Wednesday, 01 February 2012 20:56 Atty.
Rosa Michele C. Bagtas / On Firm Ground
[ http://www.businessmirror.com.ph ]
THE Philippine real-estate market
remains on an upswing and “mass housing,” for instance, remains to be included
in the priority areas of investment. In view of the numerous subdivisions,
villages and other housing projects that have been and are still being
developed all over the country, basic community services and facilities will
always be required in such projects but these cannot be provided entirely by
the local government. Hence, these communities are encouraged to have
homeowners’ associations that will take care of providing and maintaining,
among other services, security, street lighting, street cleaning, garbage
collection and disposal.
Republic Act (RA) 9904, otherwise
known as the “Magna Carta for Homeowners and Homeowners’ Associations,” was
enacted into law in 2010 to promote the rights and the roles of homeowners and
homeowners’ associations.
RA 9904 gave the Housing and Land
Use Regulatory Board (HLURB) the exclusive power to register homeowners’
associations and to also hear and decide intra-association and
inter-association controversies. The HLURB also approved the implementing rules
of RA 9904 in June 2011, but which according to HLURB sources, took effect some
time in October 2011.
The rules provide, among other
things, that it is mandatory for all homeowners’ associations to register with
the HLURB. It also provides that while associations previously registered with
the Home Insurance Guaranty Corp. (HIGC) and the Securities and Exchange
Commission (SEC) will be recognized, they have to register with the HLURB
within one year from the effectivity of the implementing rules, or up to
October 2012. It is imperative for associations to comply with this mandate to
avoid these effects: (1) The association will lose the legal standing to sue
before the HLURB but it can still be sued before the HLURB by its members and
other interested parties. (2) The association’s officers can be held personally
liable for the obligations and liabilities incurred by the association. These
effects should encourage the officers of existing homeowners’ associations to
comply with the mandate of RA 9904 and its implementing rules.
Considering the aforementioned
requirement of the HLURB, an adjudicatory mechanism was established in case two
or more associations were organized within the same village or subdivision and
both applied for registration with the HLURB. Since only one association can be
registered, the HLURB will decide which association will be officially
recognized by checking which one first submitted its registration papers and
complied with all requirements, or that which registered earlier (either with
the HIGC or the SEC), or in case one is registered with the SEC while the other
is registered with the HLURB, the one which registered earlier will prevail and
the registration of the other one will be revoked, provided that the earlier
registrant timely complied with HLURB requirements.
It will be observed that the
requirements for registration, the contents of the Articles of Association and
Bylaws of homeowners’ associations are very similar to those of corporations
registered with the SEC pursuant to the Corporation Code. However, some marked
differences include the following: (a) The vote of majority of the members of
the association is required to amend the Articles of Association (instead of
the two-thirds’ vote requirement for ordinary corporations). (b) To register a
homeowners’ association, a list of members with their corresponding signatures
must be submitted to the HLURB (while this is not required under the
Corporation Code). (c) The term of board members of associations is limited to
only two years (while the Corporation Code allows trustees of non-stock
corporations to have a term of three years). (d) A director or trustee of an
association may be removed through a verified petition signed by a majority of
the members for any cause provided in the by-laws (instead of the two-thirds’
vote required under the Corporation Code). (e) The association’s board may be
entirely dissolved by the vote of two-thirds of the association’s members
(while there is no equivalent provision under the Corporation Code). (f) The
vote of majority of the members of the association is sufficient to approve its
dissolution (instead of the two-thirds’ vote required under the Corporation
Code). (g) Proxies issued by association members cannot be for a period longer
than three years (while the Corporation Code allows proxies to be valid for
five years).
With respect to homeowners, RA 9904
and its implementing rules are very clear that a homeowner has the right to
enjoy basic community services and facilities provided that he pays the
necessary fees and charges. In effect, a homeowners’ association is justified
in depriving delinquent homeowners with certain services and with exercising
the other rights of a member. Thus, while RA 9904 intends to promote the
interest of homeowners, it also recognizes that homeowners have certain duties
to the association that must be fulfilled for its preservation and to enable it
to exercise its rights and powers.
Notably, RA 9904 gives homeowners
the right to become a member but they cannot be compelled to join a homeowners’
association, unless the same is required in a contract or in an annotation in
the title. The implementing rules even expressly mention that membership in the
homeowners’ association is optional. This may have to be revisited considering
that even a nonmember will certainly reap the benefits of services provided by
the homeowners’ association, such as security services and street lighting. It
will be unfair if only members carry the costs of the services provided by
homeowners’ associations while benefits are reaped even by nonmembers. At the
very least, a nonmember should be required to pay all his unpaid dues and
charges once he decides to use or occupy his property.
It is interesting that the term
“homeowner” has been extended by the HLURB to include a lessee of a member or
homeowner under a lease contract that has a term of at least one year. Such
lessee can exercise the rights of a member of the homeowners’ association
(i.e., to avail himself/herself of basic community services, to vote, and to
participate in meetings) upon the issuance by the lot or housing unit owner of
a written consent or authorization. Unless the owner revokes the written
consent or authorization in writing, that owner is deemed to have waived
his/her rights as a member of the association in favor of the lessee, except
the right to inspect the books and records of the association. In effect, the
lessee steps into the shoes of the member/homeowner for the duration of the
lease.
RA 9904 is a welcome development for
homeowners’ associations. Sadly, however, RA 9904 does not apply to condominium
corporations. While subdivision projects and condominium projects have their
differences, condominium corporations do encounter problems similar to
homeowners’ associations, such as disputes between the board and members,
issues with regard to maintenance of common areas, collection of unpaid dues
and assessments, and even disputes with developers. Condominium projects and
condominium corporations are still primarily governed by the Condominium Act,
which was enacted in 1966 and which needs to be studied and further amended to
address recent developments affecting condominium buildings. For instance,
since condominium plans and licenses to sell condominium units are approved by
the HLURB, it may be more beneficial for interested parties (i.e., developers,
unit owners, condominium corporations, lessors and lessees) if the HLURB will
also exercise the same rights and duties that it has under RA 9904 in
connection with condominium corporations.
Atty. Rosa Michele C. Bagtas is a
partner at the Villaraza Cruz Marcelo & Angangco Law Offices (web site:
www.cvclaw.com), where she heads the Property Development and Immigration
Practice Groups. She is a member of the Corporate and Commercial Law Department
and her other areas of practice include mergers and acquisitions, corporate
governance, and taxation.
Disclaimer:
This article has been prepared for
informational purposes only and should not be treated as legal advice.
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