A condominium, under Section 2 of R. A. 4726 otherwise known as the Condominium Act (An Act to Define Condominium, Establish Requirements for its Creation, and Govern its Incidents), is defined as an interest in real property consisting of separate interest in a unit in a residential, industrial or commercial building and an undivided interest in common, directly or indirectly, in the land on which it is located and in other common areas of the building. A condominium may include, in addition, a separate interest in other portions of such real property. Title to the common area may be held by a corporation specially formed for the purpose (the "condominium corporation") in which the holders of separate interest shall automatically be members or shareholders, to the exclusion of others, in proportion appurtenant to their respective units in the common areas.
From this legal definition, ownership of a condominium is an interest in real property that must also conform to the constitutional proscription against aliens owning real property in the Philippines. Thus, any transfer or conveyance of a unit or an apartment, office or store or other spaces in them 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: Provided, however, That where the common areas in the condominium project are held by owners of separate unit as co-owners, no condominium unit in it shall be conveyed to or transferred to persons other than Filipino citizens or corporation at least 60 percent of the capital stock of which belong to Filipino citizens, except in hereditary succession. 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 law (Section 5 R.A. 4726).
The validity of the ownership of a foreign national of a condominium unit depends on who are the designated owners of the common areas in the condominium project. If the common areas are owned by a condominium corporation, the transfer to foreigners will thus be
valid without circumventing the constitutional proscription against foreigners owning real estate in the Philippines. However, if the ownership of the common areas vests on the owners of separate units as co-owners, no condominium unit there shall be conveyed or transferred to persons other than Filipino citizens or corporations ("condominium corporations") at least 60 percent of the capital stock of which belongs to Filipino citizens, except in cases of hereditary succession.
The creation of the condominium corporation is sanctioned by R.A. 4726 to enable the orderly administration over the common areas that are jointly owned by the various unit owners and is specifically formed for the purpose of holding title to the common areas in which the holders of separate interests shall automatically be members or shareholders, to the exclusion of others, in proportion to the appurtenant interests in their respective units. However, the necessity of a condominium corporation has not gained widespread acceptance and is even merely permissible under the Condominium Act (City Treasurer of Makati versus BA Lepanto Condominium Corporation, G.R. No. 154993, October 25, 2005).
Foreign nationals who wish to purchase condominium units must therefore exercise caution in analyzing the provisions of the Master Deed of the Condominium Project and of the pertinent contract of sale. The master deed must contain a statement of the exact nature of the interest acquired or to be acquired by the purchaser in the separate units and in the common areas of the condominium project. When title to or the appurtenant interest in the common areas is to be held by a condominium corporation, a statement to this effect shall be included (Section 4(d) R.A. 4726).
Likewise, if upon perusal of the contract of sale or contract to sell as the case may be, it is evident that the sale to the buyer (foreigner) will not transfer ownership of the land on which the unit is situated and will not get a Transfer Certificate of Title, but merely a Condominium Certificate of Title as evidence of ownership of the condominium unit. The ownership of the land on which the condominium unit is built, remains with the Condominium Corporation. The unit owner is simply
a member of the Condominium Corporation. In this instance, the ownership of the foreigner buyer would thus be valid, unless the concomitant transfer of the appurtenant membership or stockholding in the condominium corporation will cause the alien interest in such corporation to exceed the limits imposed by law. Under R.A. 4726, foreign nationals can own Philippine real estate through the purchase of condominium units or townhouses constituted under the Condominium Principle with Condominium Certificates of Title (Jacobus BernhardHulst versus PR Builders, Inc., G.R. No. 156364, September25,2008, decided by the Supreme Court of the Philippines)
The law provides that no condominium unit can be sold without at the same time selling the corresponding amount of rights, shares or other interests in the condominium management body, the Condominium Corporation; and no one can buy shares in a Condominium Corporation without at the same time buying a condominium unit. It expressly allows foreigners to acquire condominium units and shares in condominium up to not more than 40 percent of the total and outstanding capital stock of a Filipino-owned or controlled corporation.
Under this set-up, the ownership of the land is legally separated from the unit itself. The land is owned by a Condominium Corporation and the unit is simply a member in this Condominium Corporation. As long as 60 percent of the members of this Condominium Corporation are Filipino, the remaining members can be foreigners (City Treasurer of Makati versus BA Lepanto Condominium Corporation, G.R. No. 154993, October25, 2005, decided by the Supreme Court of the Philippines).