Can foreigners own condominiums in the Philippines?

By Atty. Eduardo T. Reyes III

Two weeks into their “search and rescue” operations in the rubble that was the Champlain Towers South condominium in Florida, the elite crews had finally decided to change tack and deploy a “search and recovery” team instead. This means that they are resigned to the grim reality that there is no more hope for survivors- only dead bodies.

It is surreal that a once unassuming but not rickety structure would just crumble to the ground into debris the cause of which is still engulfed in mystery. The agony of families and loved ones of those unit owners of the edifice which once served as their home is heart-rending.

Rising from the ashes is the legal question of who owns the land where a condominium stands.

In the Philippine setting, foreigners are not allowed to own lands. But can they own condominiums?

Ownership of condominiums is governed by REPUBLIC ACT NO. 4726 otherwise known as AN ACT TO DEFINE CONDOMINIUM, ESTABLISH REQUIREMENTS FOR ITS CREATION, AND GOVERN ITS INCIDENTS which came into effect on June 18, 1966.

It will be observed that under Section 1 of R.A. 4726, a condominium refers to the absolute ownership by a person/ corporation of a unit (which may be industrial, commercial or residential) and an “undivided interest” (or co-ownership) over the common areas such as the land where the building stands, the elevator, the lobby, the outer walls, etc.

In turn, it may be deduced from Section 5 of the same law that as to the common areas, they may be owned: (1)by the unit owners themselves as co-owners; or, (2) the unit owners can form a condominium corporation that will own and manage the common areas. In the latter case, it becomes automatic that when a person buys a condominium unit, he/ she becomes a shareholder in the condominium corporation. (Some condominium developers already form a condominium corporation even before the “turn-over” of the units to the buyers).

Here is what Section 5 says in regard to this:

Sec. 5. Any transfer or conveyance of a unit or an apartment, office or store or other space therein, shall include the transfer or conveyance of the undivided interests in the common areas or, in a proper case, the membership or shareholdings in the condominium corporation: x x x 

            When the common areas are owned by the unit owners as co-owners, the rule is that: 

Provided, however, That where the common areas in the condominium project are owned by the owners of separate units as co-owners thereof, no condominium unit therein shall be conveyed or transferred to persons other than Filipino citizens, or corporations at least sixty percent of the capital stock of which belong to Filipino citizens, except in cases of hereditary succession. (Emphasis supplied).  

Thus, under the first (1^st) scenario (common areas are owned by the unit owners as co-owners), a condominium unit can only be sold to:

1. Filipino citizens; and,
2. Corporations with 60% capital stock belonging to Filipinos

Except: In cases of hereditary succession, i.e, a Filipina gives birth to a child who, based on jus soli, is considered an American citizen in the States and upon the Filipina’s death, the child inherits the condominium unit

While as to scenario 2 (common areas are owned by a condominium corporation), here is what Section 5 says:

Where the common areas in a condominium project are held by a corporation, no transfer or conveyance of a unit shall be valid if the concomitant transfer of the appurtenant membership or stockholding in the corporation will cause the alien interest in such corporation to exceed the limits imposed by existing laws.(Emphasis supplied).

As may be gleaned from the last part of Section 5, if the common areas are owned by a condominium corporation, a unit may be transferred to any person subject only to the restriction that the shareholdings of foreigners in the condominium corporation shall not “exceed the limits imposed by existing laws”. The limit under prevailing law is 40% shareholdings for aliens.

Thus, if for instance, X, a foreign national, would want to purchase a condominium unit, he IS NOT ALLOWED to do so under scenario 1 because: (1) he is not a Filipino citizen, and (2) he is not a corporation as he is a natural person.

Under scenario 2, i.e, the common areas are owned by a condominium corporation, Mr. X ought to check with the SEC as to what is the prevailing alien shareholding in the said condominium corporation. If the foreigner’s total shareholdings is only 30% so far, then Mr. X may still purchase a condominium unit as the “limits provided for by existing laws” which is 40% has not yet been exceeded. However, if the prevailing foreigner shareholding is already up to the threshold which is 40%, then Mr. X can no longer be allowed to purchase a unit.

To be sure, neither in scenario 1 nor scenario 2 is a foreigner allowed to own lands in the Philippines. The closest that he/ she can get at exercising dominion over a swathe of land in this country is by joining a corporation which will, as a corporate entity, own the land in part, but not in his or her personal capacity.

Thus the raging debate goes on as to whether our constitution as well as other statutory laws are ensnared by xenophobia.

(The author is the senior partner of ET Reyes III & Associates– a law firm based in Iloilo City. He is a litigation attorney, a law professor and a book author. His website is etriiilaw.com).