philippine homeowners associations

Guidelines in the Kind of Dues, Fees and Contributions that may be collected by Homeowners Associations

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Executive Committee Res. No. 001 S. of 2017,
Guidelines in the Kind of Dues, Fees and Contributions that may be collected by Homeowners Associations
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HLURB TAPS HOMEOWNERS’ ASSOCIATIONS TO COMBAT GRAFT & CORRUPTION

VP NEWS
Posted: Tuesday, April 30, 2013
CEBU CITY --- Vice President Jejomar C. Binay today said the home owners’ associations (HOAs) can be effective agents in the drive to eradicate graft and corruption in both the public and private sectors.

Binay, who chairs the Housing and Urban Development Coordinating Council (HUDCC), was in town to attend a meeting with members of the different HOAs in the Central Visayas region to discuss their role in ridding the country of graft and corruption.

The project was initiated by the Housing and Land Use Regulatory Board (HLURB) and was attended by around 1,150 members from some 350 associations in Region 7 with Deputy Ombudsman for Central Visayas Pelagio Apostol as resource speaker.

“We want to elevate the consciousness of HOA members and empower them to become agents of change,” the housing czar said.

He encouraged HOAs to report any anomalous transactions in the government as well as in private housing developers.

“We all have a role to play. And it’s high time that the interests of homeowners are protected,” the Vice President said.

“We want to prevent what happened with Globe Asiatique wherein our kababayans were defrauded of their hard-earned money,” he added.

Binay said a similar meeting was scheduled with housing associations from Region 8 on May 6.

“We are now looking for ways to try and replicate this in project in the entire country and we also want to tap other shelter agencies,” the housing czar said.

HLURB chief executive officer Antonio Bernardo and Commissioners Ria Cabrera and Luis Paredes also attended the meeting.

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BIR Revenue Memorandum Circular No. 9-2013

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BIR eases on condo dues

Posted by Online on Feb 6th, 2013

http://www.tempo.com.ph

Manila, Philippines – The Bureau of Internal Revenue (BIR) has softened its stand on the collection of income and value-added taxes out of the association dues, membership fees and other charges paid by condominium and homeowners associations.
BIR Commissioner Kim S. Jacinto-Henares said tax payments may be waived under certain conditions as prescribed under her new Revenue Memorandum Circular No. 9-2013.

The BIR chief said dues and membership fees will not be taxed if the local government having jurisdiction over the homeowner associations will certify that it has no, or insufficient funds to cover basic services rendered by the homeowners to their members.

She said condominium, or homeowner associations must present proof that the dues and fees are used “for cleanliness, safety, security and other basic services needed by members,“

The homeowners organization, she said, must also be duly constituted as “association“ as defined under Republic Act No. 9904 (Magna Carta for Homeowners Association) which grants tax incentives to homeowners associations.

Informed sources said the BIR relaxed its stand on the controversial ruling after many homeowners associations in Metro Manila and elsewhere protested it.

Two solons sponsored a bill in the House of Representatives seeking the abolition of the said taxes. (Jun Ramirez)

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Homeowner's associations taxability

Homeowner's associations taxability by: Rachelle Ann C. Baod

WITH THE ISSUANCE of Revenue Memorandum Circular No. (RMC) 9-2013, clarifying the taxability of association dues, membership fees and other assessments/charges collected by homeowners’ associations, many taxpayers were unfortunately perturbed on whether Republic Act No. (RA) 9904 (Magna Carta for Homeowners and Homeowners’ Associations) was blatantly disregarded and whether the previous related Bureau of Internal Revenue (BIR) rulings were revoked.

It is an elementary rule in administrative law that administrative rules and regulations are intended to carry out, not supplant or modify, the law.

The law cannot be amended by a mere regulation or in this case, a memorandum circular. In a Supreme Court (SC) decision, it was held that a regulation that is inconsistent with the statute is a mere nullity and cannot prevail.

Applying the above principle, an RMC, which is an administrative issuance, cannot repeal RA 9904. On the other hand, BIR rulings, also administrative issuances, may be revoked by an RMC.

Let us now take a closer look on the taxability or exemption of homeowners’ associations, considering the validity of RA 9904 and RMC 9-2013.

Pursuant to RA 9904, where the Local Government Units (LGUs) lack resources to provide for basic services, the associations shall endeavor to tap the means to provide for the same.

In recognition of the associations’ efforts to assist the LGUs in providing such basic services, association dues and income derived from rentals of their facilities shall be tax-exempt provided that such income and dues shall be used for the cleanliness, safety, security and other basic services needed by the members, including the maintenance of the facilities of their respective subdivisions or villages.

On the other hand, the BIR recently issued RMC 9-2013 emphasizing that association dues, membership fees, and other assessments/charges collected by homeowners’ associations from its homeowner-members and other entities are subject to value-added tax (VAT)/percentage tax, income tax and consequently to expanded withholding taxes.

Nevertheless, said RMC still entitles an association to exemption provided certain conditions are satisfied.

It is important to take note of the significant points on the BIR’s bases for the imposition of taxes, hence, departing from specific provisions laid down under various BIR rulings while still seemingly upholding the exemption set forth under RA 9904.

Based on the previous rulings issued by the BIR, collection of association dues and other assessments/charges for condominium corporations and homeowners association is exempted from income tax because "it is merely held in trust to be used solely for administrative expenses in implementing its purpose and from which both could not realize any gain or profit."

However, the newly-issued RMC abandoned the previous interpretations and clarified that the amounts paid as dues or fees by homeowner-members of a homeowners’ association form part of the gross income of the latter because such constitute income payments or compensation for beneficial services it provides to its members and tenants, thus, subject to income tax and consequently, expanded withholding taxes, accordingly.

IN THE COURSE OF TRADE OR BUSINESS

The new RMC also enunciated that the gross receipts of homeowners’ associations including association dues, membership fees, and other assessments/charges, being derived in the course of trade or business, are subject to VAT or percentage taxes for non-VAT registered entities exempt under Section 109 (1) (V) of the 1997 Tax Code, as amended.

Section 105 of the 1997 Tax Code, as amended, provides that "in the course of trade or business" means the regular conduct or pursuit of a commercial or an economic activity, including transactions incidental thereto, by any person regardless of whether or not the person e ngaged therein is a non-stock, non-profit private organization (irrespective of the disposition of its net income and whether or not it sells exclusively to members or their guests), or government entity.

Further, it pointed out that even a non-stock, non-profit organization or government entity is liable to pay VAT on the sale of goods or services as cited by the SC in Commissioner of Internal Revenue v. Court of Appeals and Commonwealth Management and Services Corporation, (G.R. No. 125355, March 30, 2000). It is immaterial whether the primary purpose of a corporation indicates that it receives payments for services rendered to its affiliates on a reimbursement-on-cost basis only, without realizing profit, for purposes of determining liability for VAT on services rendered. As long as the entity provides service for a fee, remuneration or consideration, then the service rendered is subject to VAT.

QUALIFYING FOR TAX EXEMPTION

Notwithstanding the clarifications set forth by the RMC on imposition of taxes on homeowners’ associations, it concluded by reiterating that association dues and income derived from rentals of the homeowners’ association’s properties may still be exempted from taxes provided the following conditions are met:

The homeowners’ association must be a duly constituted "association" as defined under Section 3(b) of RA 9904;

The local government unit having jurisdiction over the homeowners’ association must issue a certification identifying the basic services being rendered by the homeowners’ association and therein stating its lack of resources to render such services notwithstanding its clear mandate under applicable laws, rules and regulations.

Provided further, that such services must fall within the purview of the "basic community services and facilities" which is defined under Section 3(d) of RA No. 9904 as those referring to services and facilities that redound to the benefit of all homeowners and from which, by reason of practicality, no homeowner may be excluded such as, but not limited to: security; street and vicinity lights; maintenance, repairs and cleaning of streets; garbage collection and disposal; and other similar services and facilities.; and

The homeowners’ association must present proof (i.e. financial statements) that the income and dues are used for the cleanliness, safety, security and other basic services needed by the members, including the maintenance of the facilities of their respective subdivisions or villages.

As a rule, any claim for exemption from a tax statute is strictly construed against the taxpayer. However, where the law is clear and unambiguous, the law must be taken as it is, devoid of judicial addition or subtraction.

Based on the foregoing, taxpayers claiming for exemption has the burden of proving entitlement, otherwise, deemed taxable.

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Courtesy of : http://www.punongbayan-araullo.com

Magna Carta for homeowners, homeowners’ groups

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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Homeowners, Homeowners Associations' Rights Protected in Magna Carta - Zubiri

Press Release [ Senate of the Philippines ]
January 13, 2010

"The rights of homeowners and homeowners associations are well-protected and will cut conflicts now experienced in many communities with the enactment of the Magna Carta for Homeowners and Homeowners Associations or Republic Act 9904," according to its main author Senate Majority Leader Juan Miguel F. Zubiri.

"In very clear and specific language the law laid down the rights and responsibilities of homeowners and the guidelines on the operations of homeowners associations," said Zubiri, past chairman of the Committee on Housing, Urban Planning and Resettlement now chaired by Senator Rodolfo Biazon.

"From now on, homeowners and homeowners association members will be supported by the law's clear provisions and guidelines ensuring their right to avail of basic community services and facilities due them. There will be less frustrations on both sectors."

"The Magna Carta will be the vehicle to bring peace and comfortable living conditions in many communities," he said.

"This law will benefit all homeowners from the different socio-economic classes. We made sure that the benefits will be encompassing. Homeowners are defined as 'not only those living in titled homes and lots in subdivisions but to lessees, awardees, beneficiaries, or occupants in government socialized or economic housing or relocation projects, and even underprivileged and homeless citizens while they are in the process of being accredited as beneficiaries or awardees of ownership rights under the CMP, LTA, and other similar programs.' "

Zubiri clarified that "contrary to earlier perceptions, this law was not made for rich residents of gated subdivisions only. Lessees in government socialized housing projects or urban estates and those in communities of underprivileged and homeless citizens are also considered as homeowners for the purpose of qualifying as a member of a homeowners' association without need of any written consent or authorization."

"We tried our best not to leave gray areas to prevent conflicts and confusion." Zubiri said the rights and benefits of homeowners, both members and non-members of homeowners associations, are enumerated in the law. The rights of a member are as follows: "(1) to avail of and enjoy all basic community services and the use of common areas and facilities; (2) to inspect association books and records during office hours and to be provided upon request with annual reports, including financial statements; (3) to participate, vote and be eligible for any elective or appointive office of the association subject to the qualifications as provided for in the bylaws; (4) to demand and promptly receive deposits required by the association as soon as the condition for the deposit has been complied with or the period has expired; (5) to participate in association meetings, elections and referenda, as long as his/her bonafide membership subsists."

On the other hand, members have the following duties: "(1) to pay membership fees, dues and special assessments; (2) to attend meetings of the association; and (3) to support and participate in projects and activities of the association." The bylaws shall contain the definition and procedure of determining who are delinquent and administrative sanctions even as it guarantees their right to due process.

The rights and powers of the association are provided for, such as:

"- regulate the use, maintenance, repair, replacement and modification and modification of common areas and cause additional improvements to be made part of the common areas: Provided, That the aforementioned do not contradict the provisions of the approved subdivision plan;

- regulate access to, or passage through the subdivision/village roads for purposes of preserving privacy, tranquility, internal security, safety and traffic order;

- ensure the availability of quality water services at a reasonable price and, at its option, administer and manage the waterworks system of the subdivision;

- impose or collect reasonable fees for the use of open spaces, facilities and services of the association to defray necessary operational expenses, subject to the limitations and conditions imposed under the law, the regulations of the board and the association's bylaws;

- subject to consultation and with the approval of a simple majority of the association members, allow the establishment of certain institutions such as, but not limited to, schools, hospitals, markets, grocery stores and other similar establishments that will necessarily affect the character of the subdivision/village in terms of traffic generation, and/or opening the area to outsiders � Provided, That such prior approval shall not be necessary for the establishment of sari-sari stores; and,

- suspend privileges of and services to and/or impose sanctions upon its members for violations and/or noncompliance with the association's bylaws, rules and regulations," among others.

Zubiri also stressed that the Magna Carta strengthens the accountability of association directors, trustees and Board. "Through a signed petition of a simple majority of the association members in good standing, subject to verification and validation of the HLURB, a director/trustee may be removed for causes provided in the bylaws of the association: Provided, That if a majority of the members of the board is removed, it shall be considered a dissolution of the entire board, in which case, Section 14 hereof shall govern. a signed petition of two-thirds (2/3) of the association members subject to verification and validation of the HLURB, the board of the association may be dissolved for causes provided in the bylaws of the association."

"Until the new board members shall have been elected and qualified, the HLURB shall designate an interim board: Provided, That, such board shall be composed of association members in good standing: Provided, further, That such interim board members shall not be eligible to run in the election called for the purpose of replacing the members of the dissolved board."

The Magna Carta also provided for the duties and responsibilities of the HLURB. Among which are as follows: "Regularly conduct free orientation for officers of homeowners' associations or deputize another competent agency to conduct the orientation; Formulate and publish a Code of Ethics and Ethical Standards for board members detailing prohibited conflicts of interest; Hear and decide intra and/or inter-association controversies and/or conflicts, without prejudice to filing civil and criminal cases by the parties concerned before the regular courts: Provided, That all decisions of the HLURB are appealable directly to the Court of Appeals."

The HLURB is also authorized to ask the assistance of the Philippine National Police and other law enforcement agencies and instrumentalities of the government if necessary to rightfully enforce its functions.

Zubiri stressed the Magna Carta would "hopefully put an end to the confusion on where to register homeowners' associations. All homeowners' association shall register with the Housing and Land Use Regulatory Board (HLURB), instead of listing with the Securities and Exchange Commission (SEC). This will immediately lessen future conflicts and unify fractured homeowners belonging to different associations in one community."

He explained that while existing associations previously registered with the Home Insurance Guarantee Corporation (HIGC) or SEC would still be recognized, the associations could opt to register anew to the HLURB without penalty after the law becomes effective.

As to the activities of local governments such as zone reclassification, the law mandates the LGU to first get the consent of the homeowners in the area targeted for reclassification before these are undertaken.

The Magna Carta also provided for prohibited acts, among them: To deprive any homeowner of his/her right to avail of or enjoy basic community services and facilities where he/she has paid the dues, charges and other fees for such services; To prevent any member in good standing from participating in association meetings, elections and referenda. Violations of the Magna Carta shall be punished with a fine of not less than P5,000 but not more than P50,000 and permanent disqualification from being elected or appointed as members of the board, officer or employee of the association.

Zubiri turned over a signed copy of the Magna Carta for Homeowners and Homeowners Associations in simple ceremony at the Senate of the Philippines. Homeowners and homeowners associations were in attendance, among them Danilo Mendoza representing Alliance of Quezon City Homeowners Association; Bonifacio Dazo, Federation of Las Piñas Village Associations; Atty. Mario Jalandoni, FORA; and Atty. Ed Magpantay, Parañaque Federation of Homeowners Associations.

The turn-over was witnessed by the Housing and Land Use Regulatory Board represented by Romulo Fabul, HLURB Commissioner. The Village Voice, a community paper in Makati City the Village Voice also sent their representative Sigmund Tesorero,Ms. Nelia Estrevencion of SSANGKAP and Marie Allanosa also of the Federation of Las Pinas Village Association, Mr. Anto Ocampo, and Ms. Andrea Rebustillo, Manolo Dayrit.

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HLURB Governing Laws and Regulations

Highlights

R-802, S. 2007 - Amending Rules III and X of The 2004 Rules of Procedure to Incorporate Rules on Mediation

R-818, S. 2008 - Amending Certain Provisions of the 2004 Rules of Procedure of the Board

Source : HLURB [ hlurb.gov.ph ]

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List of Registered Homeowners Association

List of Registered Homeowners Association - NCR and CAR

Expanded National Capital Region (ENCR)
As of January 2010

Metro Manila

Rizal Province

Cordillera Administrative Region (CAR)
as of July 2008

Source : HLURB [ hlurb.gov.ph ]

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Homeowners, Homeowners Associations' Rights Protected in Magna Carta - Zubiri

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