Perpetual Ownership

by Steve Van Derodar

| Photo from stxla.com via Steve Derodar

Every now and then, the subject of perpetual ownership of condominium properties comes into any table conversation. Just recently, over dinner, a familiar friend yelled out to the group, how sure are you that properties nowadays are free from demolitions in favor of the land owner’s discretion?

This question is not surprising to be asked by any would-be buyers since many of us believe that maybe developers would build properties on a leased lot for 100 years. I would say that this could have happened in the past, especially when land properties were only to be leased out, as in some cases, but it is not a norm. The practices of the land lease are standard except for residential constructions. Perhaps this stemmed from the fact that Makati CBD, for example, is known to have long-term land leases earlier.

Unknown to many, usually, all condominium builders have to own the lot on which the property is built. It is one of the many factors in the property price since the land cost is a major consideration in the property valuation.

A condominium is a building structure divided into several units, each separately owned, surrounded by common areas jointly owned. Residential condominiums are frequently constructed as apartment buildings. Still, there are also “detached condominiums,” which look like single-family homes, but in which the yards (gardens), corridors, building exteriors, and streets as well as any recreational facilities (like a pool or pools, bowling alley, tennis courts, golf course, etc.), are jointly owned and maintained by a community association. Condominium units are owned outright. Additionally, the owners of the individual units also collectively own the property’s common areas, such as corridors/hallways, walkways, laundry rooms, etc., as well as standard utilities and amenities, such as the HVAC system and elevators on.

So what does perpetual ownership mean in the context of condominium purchases? It means you have every right a condominium unit owner is entitled to as provided in the Condominium Act; you have full ownership rights to your unit(s) and a proportionate share of ownership to all the common areas of the building and the land itself where your condo is built on. This ownership will never expire, with the most significant advantage of passing it on to your family.

The Philippines is becoming the US and many bigger cities where the trend of multi-family living is on an upswing preference. According to the US census, roughly one in five US cities and suburbs homeowners live in a multi-family complex rather than a single-family house. No doubt that in some metropolitan cities globally, the ratio is one to three.

In the Philippines, the law protects the interest of the unit owners in a condominium project. The Republic Act 4726 or The Condominium Act of the Philippines was mandated on June 18, 1966. An excerpt states

“SECTION 8. Where several persons own condominiums in a condominium project, an action may be brought by one or more such persons for partition thereof by sale of the entire project, as if the owners of all of the condominiums in such project were co-owners of the whole project in the same proportion as their interests in the common areas: Provided, however, That a partition shall be made only upon a showing: That three years after damage or destruction to the project which renders material part thereof unit for its use prior thereto, the project has not been rebuilt or repaired substantially to its state prior to its damage or destruction, or That damage or destruction to the project has rendered one-half or more of the units therein untenantable and that condominium owners holding in aggregate more than thirty percent interest in the common areas are opposed to repair or restoration of the project; or That the project has been in existence in excess of fifty years, that it is obsolete and uneconomic, and that condominium owners holding in aggregate more than fifty percent interest in the common areas are opposed to repair or restoration or remodeling or modernizing of the project; or That the project or a material part thereof has been condemned or expropriated and that the project is no longer viable, or that the condominium owners holding in aggregate more than seventy percent interest in the common areas are opposed to continuation of the condominium regime after expropriation or condemnation of a material portion thereof; or That the conditions for such partition by sale set forth in the declaration of restrictions, duly registered in accordance with the terms of this Act, have been met.”

“…I wouldn’t be interested to invest in a property that is not for perpetual ownership. Like many would-be buyers, it gives such peace of mind that what you are buying is something that you continue to own whether or not you are no longer able to enjoy it physically or your loved ones are enjoying it.”

When a condominium project is fully turned over to the unit owners, it becomes like a corporation. Members of a condominium automatically become co-owners of a corporate entity responsible for common elements. They will make decisions about the building will be made, and you will be part of the fate of the building down the road maintaining your interest in the assets. Should the building transform, expand or evolve, you will have your rightful share of the proceeds of the investment.

So, it means that if the property, in the end, would have to be demolished or rebuilt for a new property, you will have an interest and is part of the overall proceeds of the property. Like any investment, your condominium property can last, be profitable, and be an asset to be enjoyed by your family.

Personally, I wouldn’t be interested to invest in a property that is not for perpetual ownership. Like many would-be buyers, it gives such peace of mind that what you are buying is something that you continue to own whether or not you are no longer able to enjoy it physically or your loved ones are enjoying it. Or should I say that for the life of the building and whether it transforms into a newer development, you retain the interest in it unless you cashed out your investment at any given time?

But wait, isn’t it that any property investments are supposed to be perpetual ownership? Not exactly, as there could be many forms of property investments not involving the lot ownership. Properties in a hotel time-share could be different as well as Cooperatives, although it isn’t popular in the Philippines. Unlike condominium properties, other properties aren’t perpetual ownership. For as long as it has Condominium Certificate Title attached to the purchase, it is for perpetual ownership and not on a leasehold.

Given the perpetual ownership characteristic of a condominium purchase, it is then safe to say that investments in condominium properties are relatively safe and protected. The ownership in such properties provides undivided interest to the property and can be a powerful income instrument for potential resale and the rental income it provides.

With the ease of leasing management, condominium property investments are one way to own for keeps.

———————————–

(Stevenson’s experience in Philippine Real Estate spans more than 15 years. He has been involved in horizontal, vertical, vacation, and commercial properties. He has worked as an International Property Specialist in markets in Asia, Europe, and North America with Ayala Land, Federal Land, and Century Properties. Through PhilHouseHunters, he offers real estate investment opportunities, marketing, and consultancy with a key focus on Metro Manila and Mega Cebu areas. Visit www.philhousehunters.com. Email at derodarsales@gmail.com.)

You may also like

Leave a Comment

X