Buy now, derelict later?

Many people may be asking this. After one has purchased a condominium, what will happen to it after 50 years when it has served its purpose and the area where it stands becomes, well, not so much of a real estate hotspot as it is now? After all, buildings and structures are exposed to the elements and they are especially vulnerable-especially when not maintained well-to damage and wear and tear.

The condominium's location, a primary predictor of its value, is also an important factor to its lifespan. What may be a real estate hotspot now may be an area of urban decay in 50 years’ time. (Though there are exceptions to this, including Melbourne’s Docklands and London’s Canary Wharf.) And this is especially true in the Philippines where an area could rapidly suffer urban decay: downtown Manila’s central business district of Escolta-a bustling area up until the 1960s-is now a long-forgotten street of dilapidated buildings. Even the Makati central business district, just a little over 40 years old, is already showing signs of aging.

It’s not surprising then that many would-be Filipino homebuyers are hesitant to purchase condominiums. Among their usual concerns include the extent of one’s ownership into a specific condominium project, who owns the land where the building sits, and who decides if and when the building has to be demolished.

Here we will address these concerns, which will eventually lead us to the issue of a condominium’s lifespan.

1. Condominiums Are Essentially Corporations

Although the Condominium Act of 1966 does not specifically stipulate this, it has become necessary today as many developers are targeting foreign buyers. Foreigners as we now are not allowed to own land in the Philippines, but they can buy into a corporation that owns one, so long as foreign ownership in a condo project does not exceed 40 percent. Hence, the land on which the condo sits is owned by the condominium corporation whose members are the individual unit owners (or shareholders). And this brings us to next point.

2. What Is the Extent of Ownership in a Condo Project?

Since homeowners possess only the specific dwelling (or dwellings) they purchased in a condominium project, they do not hold the title for the land where the building stands, neither do they hold exclusive ownership to the condominium’s common areas. Instead, individual unit owners are shareholders of the condominium corporation.

One unit is equal to one share (that is proportionate to the size and price of your unit) in the corporation, which is then equal to a proportionate vote. Say you buy one unit into a 100-unit condo project and all units are of equal size and value, there are 99 other shareholders into the condominium corporation all of whom more or less have the same stake and voting power as you do.

3. Do Shareholders Have to Decide in Unison?

Like a normal, profit-oriented corporation, there are certain issues within a condominium that can only be decided through votes by the shareholders. These issues may include the mundane, such as having the swimming pool retiled or the common areas repainted, to the (literally) groundbreaking, such as if and when the building has to be demolished. Which again brings us to final crucial question.

4. What Is the Lifespan of a Condo Building?

Although the law does not explicitly say that a condominium has a lifespan of only 50 years, it definitely implies so. Consider Section 8c:

That project has been in existence in excess of 50 years; that it is obsolete and uneconomical, and that condominium owners holding in aggregate more than 50 percent interest in the common areas are opposed to repair or restoration or remodeling or modernizing of the project.”
And if the time comes, shareholders to the condominium corporation can vote to have the building demolished, and they have two options. Either they sell the land, make some money from the salvageable scrap from the demolished building, deduct the cost of demolition, and divide the proceeds among the owners; or strike a deal with the original developer or another developer to build a new condominium on their land.

5. So Do All These Mean That You Shouldn’t Buy a Condominium?

Absolutely not. When a person buys a property, he also considers the lifestyle he leads and the problems the purchase solves. Ownership in the case of a condominium may be limited compared to a landed property, but it definitely makes up for in terms of convenience, such as being close to places of work and commercial areas, an in-city lifestyle, and the convenience of not having to do long commutes every day. As a shareholder, you (and your heirs) also get to profit from the sale of the land should the condominium corporation decides to do so.

Low cost of living, warm tropical climate, and friendly people. These are some of the things that await anyone who wants to own a condominium in the Philippines.

Since the steady growth of the real estate market in 2001, buying condominiums continues to become a trend. The proliferation of BPO companies, looking to harness the potential of the Philippine workforce, has created a huge demand for both commercial and residential properties.

Aside from foreign demand, many Overseas Filipino Workers (OFWs) are using their income to purchase condos either as home for themselves and their families or as investments to be liquidated in the future. In fact, some migrant workers purchase properties in the Philippines even while abroad.

Owning a condo in the Philippines today has changed from an extravagance available only to the affluent to a worthy investment that yields many purposes.

What is a Condominium?

Unlike a house or a land property, a condominium is a section of a building or a complex which a person can own individually.

The rules for owning a condominium varies from country to country. In the U.S., foreigners are eligible to purchase properties regardless of whether they are present or not. In Thailand, foreigners are given 100% freedom to own condominiums and sell them to other expats or local citizens. However, local citizens are not allowed to sell their own properties to foreigners.

Meanwhile, the strict law of the Philippines limits foreign ownership of real estate where purchasing lands or properties are prohibited, except in few cases. With the implementation of “The Condominium Act,” foreigners looking for residential or commercial properties are now given an option to own them.

The Philippine Condominium Act

Republic Act No. 4726, or commonly known as “The Condominium Act,” is a law that allows people the right to co-own a piece of property of land aside from the absolute ownership of his/her unit.

The Condominium Act states the rights of the owner and the extent of his/her influence in the property where he/she has purchased the unit. It serves to protect the rights of buyers to ensure that they are not being misled by property owners or developers.

One of its most significant provisions is that it allows foreigners to purchase condos in the Philippines, given that they do not own the land on which it is built.

The implementation of this law has allowed many foreigners to buy units in the Philippines, thus strengthening more the country’s real estate market.

Why buy a condo?

When planning to buy a condominium, the ultimate consideration is your purpose for purchasing one. Is it because you want to move into a better residence to establish your independence? Or are you planning to make it an investment property? Buying a condominium ensures that these two reasons are fulfilled.

A condominium offers a kind of flexibility that you can’t find in owning a house or land. If you’re looking for a permanent residence without the added burden of building your own home, then a condo is your best option. Similarly, if you want an asset which you can use commercially, it can become a lucrative investment property.

Important factors when buying a condo:

Consider your short-term needs and long-term goals.

Evaluate your goals in life before buying a condo. While a condominium is a premium investment and a cost effective housing option, you cannot bank on the possibility that it can be passed on to your children 50 years into the future (see Section 8 of RA 4726).

Think about the next five years, and ask yourself questions that will create a drastic change in your lifestyle in the future. Will you be married then? Do you have plans to move in five years? Are you planning on changing careers in the next few years? All these will help you decide whether you should invest on a condo and what type you will buy. If you’re not planning to stay long, you might want to consider renting a condominium instead.

Learn about the prices of properties in different locations before deciding on a place to settle down.

Location is a very crucial factor in selecting your unit, mainly because where you choose to live will shape the lifestyle that you will have. However, different locations especially in the Metro are priced differently depending on the area.

Properties near the central business districts are higher than those farther away. For example, the selling price of a three-bedroom unit in Makati can go from PHP 14,500,000 to PHP 25,785,000. While the same unit for sale in Bonifacio Global City average between PHP 13,500,000 to PHP 29,500,000. Aside from condominium prices, the cost of living also varies in different locations.

Choose the type of unit that best suits your needs.

The great thing about buying a condo in the Philippines is that you have a lot of options to choose from. Aside from the many existing condominiums in the market, there are also pre-selling condos that are readily available. However that same factor can also hinder you when you start searching for your ideal residence.

Because of the number of options, you may find yourself gravitating towards cheaper alternatives or more costly ones just because they have amenities and features you think you might need.

Bear in mind that you are in control of what condo you’ll buy. Don’t settle for second best when you can have the perfect one by simply being very discerning about your decisions.

Gather all the information you need before signing a contract.

Buying a condo unit entitles you to a building’s services and amenities. Thus, you are also responsible for a portion of the upkeep of the building. Before you sign a contract, enlist the help of a broker to guide you into the financial aspect of buying a condo unit. This ensures you won’t be blindsided when a bill comes for a service that you were not aware of before buying the unit.

You should also pay particular attention to the details of the contract and discuss some important points you want to clarify with the building owner. For example, if you’re planning on sub-letting your unit then you should be aware if the owner allows this sort of business venture or not.

Moreover you can also make some suggestions or propose changes to your contract. For example, you are not certain about paying for a gym membership since you don’t work out that much or you want to upgrade the pre-installed appliances in your unit. You can discuss these with your broker or the owner of the building. By voicing out your opinion, you will save yourself from regret and complications later on.

Buying a condominium in the Philippines shouldn’t be a difficult task, especially if you follow these simple guidelines. Owning the perfect residential home is a dream, and you now have a chance to turn it into a reality.