Atty. Benjamin S. Formoso

June 15, 1990 Atty. Benjamin S. Formoso 2nd Floor Gonzales Building 738 Aurora Blvd., Cor. Balite Drive Quezon City S i r : This refers to your letter dated February 9, 1990 inquiring as to the proper agency in charge of the registration of "homeowners association" in a condominium or subdivision project. LexLib Under Executive Order No. 535 dated May 3, 1979, the powers, authorities and responsibilities of the Securities and Exchange Commission with respect to "homeowners association", including the registration thereof, are now vested with the Home Insurance and Guaranty Corporation (formerly the Home Financing Corporation). The Executive Order provides, thus: "1. In addition to the powers and functions vested under the Home Financing Act, the corporation shall have, among others, the following additional powers: a) To require submission of and register articles of incorporation of homeowners associations and issue certificates of incorporation/registration upon compliance by the registering association with the fully 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 , the provisions of Act, 1459, as amended by PD 902-A, to the contrary notwithstanding." (emphasis supplied) The foregoing express provision leaves no doubt that the SEC totally lost its jurisdiction over "homeowners associations". However, "condominium corporations", (organization of unit holders of condominium projects) created pursuant to RA No. 4726, otherwise known as the "Condominium Law" are not covered by the provisions of Executive Order No. 535. Sections 2 and 10 of the Condominium Law provide in part: "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." (Emphasis supplied) "SECTION 10. Whenever the common areas in a condominium area 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 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 . . . . Membership in a condominium corporation, shall not be transferable separately from the condominium unit of which it is an appurtenance. . . ." (Emphasis supplied) From the foregoing provisions, a condominium corporation created pursuant to the Condominium Law is organized primarily to hold title to the common areas in the condominium itself as the law so intended and precisely not for the purpose of forming a "homeowners' association" which on the other hand is defined under Section 1, Rule 1 of the Implementing Rules and Regulations of Executive Order No. 535 , quoted below: "Homeowners Association (HOA) is any housing or community association composed primarily of present or future homeowners/awardees/occupants of private or government housing project, subdivision and urban estates organized for the purpose of facilitating the delivery of adequate social and economic services to improve the quality of life of its members ." (emphasis supplied) Comparing the above-mentioned provisions of law, there appears a clear-cut distinction between a "condominium corporation" and a "homeowners association". Aside from the different purposes for which they are formed , the former provides for an automatic grant of membership, while in the latter, membership is not automatic. Considering the peculiar and distinct concept of a "condominium corporation" for which special provisions are made and provided for in RA 4726, the same is not a "homeowner association" contemplated under Executive Order No. 535. The SEC, therefore, still retains the function of accepting the registration of articles of incorporation of condominium corporations. Incidentally, it may be mentioned that when the owners or unit holders of a condominium project have registered a condominium corporation pursuant to RA 4726, the unit owners need not register a separate homeowners association since one of the intended purposes for which a condominium corporation is organized is to manage the condominium project (Sec 10) which may also include as incident thereto, the purpose of facilitating the delivery of adequate social and economic services to improve the quality of life of its members. Thus, in reply to your query, registration of "homeowners association" in subdivision projects falls within the exclusive jurisdiction in the Home Insurance Guaranty Corporation (formerly the Home Financing Corporation). On the other hand, "condominium corporations" shall be registered with the Securities and Exchange Commission. Very truly yours, (SGD.) ROSARIO N. LOPEZ Chairman