Opinion No. 18-05 Re: Membership in a Condominium Corporation.

Securities and Exchange Commission Republic of the Philippines Department of Finance

OFFICE OF THE GENERAL COUNSEL

19 March 2018

SEC-0GC Opinion No. 18-05 Re: Membership in Condominium Corporation

8th Floor Tower One and Exchange Plaza Ayala Triangle, Ayala Avenue Makati SALVADOR LLANILLO & BERNARDO

Attention: Mary Rose V. Pascual, Maricon Z. Maralit-Soriano, Iris Katrine M

Exchaure

Dear Mesdames,

This refers to your letter dated 28 November 2017 requesting the Commission to render an opinion on the matter of The Grand Towers Manila Condominium Association Inc., (CondoCorp). Specifically, you posited two issues:

1. Whether or not purchasers of private units who have not fully paid the

2. Whether or not purchasers of private units who have not fully paid the purchase price may be considered members of the CondoCorp; and

purchase price may be assessed condominium dues.

"members" in the CondoCorp's By-Laws and Master Deed. In the By-Laws, the membership In your letter, you disclosed that there appears to be a difference in the definition of

in the corporation is limited exclusively to "the registered owners of the private units in the

members of the corporation." The Master Deed, on the other hand, defines the members of condominium, who under the provisions of the Master Deed, automatically become

the CondoCorp as follows, to wit:

"Section 9. Membership and Voting Rights in the Condominium Corporation.

Page 2 of 4

of ownership. xxx" (Underscoring supplied). Membership in the Condominium shall be exclusive to the owners and/or purchasers of the Units, the same being a mere appurtenance

become more apparent in cases where persons and entities purchased private units from You also mentioned that the inconsistency between the foregoing provisions

the developer on installment basis. It has been the practice of the CondoCorp to assess these purchasers the condominium dues after the private units have been turned over. Such assessment is regardless of the fact that the title to the private units remains with the developer until the full purchase price of the private units have been paid.

Master Deed, the provision of the latter shall prevail. Settled is the rule that in case of inconsistency in the provisions of the By-Laws and This is according to SEC-OGC Opinion No. 12-181, which referred to Section 10 of Republic Act No. 4726 or the Condominium Act2, to wit:

incorporation or by-laws of the corporation shall not contain any "Section 10. Whenever the common areas in a condominium project are held by a condominium corporation, such corporation shall purpose of such a corporation shall be limited to the holding of the common areas; either in ownership or any other interest in real property recognized by law, to the management of the project, and to such other purposes as may be necessary, incidental or convenient to the accomplishment of said purposes. constitute the management body of the project. The corporate The articles of

provision contrary to or inconsistent with the provisions of this Act, the enabling master deed, or the declaration or restrictions of the project. Membership in a condominium corporation regardless of whether it is a stock or non-stock corporation shall not be transferable separately from the condominium unit of which it is an appurtenance. When a member of a stockholder cease to own holds the common areas, he shall automatically cease to be a member or stockholder of the condominium corporation. a unit in the project in which the condominium corporation owns or

(Emphasis and underscoring supplied).

what is meant by the word "purchaser" in the Master Deed. Thus, the definition of a member in the Master Deed shall prevail. The issue now is

As to your first query, in order to determine who shall be a member of the condominium corporation, it is critical to determine who is the owner of the unit.

2 An Act To Define Condominium, Establish Requirements for its Creation, and Govern its Incidents, Republic Act No. Velasco-Ho. 4726. 1 SEC-OGC Opinion No. 12-18, dated 18 September 2012, addressed to Velasco Law Office c/o Atty. Brenda Angeline K.

Page 3 of 4

In the case of Sunset View Condominium Corporation v. The Hon. Jose C. Campos. Jr. and Aguilar Bernares Realty,3 the Supreme Court held that only the owner of a unit is a stockholder of the Condominium Corporation, as inferred from Section 10 of the Condominium Act; thus, ownership of a unit is a condition sine qua non to being a shareholder in the corporation.

In the said case, the Court, in order to determine when and under what conditions ownership of a unit is acquired by a purchaser, analyzed the provisions of the Master Deed and the words of the instrument conveying the unit. The Master Deed provides that the "purchaser of a unit shall acquire title or ownership of such Unit, subject to the terms and conditions of the instrument conveying the unit to such purchaser." Examining further, the Court discovered that the instrument conveying the unit is a Contract to Buy and Sell which provides that the seller will convey unto the buyer full and absolute title to the unit upon full payment of the total purchase price and full compliance of any other obligation. Based on the foregoing, the Court then held that those who have not fully paid the purchase price of the units are not owners of their units, and consequently, are not members of the corporation, to wit:

"Pursuant to the above statutory provision [Section 10], ownership] of a unit is a condition sine qua non to being a shareholder in the condominium corporation. It follows that a purchaser of a unit who is not yet the owner thereof for not having fully paid the full purchase price, is not a shareholder by necessary implication, the "separate interest" in a condominium, which entitles the holder to become automatically a share holder in the condominium corporation, as provided in Section 2 of the Condominium Act, can be no other than ownership of a unit. This is so because nobody can be a shareholder unless he is the owner of a unit and when he ceases to be the owner, he also ceases automatically to be a shareholder.

The private respondents, therefore, who have not fully paid the purchase price of their units are consequently not owners of their units are not members or shareholders of the petitioner condominium corporation." 4

Based on your statement that it is a "fact that the title to the private units remains with the developer until the full purchase _price of the_private units have been paid," it appears that the instruments related to the inquiry are contracts to sell; hence, applying the above-said Supreme Court decision, the purchasers who have not yet fully paid is not yet deemed as the owners, and thus, not members of the CondoCorp.

3 Sunset View Condominium Corporation vs. Hon. Jose C. Campos and Aguilar-Bernares Realty, G.R. No. L-52361, 27 April 1981 4 Ibid

Page 4 of 4

As to the query on who will be principally liable for the payment of association dues in the CondoCorp., the Master Deed left it to the Board to determine the levying of assessment including association dues. In this respect, we refrain from issuing an opinion on this matter as the determination of who shall be assessed association dues is already within the business judgment of officers of the CondoCorp.

circumstances disclosed and relevant solely to the particular issue raised therein.5 If, upon further inquiry or investigation, it will be disclosed that the facts relied upon are different, this opinion shall be rendered void. Please note that the foregoing opinion is rendered based solely on the facts and

Please be guided accordingly

Very truly yours,

CAMILO S. CORREA General Counsel

5 SEC Memorandum Circular 2003-15, No.7