Jurisdiction of HLURB or SEC Over an Association of Condominium Unit Owners

DOJ OPINION NO. 006 , s. 2012 January 25, 2012 Atty. Antonio M. Bernardo Chief Executive Officer and Commissioner Housing and Land Use Regulatory Board HLURB Bldg., Kalayaan Ave. cor. Mayaman St., Diliman, Quezon City Dear Atty. Bernardo : This refers to your request for opinion on whether the Housing and Land Use Regulatory Board (HLURB) or the Securities and Exchange Commission (SEC) has jurisdiction over an association of unit owners in a condominium project notwithstanding the existence of condominium corporation which is registered with and regulated by the SEC. ACIDSc You state that a group of unit owners in a condominium project organized themselves into an association (hereinafter referred to as the "subject homeowners' association") to advance their mutual benefits as unit and homeowners of the condominium project, and even with an already existing condominium corporation established by a developer of the said project pursuant to the condominium's master deed or deed of restriction for the purpose of managing and holding title over the condominium's common areas. You also state that despite the passage of Republic Act No. 9904, otherwise known as the Magna Carta for Homeowners and Homeowners Associations, 1 you are still in a quandary if you will entertain or decline the request of the subject homeowners' association thus formed. Hence, this query. The issue has already been addressed in the case of Maria Luisa Park Association, Inc. v. Samantha Marie T. Almendras and Pia Angela T. Almendras 2 where the Supreme Court categorically ruled that administrative supervision over homeowners' associations now lies with the HLURB. It was held, thus: Originally, administrative supervision over homeowners' associations was vested by law with the Securities and Exchange Commission (SEC) . However, pursuant to Executive Order No. 535, the HIGC 3 assumed regulatory and adjudicative functions of the SEC over homeowners' associations . Section 2 of E.O. No. 535 provides: 2. In addition to the powers and functions vested under the Home Financing Act, the Corporation, 4 shall have among others, the following additional powers: SCHcaT (a) . . . and exercise all the powers, authorities and responsibilities that are vested on the Securities and Exchange Commission with respect to homeowners associations, the provision of Act 1459, as amended by P.D. 902-A, to the contrary notwithstanding; (b) To regulate and supervise the activities and operations of all houseowners associations registered in accordance therewith; xxx xxx xxx Moreover, by virtue of this amendatory law, the HIGC also assumed the SEC's original and exclusive jurisdiction under Section 5 of Presidential Decree No. 902-A to hear and decide cases involving: b) Controversies arising out of intra-corporate or partnership relations, between and among stockholders, members, or associates; between any and/or all of them and the corporation, partnership or association of which they are stockholders, members or associates , respectively; and between such corporation, partnership or association and the state insofar as it concerns their individual franchise or right to exist as such entity; (Emphasis supplied) xxx xxx xxx Consequently, in Sta. Clara Homeowners' Association v. Gaston and Metro Properties, Inc. v. Magallanes Village Association, Inc., the Court recognized the HIGC's "Revised Rules of procedure in the Hearing of Home Owner's Disputes,' pertinent provisions of which are reproduced below: RULE II Disputes Triable by HIGC/Nature of Proceedings Section 1. Types of Disputes . The HIGC or any person, officer, body, board or committee duly designated or created by it shall have jurisdiction to hear and decide cases involving the following: xxx xxx xxx (b) Controversies arising out of intra-corporate relations between and among members of the association, between any or all of them and the association of which they are members , and between such association and the state/general public or other entity in so far as it concerns its right to exist as a corporate entity. (Emphasis supplied) xxx xxx xxx Later on, the above-mentioned powers and responsibilities, which had been vested in the HIGC with respect to homeowners' associations, were transferred to the HLURB pursuant to Republic Act No. 8763, entitled "Home Guaranty Corporation Act of 2000." (Emphasis supplied) As mentioned above, by virtue of R.A. No. 8763, 5 the powers, authorities and responsibilities previously vested in Home Guaranty Corporation with respect to homeowners' associations are now vested in the HLURB. Specifically, these powers, authorities and responsibilities are: IaHDcT a) To require submission of and register articles of incorporation of homeowners associations and issue certificates of incorporation/registration, upon compliance by the registering associations with the duly promulgated rules and regulations thereon; maintain a registry thereof; and exercise all the powers, authorities and responsibilities that are vested on the Securities and Exchange Commission with respect to home owners association, the provision of Act 1459, as amended by P.D. 902-A, 6 to the contrary notwithstanding; b) To regulate and supervise the activities and operations of all houseowners associations registered in accordance therewith; and c) To insure and guarantee loans extended to registered homeowners associations for rendering purposes to their members for the construction, restoration and/or improvement of residential homes as well as other structures beneficial to the members of such associations. 7 Moreover, the HLURB has exclusive jurisdiction to hear and decide the following cases: (1) unsound real estate business practices; (2) claims involving refund and any other claims filed by subdivision lot or condominium unit buyer against the project owner, developer, dealer, broker or salesman; and (3) cases involving specific performance of contractual and statutory obligations filed by buyers of subdivision lot or condominium unit against the owner, developer, dealer, broker or salesman. 8 The foregoing are reiterated in the recently enacted R.A. No. 9994, which succinctly provides that HLURB's duties and responsibilities in regard to homeowners' associations stated therein 9 are "(i)n addition to the powers, authorities and responsibilities vested in it by Republic Act No. 8763, Presidential Decree No. 902-A, Batas Pambansa Blg. 68 and Executive Order No. 535, series of 1981, as amended . . . ." It is for this reason that every association of homeowners is required to register with the HLURB. 10 That a condominium corporation, which is registered with and regulated by the SEC, already exists in the condominium project to which the group of unit owners who formed the subject homeowners' association belongs does not militate against the fact that the HLURB has jurisdiction over such association. It bears stressing that R.A. No. 4726, or The Condominium Act , clearly defines in its Sections 2 and 10 the role of a condominium corporation, thus: Section 2. . . . Title to the common areas, including the land, or the appurtenant interests in such areas, may be held by a corporation specially formed for the purpose (hereinafter known as the "condominium corporation") in which the holders of separate interest shall automatically be members or shareholders, to the exclusion of others, in proportion to the appurtenant interest of their respective units in the common areas. xxx xxx xxx Section 10. Whenever the common areas in a condominium project are held by a condominium corporation, such corporation shall constitute the management body of the project. The corporate purposes of such a corporation shall be limited to the holding of the common areas, either in ownership or any other interest in real property recognized by law, to the management of the project, and to such other purposes as may be necessary, incidental or convenient to the accomplishment of said purposes . The articles of incorporation or by-laws of the corporation shall not contain any provision contrary to or inconsistent with the provisions of this Act, the enabling or master deed, or the declaration of restrictions of the project. Membership in a condominium corporation, regardless of whether it is a stock or non-stock corporation, shall not be transferable separately from the condominium unit of which it is an appurtenance. When a member or stockholder ceases to own a unit in the project in which the condominium corporation owns or holds the common areas, he shall automatically cease to be a member or stockholder of the condominium corporation. (Emphasis supplied) EaICAD It is clear from the foregoing that the corporate purposes of a condominium corporation are limited to the holding of the common areas and the management of the condominium project. And in order to carry out its corporate purposes, such condominium corporation must be registered with the SEC as required by law. 11 On the other hand, as expressly stated in Section 30 of Presidential Decree (P.D.) No. 957, or The Subdivision and Buyers' Protective Decree, 12 which allows the organization of homeowners' association among buyers and residents of subdivision and condominium projects, such association is "for the purpose of promoting and protecting their mutual interest and assist in their community development." Please be guided accordingly. Very truly yours, (SGD.) LEILA M. DE LIMA Secretary Footnotes 1. Dated 7 July 2009. 2. G.R. No. 171763, 5 June 2009. 3. Home Insurance and Guaranty Corporation. 4. Home Financing Corporation (HFC), later renamed as Home Insurance and Guaranty Corporation (HIGC) by Executive Order (E.O.) No. 90 dated 17 December 1986, which in turn, was later renamed as Home Guaranty Corporation (HGC) by Republic Act (R.A.) No. 8763 dated 7 March 2000. 5. Section 26 of R.A. No. 8763, or Home Guaranty Corporation Act of 2000 : ection 26. Powers over Homeowners Associations. The powers, authorities and responsibilities vested in the Corporation with respect to homeowners' association under Republic Act No. 580, as amended by Executive Order No. 535 is hereby transferred to the Housing and Land Use Regulatory Board (HLURB). xxx xxx xxx 6. Thus, it is now the HLURB which has jurisdiction over controversies: (1) between and among members of associations; (2) between any and/or all of such members and the association of which they are such members; and (3) between the association and the State insofar as it concerns its individual franchise or right to exist as such entity. 7. Section 5 (a), (b) and (c) of R.A. No. 580 (An Act to Create the Home Financing Commission, to Stimulate Home Building and Land Ownership and to Promote the Development of Land for that Purpose, Provide Liberal Financing Through an Insured Mortgage System, and Develop Thrift Through the Accumulation of Savings in Insured Institutions), as amended by E.O. No. 535, s. 1981 (Amending the Charter of the Home Financing Commission, Renaming it as Home Financing Corporation, Enlarging its Powers, and for Other Purposes). 8. As stated in Sps. Ernesto Lim and Zenaida Lim v. Ruby Shelter Builders and Realty Development Corp., G.R. No. 182707, 1 September 2010, thus: ection 1 of Presidential Decree 1344 4 vests in the National Housing Authority (now HLURB) exclusive jurisdiction to hear and decide the following cases: (a) unsound real estate business practices; (b) claims involving refund and any other claims filed by subdivision lot or condominium unit buyer against the project owner, developer, dealer, broker or salesman; and (c) cases involving specific performance of contractual and statutory obligations filed by buyers of subdivision lot or condominium unit against the owner, developer, dealer, broker or salesman. (Emphasis supplied) 9. Section 20 of R.A. No. 9904: ection 20. Duties and Responsibilities of the HLURB. In addition to the powers, authorities and responsibilities vested in it by Republic Act No. 8763, Presidential Decree No. 902-A, Batas Pambansa Blg. 68 and Executive Order No. 535, Series of 1981, as amended, the HLURB shall: (a) Regularly conduct free orientation for officers of homeowners' associations or deputize another competent agency to conduct the orientation; (b) Formulate and publish a Code of Ethics and Ethical Standards for board members detailing prohibited conflicts of interest; (c) Register all associations, federations, confederations or umbrella organizations of the associations; (d) Hear and decide intra-association 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; (e) Formulate the rules or manner of verification and validation of petitions for the removal of director(s) or trustee(s) of the association or dissolution of the board pursuant to Sections 13 and 14 of this Act; (f) Exercise the same powers over federations, confederations or umbrella organizations of the associations; (g) Formulate, in consultation with the representatives of associations, federations, confederations or umbrella organizations of the associations, standard nomenclatures to be used for the associations' books of accounts, and a standard articles of incorporation and bylaws for homeowners' association for reference purposes; (h) Formulate, in consultation with the representatives of associations, federations, confederations or umbrella organizations of the associations, the guidelines in regulating the kinds of contributions and fees that may be charged and/or collected by associations; and (i) Call upon the Philippine National Police, other law enforcement agencies, and other instrumentalities of the government, if necessary, for the enforcement of its functions. 10. Section 4, R.A. No. 9904. 11. Section 19 of Batas Pambansa Blg. 68, or The Corporation Code of the Philippines : Section 19. Commencement of corporate existence. A private corporation formed or organized under this Code commences to have corporate existence and juridical personality and is deemed incorporated from the date the Securities and Exchange Commission issues a certificate of incorporation under its official seal; and thereupon the incorporators, stockholders/members and their successors shall constitute a body politic and corporate under the name stated in the articles of incorporation for the period of time mentioned therein, unless said period is extended or the corporation is sooner dissolved in accordance with law. 12. Dated 12 July 1976.