Condominium ownership rights

By Raul J. Palabrica Jr.

No doubt about it, the country is experiencing a construction boom in commercial and residential projects.

The skyline in the business districts of Metro Manila and other urban centers has undergone major changes in the past two years.

Several old structures in the metropolis have been gutted down to make way for buildings that, in the words of their developers, are environment-friendly. “Green” has become part of the domestic real estate lingo.

In the process, the broadsheets are enjoying full-page advertisements on high-rise buildings that are about to be constructed, have been topped off, inaugurated or ready for occupancy by interested buyers.

Underused or idle lots in prime locations that are fit for commercial, residential or mixed-use purposes are in the crosshairs of enterprising construction companies.

The building frenzy has spread to the housing sector. The country’s iconic real estate developers have shifted their sights from the traditional high-end residences to middle-class and mass-housing projects.

The surge in construction indicates a strong demand for commercial and housing units that need to be filled up, a challenge that real estate developers with deep pockets are willing to risk their money on.

Citizenship

The question of who can buy or acquire real property was the subject of a recent query to the Securities and Exchange Commission by a company behind some of the biggest construction projects in Metro Manila.

The company wanted to know whether a private corporation, whose shares of stocks are 99.95-percent owned by foreigners, can legally purchase real property in the country.

The issue calls for an interpretation of the constitutional provision that states “save in cases of hereditary succession, no private lands shall be transferred or conveyed except to individuals, corporations or associations qualified to acquire or hold lands of the public domain.”

Read in relation to Commonwealth Act 141, which uses the percentage of Filipino ownership in a corporation as criterion in determining its nationality, the SEC stated that for a corporation to be able to purchase, acquire or own land in our country, it is essential that “at least 60 percent of the total capital stock of the corporation must be wholly owned by Filipino citizens.”

Thus, if more than 40 percent of that corporation’s capital stock is owned by foreigners, it is barred from acquiring land in the country.

The SEC, however, pointed out that, for other forms of real property, outside of land, such as houses or buildings, foreigners can, as a general rule, purchase them unless a law specifically prohibits them from doing so.

Ownership

To illustrate this point, the SEC cited the rules applicable on the ownership of an interest in a building or condominium project by persons other than Filipino citizens.

Such interest may be “in the form of ownership, lease or any other real rights.”

A foreign person or non-Philippine corporation—i.e., foreigners own more than 40 percent of its capital stock—can own an interest in a condominium project depending on the nationality of the person or entity that owns the land on which it is constructed.

If the condominium building, whether commercial or residential, is built on leased land, “the corresponding condominium corporation may be established by a corporation which is wholly owned by a foreign firm.”

In case the land is owned by a Filipino condominium corporation, no interest in the condominium may be transferred to foreigners or corporations whose capital stock is owned in excess of 40 percent by foreigners or non-Filipino citizens.

In the same token, if the common areas in a condominium project are held or owned by a Filipino condominium corporation, the transfer of units in the project may be made “only up to the point where the concomitant transfer of stockholdings in the condominium corporation” would not cause the foreign interest in the corporation to exceed 40 percent of its capital stock.

Although the SEC did not state the consequences of violation of the nationality rules on the ownership of real property in the country, it is noteworthy to mention that, under existing laws, that infraction could lead to the forfeiture of the unlawfully acquired property without the benefit of restitution of whatever money that may have been paid and, worse, prosecution of the parties who participated in the commission of the prohibited act.

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(For feedback, write to rpalabrica@inquirer.com.ph.)