Understanding Homeowners Associations

Transcription

1 Understanding Homeowners Associations Your Ultimate Guide to Master the Magna Carta for Homeowners and Homeowners Associations By ATTY. ERNESTO C. PEREZ II A.B., University of the Philippines LL.B., University of Perpetual Help Rizal Post-Baccalaureate Diploma in Real Estate Management Managing Partner, Perez Valencia & Perez Law Firm Chief Entrepreneurial Officer, Realttorney Professional Realty Services Private Money Consultant Blogger, Author and Lecturer, Member, Integrated Bar of the Philippines Member, Muntinlupa Real Estate Board PAREB Licensed Real Estate Broker First Edition 2014

2 P a g e 2 THANK YOU FOR DOWNLOADING THIS FREE EXCERPT The book is a product of my blogging which I started in August On February 2010, I posted an article in my website ( announcing the enactment into law of Republic Act No. 9904, otherwise known as Magna Carta for Homeowners and Homeowners Associations. The initial article was followed by another entitled Is Membership in a Homeowners Association Voluntary? on March Out of numerous articles I posted in the website, the one that had the most comments and posted queries were those concerning this article and other articles about R.A Earlier on, I tried my best to answer all the questions and queries of all those who posted in the website. However, business and professional concerns prevented me from fulfilling this goal. There was simply not enough time for me to address all their concerns and queries. At present, there are more than 5,200 registered HOAs in the National Capital Region (NCR) alone. 1 We have not even begun to count the HOAs registered in the twelve other regions in the country. However, you will notice that the list of registered HOAs found in the HLURB website is far from being current and updated. With thousands of registered HOAs in the country, numerous homeowner-members are left at the mercy of abusive and often ill-trained HOA officials, directors or trustees of the HOA Board. Many of the readers of my blog are also HOA officials who are seeking information on how to govern properly their community associations. I hope that this book will serve as an invaluable resource, guide or handbook to the homeowner-members as well as HOA officials who are in the dark as to what their rights and obligations as well as their duties and functions are. Furthermore, I hope that through this book the disputes, conflicts and animosities that are prevalent in many gated communities all over the country will be resolved quickly, if not lessened. To increase the discourse and improve the materials which tackle the issues concerning homeowners and HOAs, I would encourage and welcome any comments and suggestions with an open mind, utmost humility and appreciation. You can reach me through my website. I hope you find this free chapter helpful. Stay tuned for the launch of the book. That in all things, God may be glorified! July 17, Indang, Cavite, Philippines. Atty. Ernesto C. Perez II 1 Based on the list of registered HOA found in the HLURB website ( which was viewed on November 26, 2014 at 8:52PM.

3 P a g e 3 III Registration of Homeowners Association QUICK POINTERS If you want to create a corporation be it stock or non-stock one goes to the Securities and Exchange Commission (SEC) to have it registered. If you want to create a HOA, one goes to the Housing and Land Use and Regulatory Board (HLURB) for its registration pursuant to RA This chapter lists the requirements needed as well as the process of how a HOA is registered under the present regulatory framework. In this chapter you will also learn: Who is tasked to initiate the organization of the HOA The importance of registering your HOA with the HLURB and the effects of nonregistration. The laws that regulated HOAs prior to the enactment of RA Who has the task to organize a HOA from among the buyers and residents of the subdivision project? Section 30 of PD 957 obligates the owner or developer of a subdivision project to initiate the organization of a HOA for the purpose of promoting and protecting the mutual interest and assist in the community development of such buyers and residents of the subdivision projects. 2. Can the developer or owner of the subdivision project forgo the organization of a HOA? No. The creation of a HOA is mandated by Section 30, PD 957. It is a legal obligation imposed on owners or developers by law. However, if there is a delay or hesitance in the organization of the HOA by the owner or developer then there is nothing to stop civic-conscious homeowners from initiating the organization of the HOA by themselves and without the assistance of the owner or developer.

4 P a g e 4 3. How many number of buyers and residents of the subdivision project are required to form a new HOA? 2 Under RA 9904 and its IRR, a new HOA can be registered by incorporators consisting of not less than five (5) natural persons but not more than fifteen (15). Therefore, it takes a minimum of 5 people to form a new HOA that can be registered with HLURB, whether or not the buyers and residents of the subdivision project automatically become members of the HOA as provided in the deed of sale or deed of restrictions. 4. When must the HOA in the subdivision project be organized? There is no hard and fast rule that mandates when the HOA in the subdivision project must be organized. The timing is dependent on the purposes of the organizer be it the owner or developer of the subdivision project or the residents and buyers themselves. 5. Under R.A. 9904, are HOAs required to be registered? Yes. Every association of homeowners shall be required to register with the Housing and Land Use Regulatory Board (HLURB) only. This registration shall serve to grant juridical personality to all such associations that have not previously acquired the same by operation of the General Corporation Law or by any other general law. After registration, the HOA becomes a legal entity that can sue and be sued and legally represent its members on issues that affect the general welfare of the community as a whole. 6. What happens if the HOA does not register with the HLURB? A Homeowner Association which does not register in accordance with the rules and regulations promulgated by the HLURB does not acquire a separate juridical entity. Therefore, it cannot act for and in behalf of its homeowner-members. Moreover, it cannot exercise the powers and functions of a HOA duly registered with HLURB. For example, it will be illegal for the unregistered HOA to collect from its homeowner-member monthly dues, fees or special assessments. 7. Are there other kinds of association that are required to register with the HLURB? Yes. All associations whose purpose, among others, is to promote and protect their mutual interests and assist in their community development as homeowners are considered homeowners associations and are mandated to register with HLURB. 8. What happens to those HOAs which are already registered in other government agencies and in existence before the passage of R.A. 9904? 2 Posted in the author s website ( on September 3, 2014 at 9:48PM. It has been edited to better suit the flow of the questions that it followed.

5 P a g e 5 Associations previously registered with the Home Insurance [and] Guarantee Corporation (HIGC) or the SEC shall be respected and recognized: Provided that they register with HLURB; and in which case no penalty shall be charged to the said HOAs. 9. Before the passage of R.A. 9904, what laws regulated the establishment and organization of HOAs? On 11 March 1976, the SEC was reorganized under Presidential Decree (P.D.) No. 902-A. Section 3 thereof gave the SEC absolute jurisdiction, supervision and control over all corporations, partnership or associations, who are the grantees of primary franchise and/or license or permit issued by the government to operate in the Philippines. In addition to the regulatory and adjudicative functions of the SEC, Section 5 of PD 902-A gave original and exclusive jurisdiction to hear and decide cases involving the following: (a) Devices or schemes employed by or any acts, of the board of directors, business associates, its officers or partnership, amounting to fraud and misrepresentation which may be detrimental to the interest of the public and/or of the stockholder, partners, members of associations or organizations registered with the Commission; (b) Controversies arising out of intra-corporate or partnership relations, between and among stockholders, members, or associates; between any or all of them and the corporation, partnership or association of which they are stockholders, members or associates, respectively; and between such corporation, partnership or association and the state insofar as it concerns their individual franchise or right to exist as such entity; and (c) Controversies in the election or appointments of directors, trustees, officers or managers of such corporations, partnerships or associations. Executive Order No. 535, Series of 1979 amended the Charter of the Home Financing Commission 3, and renamed it as Home Financing Corporation (HFC). This is important because HFC was later renamed to Home Insurance and Guaranty Corporation (HIGC) by Executive Order No. 90, Series of 1986 signed by then President Corazon Aquino. In connection with the registration and regulation of HOAs, the HFC was given additional powers, under E.O. 535, to: (a) require submission of and register articles of incorporation of homeowners associations and issue certificates of incorporation/registration, upon compliance by the registering associations with the duly promulgated rules and regulations thereon; maintain a registry thereof; and exercise all the powers, authorities and responsibilities that are vested on the Securities and Exchange Commission with respect to home 3 Republic Act No. 580, entitled An Act to Create the Home Financing Commission to Stimulate Home Building and Land Ownership and to Promote the Development of Land for that Purpose, Provide Liberal Financing Through the Accumulation of Savings in Insured Institutions. September 15, 1950.

6 P a g e 6 owners association, the provision of Act 1459, as amended by P.D. 902-A, to the contrary notwithstanding; (b) regulate and supervise the activities and operations of all houseowners association registered in accordance therewith; and (c) insure and guarantee loans extended to registered homeowners associations for rendering purposes to their members for the construction, restoration and/or improvement of residential homes as well as other structures beneficial to the members of such associations. By virtue of the amendatory law (E.O. 535), the HIGC not only assumed the regulatory and adjudicative functions of the SEC over homeowners associations, but also the original and exclusive jurisdiction to hear and decide cases mentioned in Section 5 (b) and (c), PD 902-A. To further streamline the bureaucracy, Republic Act No renamed the HIGC as Home Guaranty Corporation (HGC). The powers, authorities and responsibilities vested in HGC with respect to homeowners associations under E.O. No. 535 were transferred to the HLURB. On September and November 2004, pursuant to its powers to regulate and supervise the activities and operations of HOAs, the HLURB adopted Resolution No. 770 entitled Framework for Governance of Homeowners Associations and Board Resolution No. R-771 entitled Rules on the Registration and Supervision of Homeowners Associations, respectively. 10. Can two (2) HOAs be established and registered in a single subdivision project? No. As far as practicable, only one (1) HOA shall be established and registered with HLURB in each subdivision, except in cases where the subdivision consists of two (2) or more phases. 11. How will the HLURB decide if two (2) or more associations are registered in one and the same subdivision project? In case two (2) or more associations are registered or applying for registration within the same subdivision, the HLURB shall decide which association shall be registered pursuant to the procedures for adjudicatory mechanism as provided in the Implementing Rules and Regulations (hereinafter referred to as Rules ). 12. Using the adjudicatory mechanism in the registration of associations, what is the procedure to be followed by the HLURB? In case two or more associations are organized within the same subdivision/village and both applied for registration with HLURB in accordance with this Rules, the HLURB shall register only one association in accordance with the following procedures:

7 P a g e 7 a) The association which submitted first its registration papers and complied with all the requirements of the HLURB shall be registered; b) In case there are two (2) associations registered with the SEC or HIGC, then the association which was registered earlier shall be recognized; and c) In case one (1) of the associations is registered with the SEC and the other with the HLURB, the one earlier registered shall prevail and the registration of the other shall be revoked, provided the requirements under Rule 5, Section 24 are submitted within a period of one (1) year of the effectivity of this Rules. Nothing in the Rules shall prevent the HLURB from taking into consideration other factors in determining whose association shall be registered and recognized. 13. What is required from the HLURB under Rule 5, Section 24 of the Rules? The HLURB shall issue a certificate of registration to an association previously registered with the SEC or HIGC upon compliance with the following: a) The applicant association shall submit certified true copies of the certificate of registration, articles of association and by-laws previously submitted to the HIGC or SEC; b) When so required by the HLURB, the applicant shall amend its articles of association and by-laws to conform to the requirements of this Rules and submit such other documents; and c) Payment of necessary fees. 14. What is the procedure for registration of new HOAs? An association shall, upon payment of the prescribed fees, submit to the proper Regional Office of the HLURB its Articles of Association, duly notarized and signed on each and every page thereof by all the incorporators consisting of not less than five nor more than fifteen (15) natural persons. 15. What other documents must be submitted to the HLURB? The Articles of Association shall be accompanied by the following documents: a) Notarized Undertaking by the association to: (i) change the name of the association in the event that another person, firm or entity has acquired a prior right to the use of the name or one similar thereto; and (ii) comply with the rules and regulations; b) Information Sheet; c) List of the members of the association with the members corresponding signatures;

8 P a g e 8 d) Certification as to the existence or absence of any other association in the subdivision/ village; and the name and address of the nearest association, if any; e) Authorization by the incorporators for the representative of the association to transact/ follow-up its registration application with the HLURB; and f) Approved Subdivision/Development Plan indicating the area covered by the association. [based on Section 22, Rule 5] 16. What are the additional requirements if the applicant is a self-help housing project or one undertaken under the Group Land Acquisition and Development program (GLAD), Community Mortgage Program (CMP), or other similar land tenurial assistance programs? In such cases, the applicant shall, in addition to the documentary requirements mentioned in Rule 5, Section 22, submit the following: a) Location plan and vicinity map of the project, whether on-site or off-site, duly signed and certified by a geodetic engineer; b) Notarized list of officers and members stating the nature of their occupancy, whether as owner or tenant; c) Certified true copy of the original or transfer certificate of title issued not later than thirty (30) days before the date of application; d) Duplicate original copies of the notarized letter of intent to sell, contract to sell, deed of absolute sale, or memorandum of agreement between the landowner and association; e) List of beneficiaries as certified by the proper settlement office of the local government unit (LGU) or Urban Poor Affairs Office (UPAO); f) Certification that it is the only proposed association that is seeking to apply for a Community Mortgage Program (CMP) loan in order to acquire the parcel/s of land; and g) Alteration approval of subdivision plan from the local government units (LGUs) for homeowners associations intending to avail of community mortgage program (CMP) if located within existing subdivision projects. 17. What are the additional requirements if the applicant comes from a housing project of the National Housing Authority (NHA)? In such a case, the applicant shall, in addition to the documentary requirements mentioned in Rule 5, Section 22, submit a Certification that it is the HOA recognized by NHA.

9 P a g e What are the additional requirements if the applicant intends to segregate from a mother association? In such a case, the applicant shall, in addition to the documentary requirements mentioned in Rule 5, Section 22, submit the following requirements: a) A Sworn Statement that (i) (ii) The area of the project or the membership of the existing association has reached a size or number that renders it extremely difficult or impracticable to provide efficient delivery of services to all its members; The applicant s members are residents of a contiguous area; or (iii) The existing association is serving several or all phases of a subdivision project and the petitioners are residents of one phase or two or more contiguous phases of said project: Provided, that, where the facilities of the subdivision project are commonly shared by all the phases of a subdivision project, the existing and proposed associations shall have the right to use the facilities but shall proportionately share in the expenses for its maintenance and the earnings derived or losses incurred from the operation thereof; and, provided, further, that the remaining members of the existing association reside in a contiguous area. b) A Written Agreement between the mother and separating associations defining the obligations and liabilities among them with respect to: (i) (ii) The use, maintenance, repair, replacement, modification and improvements of common areas and facilities; Access to or passage through the subdivision/village gates, main interconnecting and other roads, alleys and sidewalks within the subdivision; (iii) Delivery of basic community services; and (iv) Such other matters necessary for the proper governance and operation of both associations. 19. What is the procedure for registration of HOAs previously registered with the HIGC or SEC? The HLURB shall issue a Certificate of Registration to an association previously registered with the SEC or HIGC upon compliance with the following: a) The applicant association shall submit certified true copies of the Certificate of Registration, Articles of Association and By-laws previously submitted to the HIGC or SEC;

10 P a g e 10 b) When so required by the HLURB, the applicant shall amend its Articles of Association and By-laws to conform to the requirements of the current Rules and submit such other documents; and c) Payment of necessary fees. 20. What happens to the HOA previously registered with SEC or HIGC when it fails to register with HLURB within the period prescribed by this Rules? An association that fails to register within a period of one (1) year from the effectivity of the Rules shall have no legal standing to sue before the HLURB or avail of its support services. It may nevertheless be sued before the HLURB by its members or other interested parties and the officers may be held personally liable for the obligations and liabilities incurred by the association. 21. What happens if all the required documents submitted to the HLURB are in order? Upon finding that the requirements for registration are in order, and that the Articles of Association and By-laws contain the provisions required by the Rules, the HLURB shall issue a Certificate of Registration to the applicant. The issuance of the Certificate of Registration shall confer upon the association a juridical personality separate and distinct from those of its members. 22. What happens if there are deficiencies in the submitted documents for registration or such documents are defective? If the application for registration is incomplete, the same shall be returned to the applicant. If any of the documents submitted are defective, the Regional Office shall notify the applicant of the defective submissions. If the applicant fails to comply with the requirements stated in the notice of deficiency within sixty (60) days from receipt thereof, the application shall be deemed denied and the documents shall be returned to the applicant. 23. Upon the denial of the application, can the applicant re-register again with the HLURB? Yes. There is no prohibition under the Implementing Rules or under the Law that prevents the submission of another application by the same group.