by the boundaries of the unit as it exists at any
particular time and as the unit may lawfully be altered or
reconstructed from time to time.

5. Unless otherwise provided, the common areas are

held in common by the holders of units, in equal
share one for each unit;
6. A non-exclusive easement for ingress, egress and
support through the common areas in appurtenant to
each unit and the common areas are subject to such
easement;
7. Each condominium owner shall have the exclusive
right to paint, repaint, tile, wax, paper or otherwise
refinish and decorate the inner surfaces of the walls,
ceilings, floors, windows and doors hounding his own unit:
provided, that in the case of an industrial estate
condominium unit, such right may be exercised over the
external surfaces of the said unit;

8. Each condominium owner shall have the exclusive

right to mortgage, pledge or encumber his
condominium and to have the same appraised
independently of the other condominium owner;
9. Each condominium owner has also the absolute right
to sell or dispose of his condominium unless the Master
Deed contains a requirements that the property be first
offered to the condominium owners within a reasonable
period of time before the same is offered to outside
parties;

-The owner of a project shall, prior to the conveyance of any

condominium therein, register a Declaration of
Restrictions,
Restrictions which restrictions shall ensure to bind all
condominium owners in the project , such liens, unless
otherwise, provided, may be enforced by the condominium
owner or by the Management Corporation.
-The Register of Deeds shall enter and annotate the
Declaration of Restrictions, upon the Certificate of Title
covering the land included within the property.

a. As to Management Body (Condominium Corporation):

For the power thereof, including power to enforce the
provisions of the Declarations of Restrictions;
For the maintenance of insurance policies insuring
condominium owners against loss by the, casualty,
liability, workmen's compensation and other insurable
risks and for bonding of the members of any
management body;
Provisions for maintenance, utility, gardening and other
services benefiting the common areas for the operations
of the building, and legal, accounting and other
professional and technical services;
For purchase of materials, supplies and the like needed
by the common areas;

For payment of taxes and special assessment which

would be a lien upon the entire project or common
areas, for discharge of any encumbrance levied
against the entire project of the common areas;
The manner for delegation of its powers;
For reconstruction of any portion or portions of any
damage to or destruction of the project;
For entry by its officers and agents into any unit when
necessary in connection with the maintenance or
construction for which such body is responsible;
For a power of attorney to the management body to sell
the entire project for the benefit of all of the owners
thereof when partition of the project may be authorized
under Section 8 of this Act, which said power shall be
binding upon all of the condominium owners regardless
or whether they assume the obligations of the
restrictions or not

b) The manner and procedure for amending such restrictions,

provided, that the vote of not less than a majority in interest of
the owners is obtained;
c) For independent audit of the accounts of the Management Body;
d) For reasonable assessments to meet authorized expenditures,
each unit to be assessed separately for its share of expenses in
proportion to its owner's fractional interest in any common areas;
e) For the subordination of the liens securing such assessments to
other lien either generally or specifically described;
f) For conditions upon which partition of the project and
dissolution of the condominium corporation may be made. Such
right to partition or dissolution may be conditioned upon failure of
the condominium owners to rebuild within a certain period or upon
specified percentage of damage to the building, or upon a decision
of an arbitration, or upon any other reasonable condition.

-Common areas in a condominium project are held by a

condominium corporation which shall constitute the
Management Body of the project.

-The Articles of Incorporation or By-Laws of the corporation

shall not contain any provision contrary to the provision of
this Act, the enabling or Master Deed, or the Declaration of
Restrictions of the project.

-Membership in a condominium corporation regardless of

stock or non-stock corporation, shall not be transferable
separately from the condominium unit.

-When a member/stockholder ceases to own a unit in the

project in which the condominium corporation owns or holds
the common area, he shall automatically cease to be a
member/stockholder of the condominium corporation.

-The registration and regulation of a condominium corporation

shall be vested with the HLURB and the term of the said
corporation shall be co-terminuous with the duration of the
subdivision projects, the provision of the Corporation Code
to the contrary notwithstanding.
-The dissolution of the condominium corporation in any
manner and any of the causes provided by law shall be
governed by the provisions of the Corporation Code.
Code

1. Until the enabling or the Master Deed of the project in which

the condominium corporation owns or holds the common
areas is revoked, the corporation shall NOT be
voluntarily dissolved through an action for dissolution
under Rule 104 of the Rules of Court EXCEPT upon a
showing:
- The three years after damage or destruction to the project in
which damage or destruction renders a materials part thereof
unfit for its use prior thereto, the project has not been rebuilt
or repaired substantially to its state prior to its damage or
destruction; or

- The damage or destruction to the project has rendered one

half or more of the units therein untenable and that more
than 30 percent of the member of the corporation entitled to
vote, if a stock corporation, are opposed to the repair or
reconstruction of the project; or
- That the project has been in existence in excess of 50
years, that it is obsolete and uneconomical and that more
than 50 percent of the members of the corporation if nonstock or stockholders representing more than 50 percent of
the capital stock entitled to vote, if a stock corporation, are
opposed to the repair or restoration or remodeling or
modernizing of the project; or

- That project or material part thereof has been

condemned or expropriated and that the project is no
longer viable or that the members holding in aggregate
more than 70 percent interest in the corporation if nonstock, or the stockholders representing more than 70
percent of the capital stock entitled to vote, if a stock
corporation, are opposed to the continuation of the
condominium regime after expropriation or condemnation
of a material portion thereof; or
- That the conditions for such a dissolution set forth in the
Declaration of Restrictions of the project in which the
corporation, are opposed to the continuation of the
condominium regime after expropriation or condemnation
of a material portion thereof; or

2. The condominium corporation may also be dissolved by the

affirmative vote of all the stockholders or members
thereof at a general or special meeting duly called
for such purpose: Provided that all the requirements of
the Corporation Law are complied with.
3. Unless otherwise provided for in the Declaration of
Restrictions, upon voluntary dissolution of a condominium
corporation in accordance with the provisions of Section 13
and 14 of this Act, the corporation shall be deemed to
hold a power of attorney from all the members or
stockholders to sell and dispose of their separate
interests in the project and liquidation of the
corporations shall be affected by a sale of the entire project
as if the corporation owned the whole thereof, subject to
the rights of the corporation and of individual condominium
creditors.

1. A condominium corporation shall not, during its

existence, sell, exchange, lease or otherwise dispose
of the common areas owned or held by it in the
condominium project unless authorized by the
affirmative vote of a simple majority of the
registered owners: provided, that prior notification to all
registered owners are done and provided further, that the
condominium corporation may expand or integrate the
project with another upon the affirmative vote of a simple
majority of the registered owners, subject only to the final
approval of the HLURB.
2. Any provisions of the Corporations Code to the contrary
not withstanding, the by-laws of a condominium corporation
shall provide.

3. That a stockholder or member shall not be entitled to

demand payment of his shares or interest in those cases
where such right is granted under the Corporation Law
unless the consent to sell his separate interest in the
project to the corporation or to any purchaser of the
corporation's choice who shall also buy from the corporation
the dissenting member or stockholder's interest. In case of
disagreement as to price, the procedure set forth in the
appropriate provisions of the Corporation Law for valuation of
shares shall be allowed.
4. The corporation shall have two years within which to pay for
the shares or furnish a purchaser of its choice from the time
of award. All expenses incurred in the liquidation of interest of
the dissenting member or stockholder shall be borne by him.

- Upon registration of an instrument, the Register of Deed

shall enter and annotate the conveyance on the Certificate
of Title covering the land included within the project and the
transferee shall be entitled to the issuance of the owners"
copy of such Condominium Certificate of Title.

- A copy of the description of land, a brief description of

condominium conveyed, name and personal circumstances
of the condominium owner would be sufficient for purposes
of the "condominium owners" copy of the Certificate of Title.

- Where the enabling or Master Deed provides that the land

included within a condominium project are to be owned in
common by the condominium owners therein, the Register
of Deeds may at the request of all the condominium owners
and upon surrender of all their condominium owner's copies,
cancel the Certificate of Title of the property and issue a new
one in the name of said condominium owners as pro-indiviso
co-owners thereof.

- Whenever real property has been divided into

condominiums, each unit shall be separately assessed,
for purposes of real property taxation and other tax
purposes to the owners thereof and tax on each such
condominium unit.

- The assessment upon any condominium shall be an

obligation of the owner thereof at the time the
assessment is made.

- The amount of assessment plus any other charges,

interest, costs (including attorney's fee) and penalties,
as such may be provided for in the Declaration of
Restrictions, shall become a lien upon the condominium
to be registered with the Register of Deed.

DISABLED PERSONS ACCESSIBILITY FEATURES

-The building and design standards for condominium projects
to be promulgated by HLURB shall provide for, among
others, accessibility features for disabled persons pursuant
to Batas Pambansa Bilang 344 of 1994.
APPROVAL OF THIS ACT
-This act shall take effect upon its approval.
-Date Approved: June 18, 1966

OTHER REAL ESTATE INVESTMENTS

1. Real Estate Investment Trusts

(REITs)
2. Real Estate Investment
Syndicates
3. Real Estate Mortgage
Investment
Conduits (REMIC)

Real Estate Investment Trusts

(REIT)

[ REPUBLIC ACT No. 9856 ]

AN ACT PROVIDING THE LEGAL FRAMEWORK FOR REAL ESTATE
INVESTMENT TRUST AND FOR OTHER PURPOSES
Be it enacted by the Senate and House of Representatives of the Philippines in
Congress assembled:
ARTICLE I - GENERAL PROVISIONS
SECTION 1. Short Title. This Act shall be known as The Real Estate
Investment Trust (REIT) Act of 2009.
SEC. 2. Declaration of Policy.- It is the policy of the State to promote the
development of the capital market, democratize wealth by broadening the
participation of Filipinos in the ownership of real estate in the Philippines, use
the capital market as an instrument to help finance and develop infrastructure
projects, and protect the investing public by providing an enabling regulatory
framework and environment under which real estate investment trusts,
through certain incentives granted herein, may assist in achieving the
objectives of this policy.

Real Estate Investment Trusts (REITs) is a form of investment

pool of investors of the same industry by directing funds to take
advantage of the same tax benefits as do mutual fund investors.

A REITs does not have to pay corporate income tax as long as 95% of
its income is distributed to its shareholders;

Certain other conditions set by the REITs investors themselves must

also be met.

To qualify as REIT, at least 75% of the trusts income must come from
real estate.

Investors purchase certificates in the trust, which in turn invests in real

estate or mortgage (or both).
Profits are distributed to investors
REITs are subject to complex restrictions and regulations.
A competent Real Estate Consultant should be involved at all stages of
a REITs development.

Real Estate Investment Syndicate is a business venture in which

people pool their resources to own or develop a particular piece of
property.
(Syndicate an association of individuals united to negotiate
business Webster)
A

structure that permits people with only modest capital to invest

in large-scale operations.
Typical

syndicate projects include joint-venture high-rise apartment

building and shopping centers. (ex. BCDA JVs)
Syndicate

members realize some profit from rents collected in the

investment.
The

main return usually comes when the syndicate sells the

property.

Legal Forms of syndicate

participation of members:
Tenants

in common or joint tenants in holding properties;

Various kinds of joint ventures, partnership, corporate and trust
ownership options;
Private syndication generally involves a small group of closely
associated or experienced investors;
Public syndication involves a much larger group of investors
who
may not be knowledgeable about real estate as an
investment.
SEC registration is always necessary for juridical personality.

Forms of Syndicates:

General Partnership is a form of syndication where all

members of the group share equally in the managerial
decisions, profits and losses involved with the investment. A
certain member (or members) is designated as a Trustee for
the group to hold title to the property and maintains it in the
syndicates name.

Limited Partnership one party (or parties) usually a

developer or real estate broker, organizes, operates and
holds responsibility for the entire syndicate. This person is
called a general partner. The other members called the
limited partners are merely investors, they have no voice
in the organization and direction of the operation.

A Real Estate Mortgage Investment Conduit has complex

qualification, transfer and liquidation rules.

REMIC must satisfy the asset test. The asset test requires
that after a start-up period, almost all assets must be
qualified mortgages and permitted investments;

Investors interests may consist of only one or more classes of

regular interest and a single class of residual interests.

Holders of regular interests receive interest or similar

payments based on either a fixed rate or a variable rate.

Holders of residual interests receive distributions (if any) on

a pro-rata basis.

Thank you