Mr. Augusto Cruz, Sr.

May 22, 1995 Mr. Augusto Cruz, Sr. Las Villas De Valle Verde Condominium Corporation Kaimito St. Valle Verde II Subdivision Pasig, Metro Manila S i r : This refers to your letter of May 15, 1995 requesting opinion on the legality of the issue raised therein relative to insurance coverage of Las Villas De Valle Verde Condominium Corporation. LibLex As stated, the Corporation presently maintains fire insurance coverage at full reinstatement value for all the buildings at Las Villas De Valle Verde Condominium Corporation, which includes the common areas and Limited Common Areas as well as all the respective residential units. The beneficiary of the insurance policy is the Corporation as provided for in the Master Deed. However, a minority group of unit owners argues (1) for an insurance coverage where the policy shall provide that the proceeds thereof be payable to each individual unit owner rather than to the Corporation; (2) that each individual unit owner be allowed to obtain his own insurance coverage for his unit and the option to decide on the amount of the coverage; (3) that the Corporation's insurance responsibility should be limited to the common areas, and limited common areas, the cost of which shall be shared by all unit owners. There have been some arguments between the minority group and the Board of Directors over the legality and/or propriety of the above proposals. Hence, you pose a query on their legality. The pertinent provisions of Republic Act No. 4726, otherwise known as the Condominium Law provides: "SECTION 9. The owner of a project shall, prior to the conveyance of any condominium therein, register a declaration of restrictions relating to such project, which restrictions shall constitute a lien upon each condominium in the project, and shall inure to and bind all condominium owners in the projects . Such liens, unless otherwise, provided, may be enforced by any condominium owner in the project or by the management body of such project. The Register of Deeds shall enter and annotate the declaration of restrictions upon the certificate of title covering the land included within the project, if the land is patented or registered under the Land Registration or Cadastral Acts. xxx xxx xxx Such declaration of restrictions, among other things, may also provide: 1. . . . 2. For maintenance of insurance policies insuring condominium owners against loss by fire, casualty, liability, workmen's compensation and other insurable risks, and for the bonding of the members of any management body; xxx xxx xxx. Corollary thereto, Part II of the " Master Deed With Declaration of Restrictions " of subject corporation provides: "SECTION 7. Insurance . (a) The Condominium Corporation shall for its benefit and for the common benefit of all the Unit owners of their interest may appear, obtain and maintain at all times fire insurance coverage (herein referred to as "Common Insurance"), with such extended coverage as is customary for Buildings in the locality, for the full reinstatement value of the common areas and Limited Common Areas in the Projects. Such reinstatement value, and with the conformity of the insurance company concerned, be revised by the Corporation from year to year, if necessary. The policy or policies shall provide that the proceeds thereof shall be payable to the Corporation. Upon receipt of the proceeds, the Corporation shall use or pay the same in the manner provided for in the following Section 8. The premium on such policy or policies shall be considered Common Expense of the Corporation and the payment of the premium on such policy or policies will be shared by the Unit owner in accordance with the percentages of participation provided for in Section 6(b), Part I hereof. b) The corporation shall also be, as it is hereby, empowered as attorney-in-fact of each respective Unit owner or his mortgagee(s) or lessee(s), if any or occupant of Units as their interest may appear, to obtain and maintain at all times a separate fire insurance coverage (herein referred to as " Separate Insurance ") on each Unit (excluding furnitures, furnishings, fixtures, improvements and personal properties supplied or installed by the Unit owner or occupant) for an amount determined by the Corporation in its sole discretion, which will be in the proportion indicated in Section 7(a) hereof for all Units. Each and all such policies shall provide that the proceeds thereof shall be payable to the Corporation, as trustee for the respective Unit owner of his mortgagee(s) if any, and subject to this limitation, shall also provide for in the following Section 8. (c) Should the Corporation find it impracticable to obtain Separate Insurance pursuant to the preceding paragraph (b), the Corporation shall obtain in Common Insurance for the entire project pursuant to paragraph (a) of this Section. xxx xxx xxx" (Emphasis supplied) The above provisions are clear and specific on the issues raised in your letter. When the condominium unit owners voluntarily bought their units, it was assumed that they bought them subject to the provisions of the Declaration of Restrictions on the Use and Occupancy of the Condominium Units. Accordingly, the decision of the Board of Directors on the matter should be guided by the provisions thereof. In case of non-compliance with the obligation of the unit owners, Section 20 of the Condominium Law, quoted hereunder, shall apply. "SECTION 20. An assessment upon any condominium made in accordance with a duly registered declaration of restrictions shall be an obligation of the owner thereof at the time of the assessment is made. The amount of any such assessment plus any other charges thereon, such as interest, costs (including attorney's fees) are penalties, as such may be provided for in the declaration of restrictions, shall be and become a lien upon the condominium assessed when the management body causes a notice of assessment to be registered with the Register of Deeds of the City or province where such condominium project is located. The notice shall state the amount of such assessment and such other charges thereon as may be authorized by the declaration of restrictions, a description of the condominium unit against which same has been assessed, and the name of the registered owner thereof. Such notice shall be signed by an authorized representative of the management body or as otherwise provided in the declaration of restrictions. Upon payment of said assessment and charges or other satisfaction thereof, the management body shall cause to be registered a release of lien. Such lien shall be superior to all other liens registered subsequent to the registration of said notice of assessment except real property tax liens and except that the declaration of restrictions may provide for the subordination thereof to any other liens and encumbrances. Such liens may be enforced in the same manner provided for by law for the judicial or extrajudicial foreclosure of mortgages of real property . Unless otherwise provided for in the declaration of the restrictions, the management body shall have the power to bid at foreclosure sale. The condominium owner shall have the same right of redemption as in cases of judicial or extrajudicial foreclosure of mortgages." (Emphasis supplied) Very truly yours, (SGD.) FE ELOISA C. GLORIA Associate Commissioner